<PAGE>

                                                                   EXHIBIT 10.42

                        PENTECH FINANCIAL SERVICES, INC.



                                                  Lease No. 301001

                             MASTER EQUIPMENT LEASE

This is a Master Equipment Lease between PENTECH FINANCIAL SERVICES, INC., A
CALIFORNIA CORPORATION, whose principal office is located at 310 West Hamilton
Avenue, Suite 202, Campbell, California 95008 ("Lessor") and CONDUCTUS, INC., A
DELAWARE CORPORATION whose principal office address is 969 W. Maude Avenue,
Sunnyvale, CA 94086 ("Lessee"), with effective date of September 1, 2000
("Effective Date").

1. LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor, subject to the terms and conditions of this Master Equipment Lease
("Lease"), the personal property ("Equipment") described in each Acceptance
Supplement ("Supplement") executed and delivered by Lessor and Lessee pursuant
to the terms of this Lease. Each Supplement shall be in the form prescribed by
Lessor and, upon execution and delivery, shall constitute a part of this Lease
to the same extent as if the provisions thereof were set forth in full in this
Lease document; the terms "Agreement", "hereof," "herein," and "thereunder,"
when used in this Lease shall mean this Lease, each Supplement and each Schedule
as hereinafter defined. This Agreement constitutes an agreement to lease.
Ownership of the Equipment remains with Lessor and nothing herein contained
shall be construed as conveying to Lessee any right, title or interest in the
equipment except as a Lessee only.

2. SELECTION OF EQUIPMENT. Lessee acknowledges that it has selected the type,
quantity and supplier of the Equipment referred to herein and that it has
requested Lessor to purchase the same under a contract for leasing to Lessee
(the "Supply Contract"). Lessee agrees that the Equipment and each part or unit
thereof is of a design, size, quality and capacity required by Lessee and is
suitable for its purposes. Lessee acknowledges that Lessor has informed or
advised Lessee, in writing either previously or by this Lease, of the following:
(i) the identity of the supplier; (ii) that the Lessee may have rights under the
Supply Contract; and (iii) that the Lessee may contact the supplier for a
description of any such rights Lessee may have under the Supply Contract. Lessor
hereby assigns to Lessee all rights which Lessor has or may acquire against any
manufacturer, supplier, or contractor with respect to any warranty or
representation relating to the Equipment leased hereunder.

3. EQUIPMENT TO REMAIN PERSONAL PROPERTY; LOCATION, IDENTIFICATION; INSPECTION.
Lessee represents that the Equipment shall be and at all times remain separately
identifiable personal property. Lessee shall, at its own expense, take such
action as may be necessary to prevent any third party from acquiring any right
to or interest in the Equipment by virtue of the Equipment being deemed to be
real property or a part of other personal property, and shall indemnify Lessor
against any loss which it may sustain by reason of Lessee's failure to do so.
The Equipment may not be removed from the location specified in the Supplement
pertaining thereto without Lessor's prior written consent. If requested by
Lessor, Lessee shall attach to and maintain on each item of Equipment a
conspicuous plate or marking disclosing Lessor's ownership thereof. Lessor or
its representatives may, after reasonable notice to Lessee, inspect the
Equipment during normal business hours. Lessee shall promptly advise Lessor of
any circumstances which may materially affect any item of Equipment or in any
manner affect Lessor's title thereto.

4. EXECUTION OF FURTHER DOCUMENTATION. Lessee will, at its own expense, promptly
execute and deliver to Lessor such further documentation and assurances and take
such further action as Lessor may from time to time require in order to more
effectively carry out the intent and purpose of this Agreement so as to
establish and protect the rights, interests and remedies intended to be created
in favor of Lessor hereunder, including, without limitation, the execution and
filing of financing statements and continuation statements with respect to the
Equipment and Agreement. Lessee authorizes Lessor to effect any such filing
(including the filing of any financing statements without the signature of
Lessee). Any expense incurred by Lessor in connection with any filings under
this paragraph shall be payable by Lessee on demand.

5. DISCLAIMER OF IMPLIED WARRANTIES. THE EQUIPMENT WILL BE LEASED "AS IS" AND
"WHERE IS". (A) THE LESSOR HAS NOT MADE, MAY NOT BE CONSIDERED TO HAVE MADE, AND
SPECIFICALLY DISCLAIMS, OTHER THAN THE WARRANTY OF QUIET ENJOYMENT:

(1) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE
EQUIPMENT, REGARDING TITLE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY,
FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE LIKE, FITNESS FOR USE FOR A
PARTICULAR PURPOSE, QUALITY OF MATERIALS OR WORKMANSHIP, ABSENCE OF DISCOVERABLE
OR NONDISCOVERABLE DEFECTS, OR THAT THE EQUIPMENT IS IN COMPLIANCE WITH ANY
APPLICABLE GOVERNMENT REQUIREMENTS OR REGULATIONS; AND

(2) ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE
EQUIPMENT (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE,
COURSE OF DEALING, OR USAGE OF TRADE); AND

(3) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY REGARDING THE
CHARACTERIZATION OF THIS LEASE FOR TAX, ACCOUNTING, OR OTHER PURPOSES.

THE LESSEE WAIVES, RELEASES, RENOUNCES, AND DISCLAIMS EXPECTATION OF OR RELIANCE
ON ANY SUCH WARRANTY OR WARRANTIES.

(B) THE LESSOR WILL NOT HAVE ANY RESPONSIBILITY OR LIABILITY TO THE LESSEE OR
ANY OTHER PERSON, WHETHER IN CONTRACT OR TORT, ARISING OUT OF ORDINARY
NEGLIGENCE OR STRICT LIABILITY OF THE LESSOR OR OTHERWISE, FOR:

(1) ANY LIABILITY, LOSS, OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT; BY ANY INADEQUACY, DEFICIENCY OR DEFECT OF THE
EQUIPMENT; OR BY ANY OTHER CIRCUMSTANCES IN CONNECTION WITH THIS LEASE;

(2) THE USE, OPERATION, OR PERFORMANCE OF THE EQUIPMENT OR ANY RISKS RELATING TO
IT;

(3) ANY CONSEQUENTIAL DAMAGES, INCLUDING THOSE FOR INTERRUPTION OF SERVICE, LOSS
OF BUSINESS, OR ANTICIPATED PROFITS; OR

(4) THE DELIVERY, OPERATION, MAINTENANCE, REPAIR, IMPROVEMENT, OR REPLACEMENT OF
THE EQUIPMENT.

6. TERM; ACCEPTANCE; RENT; RETURN. The term of lease of each item of Equipment
shall commence on the Commencement Date specified in the Supplement pertaining
to such Equipment and, unless earlier terminated pursuant to the provisions
hereof, shall continue for the term specified in such Supplement. Lessee's
execution and delivery of each Supplement shall constitute Lessee's irrevocable
acceptance of the equipment covered thereby for all purposes of this Agreement.
Lessee shall pay to Lessor, at the addresses specified above or at such other
address as may be provided by Lessor from time to time, rent as specified in
each Supplement. Each date on which an installment of rent is payable is
designated herein as "Rent Payment Date". As to each Supplement, the first Rent
Payment Date shall be the Rent Payment Date set forth therein, with the
succeeding Rent Payment Date on the corresponding day of each month thereafter.
In addition, if applicable, Lessee shall pay interim rent for the period between
the actual commencement of the rent under each Supplement and the date
designated as the Rent Payment Date, based on a 30 day month and the number of
days between the actual commencement date and the first Rent Payment Date.
Should any payment not be made by Lessee on or before the applicable Rent
Payment Date, Lessor shall be entitled to a late payment charge in addition to
the actual rent due of 5% of the late rent and any other amount due but unpaid
under this Agreement. Upon the expiration or earlier termination of the term of
lease of each item of Equipment leased thereunder, Lessee shall at its own
expense return such item to Lessor at such location as Lessor may designate, in
the condition required to be maintained by Paragraph 9 hereof.

7. LESSEE'S OBLIGATIONS IRREVOCABLE. The Lessee's obligation to pay all rent
will be absolute and unconditional and will not be affected or reduced by any
circumstance, including:
(1) Any setoff, counterclaim, recoupment, defense, or other right that the
Lessee may have for any reason against the Lessor, the manufacturer, any
seller of the Equipment, or any person providing services with respect to the
Equipment;
(2) Any defect in the title, condition, design, operation, or fitness for use
of the Equipment; any damage to, or loss or destruction of, the Equipment; or
any interruption or cessation in its use or possession by the Lessee for any
reason, whether arising out of or related to an act or omission of the Lessor
or any other person;
(3) Any liens with respect to the Equipment;
(4) The invalidity or unenforceability of this Agreement or any absence of
right, power or authority of the Lessor or Lessee to enter into this lease;
(5) Any insolvency, bankruptcy, reorganization, or similar proceedings by or
against the Lessor or Lessee; or
(6) Any other circumstance or occurrence of any nature, whether or not
similar to any of the foregoing.


<PAGE>

It is the express intention of the Lessor and Lessee that all rent payable under
this Agreement will be payable in all events, unless the obligation to pay is
terminated under the express provisions of this Agreement.

The Lessee hereby waives, to the extent permitted by law, all rights that it may
now have or later acquire, by order or otherwise, to terminate this Agreement or
any obligation imposed on the Lessee in relation to this Agreement.

Nothing in this Agreement may be construed as a waiver of the Lessee's right to
seek a separate recovery of any payment of rent that is not due and payable
under this Agreement. The Lessee retains any right it may have to seek damages,
specific performance, or any other remedy at law or in equity, separately or in
combination, against the Lessor or any other person, on account of the Lessor's
or other person's failure to perform its obligations under this Agreement.

8. RESTRICTIONS ON TRANSFER. THE LESSEE MAY NOT SUBLET OR TRANSFER POSSESSION OF
THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR WHICH MAY BE
REASONABLY WITHHELD IN THE SOLE AND ABSOLUTE DISCRETION OF THE LESSOR. THE
LESSEE MAY NOT ASSIGN, PLEDGE, OR OTHERWISE ENCUMBER THIS LEASE.

With respect to any sublease or transfer of possession of the Equipment, the
rights of the sublessee or transferee will be subject and subordinate to all the
terms of this Agreement, including the Lessor's right of repossession on the
occurrence of an event of default. The Lessee will remain primarily liable for
the performance of all the terms of this Agreement to the same extent as if the
sublease or transfer of possession had not occurred.

The Lessor will have the right, at its sole expense, to assign, sell, or
encumber any part of its interest in the Equipment or in this Agreement and any
proceeds of the disposition of that interest, subject to the Lessee's rights
under this lease. To effect or facilitate such assignment, sale or encumbrance,
the Lessee agrees to provide all agreements, consents, conveyances or documents
that may be reasonably requested by the Lessor, including an unrestricted
release of the Lessor from its obligations under this Agreement. That release
will not release the Lessor from any liability that arose before the assignment
or sale.

Any person who succeeds to the rights and interests of the Lessor under this
clause will agree to be bound by the terms of this Agreement without alteration.

The Lessee acknowledges that an assignment, sale, or encumbrance of the Lessor's
interest would not materially change the Lessee's duties under the Agreement or
materially increase its burdens or risks. Even if such a transfer could be
deemed to have that effect, the Lessee agrees that the assignment, sale or
encumbrance will nevertheless be permitted.

Without prejudice to any rights that the Lessee may have against the Lessor, the
Lessee agrees that it will not assert against an assignee any claim or defense
that it may have against the Lessor.

The agreements, covenants, obligations and liabilities contained in this clause,
including but not limited to, all obligations to pay rent and to indemnify each
indemnitee, are made for the benefit of the indemnitees and their respective
successors and assigns.

9. MAINTENANCE COVENANT. The Lessee will:

(1) Furnish all labor and parts required for maintaining, repairing, and
replacing component parts of the Equipment to keep it in good operating
condition and appearance;
(2) Use, operate, maintain, and store the Equipment in a careful and proper
manner;
(3) Protect the Equipment from deterioration;
(4) Comply with the manufacturer's operating procedures and warranty
restrictions and all laws, ordinances, and regulations applicable to the
Equipment or its use and in compliance with the insurance policies required to
be maintained thereunder;
(5) Put the Equipment only to the use contemplated by the manufacturer; and
(6) Maintain accurate and complete records of all repairs and maintenance of the
Equipment and allow the Lessor to inspect those records at any time.
(7) Comply with the maintenance requirements of any maintenance schedule
recommended by the manufacturer or attached as a part of this agreement.

The Lessee will not make any alterations, additions, or improvements to the
Equipment without the Lessor's prior written consent. All repairs, replacement
parts, additions, alterations, and improvements made to the Equipment by the
Lessee will be considered to be the Lessor's property and subject to the terms
of this Agreement.

10. RISK OF LOSS COVENANT. The Lessee will bear the entire risk of destruction,
loss, theft, requisition of title, or use, confiscation, taking, or damage
(collectively, casualty loss) of the Equipment from any cause during the period
commencing when the Equipment is placed in transit to the Lessee and ending when
the Equipment is returned to the Lessor or its designee following termination as
provided herein. If during that period the Equipment suffers any casualty loss,
the Lessee will notify the Lessor in writing within five days following the
casualty loss. On demand by the Lessor, the Lessee will:
(1) If the damage constituting the casualty loss is repairable, repair the
Equipment to the condition in which the Equipment is required to be maintained
under this Agreement;
(2) If the damaged Equipment is not repairable, replace the Equipment at the
Lessee's sole expense with like Equipment approved by the Lessor and take all
actions and make all payments that may be required to vest in the Lessor title
to the replacement Equipment, free and clear of all liens, encumbrances, or
security interests; or
(3) Pay to the Lessor the casualty value (as defined below) and all other
amounts then due under this Agreement.
 "Casualty value" is, at any given date, the stipulated loss value as shown
on the applicable Schedule to each Supplement, and is computed to be the sum
of:
(1) The discounted value at that time, of the aggregate unpaid monthly rent
payments to be paid through the then remaining term of this Agreement,
discounting that amount at an annual discount rate of 8 percent; and
(2) The Lessor's reasonable estimate, at that time, of the fair market value of
the Equipment at the end of the term of this Agreement, discounted at an annual
discount rate of 8 percent.

11. INSURANCE. Lessee shall maintain at all times on the equipment, at Lessee's
expense, property damage, direct damage, and liability insurance in such
amounts, against such risks, and in such form and with such insurers as shall be
satisfactory to Lessor. The required insurance shall be as specified in the
applicable Supplement; provided, however, that the amount of direct damage
insurance shall not on any date be less than the greater of the full replacement
value or the Stipulated Loss Value of the Equipment as of such date. Each
insurance policy will name Lessor as additional insured and as loss payee, and
shall contain a clause requiring the insurer to give to Lessor at least 30 days
prior written notice of any alteration in or cancellation of the terms of such
policy. Lessee shall furnish to Lessor a certificate or other evidence
satisfactory to Lessor that such insurance coverage is in effect, provided,
however, that Lessor shall be under no duty to ascertain the existence or
adequacy of such insurance.

12. TAXES; INDEMNITY. Lessee agrees to pay, and to indemnify and hold Lessor
harmless from, all license fees, assessments, and sales, use, property, excise,
and other taxes and charges (other than federal income taxes and taxes imposed
by any other jurisdiction which are based on, or measured by, the net income of
Lessor for reasons other than the ownership or leasing of the Equipment in such
jurisdiction) imposed upon or with respect to (a) the Equipment or any part
thereof arising out of or in connection with the shipment of Equipment or the
possession, ownership, use or operation thereof, or (b) this Agreement or the
consummation of the transactions herein contemplated. The agreements and
indemnities contained in this paragraph shall survive the expiration or earlier
termination of this Agreement.

13. DEPRECIATION INDEMNITY.

(1) Lessor, as the owner of the Equipment, shall be entitled to such deductions,
credits and other benefits as are provided by the Internal Revenue Code of 1986,
as amended (IRC), to an owner of property.
(2) Lessee agrees that neither it nor any corporation controlled by it, in
control of it, or under common control with it, directly or indirectly, will at
any time take any action or file any returns or other documents inconsistent
with the foregoing and that each of such corporations will file such returns,
take such action, and execute such documents as may be reasonable and necessary
to facilitate accomplishment of the intent thereof. Lessee agrees to copy and
make available for inspection and copying by Lessor such records as will enable
Lessor to determine whether it is entitled to the benefit of any amortization or
depreciation deduction, or other deduction or credit which may be available from
time to time with respect to the Equipment.
(3) If Lessor, under any circumstances or for any reason whatsoever, except for
acts of Lessor or future changes in the IRC, shall lose or shall not have the
right to claim or there shall be disallowed or recaptured, all or any portion of
the federal tax depreciation deductions with respect to any item of Equipment
based on depreciation of the Lessor's full cost of such item of Equipment and
computed on the basis of a method of depreciation provided by the IRC as Lessor
in its complete discretion may select, then Lessee agrees to pay Lessor upon
demand an amount which, after deduction of all taxes required to be paid by
Lessor in respect of the receipt thereof under the laws of any federal, state,
or local government or taxing authority of the United States or of any taxing
authority or government subsidiary of any foreign country, shall be equal to the
sum of (i) an amount equal to the additional income taxes paid or payable by
Lessor in consequence of the failure to obtain the benefit of a depreciation
deduction, and (ii) any interest and/or penalty which may be assessed in
connection with any of the foregoing.

The provisions of this paragraph shall survive the expiration or earlier
termination of this Agreement.

14. INDEMNIFICATION COVENANT. The Lessee agrees to indemnify, reimburse, and
hold harmless Lessor, its successors and assigns ("indemnitees") from and
against all claims, damages, losses, liabilities (including negligence, tort and
strict liability), demands, suits, judgments, and all legal proceedings, and any
and all costs and expenses in connection therewith (including attorneys' fees)
arising out of or in any manner connected with:
(1) This Agreement or the breach of any representation, warranty, or covenant
made by the Lessee under this Agreement;
(2) Manufacture, purchase, lease, delivery, nondelivery, acceptance, rejection,
ownership, possession, use, storage, operation, return, repair or other
disposition of the Equipment;
(3) Patent, copyright or trademark infringement;
(4) The Equipment's condition or any discoverable or nondiscoverable defect in
it arising from its design, testing, or construction; any article used in the
Equipment; or any maintenance, service, or repair, whether or not the Equipment
is in the Lessee's possession and regardless of where the Equipment is located;
or
(5) Any transaction, approval, or document contemplated by this Agreement.
Lessee agrees to give Lessor prompt notice of any such claim or liability.
The Lessee waives and releases indemnitees from any existing or future claims
in any way connected with injury to or death of the Lessee's personnel, loss
or damage of the Lessee's property, or loss of use of any property, which may:
(a) Result from or arise in any manner out of the ownership, leasing, condition,
use, or operation of the Equipment; or
(b) Be caused by any defect in the Equipment; its design, testing, or
construction; any article used in the Equipment; or any maintenance, service, or
repair, whether or not the Equipment is in the Lessee's possession and
regardless of where the Equipment is located. The indemnities described in this
clause will continue in full force and effect notwithstanding the expiration or
other termination of this Agreement and are expressly made for the benefit and
will be enforceable by indemnitees.

15. COVENANT TO KEEP FREE OF LIENS. The Lessee will not directly or indirectly
create, incur, assume, or suffer to exist any lien on the Equipment, its title,
or any interest therein, except for:
(1) The respective rights of the Lessor and Lessee under this Agreement;
(2) Liens granted by the Lessor with respect to the Equipment;
(3) Liens for taxes either not yet due or being contested in good faith by the
Lessee as long as adequate reserves are maintained with respect to those liens
and the Equipment is not, in the Lessor's reasonable opinion, in danger of being
sold, confiscated, forfeited, or seized as a result of the liens; and
(4) Inchoate materialmen's, mechanics', workmen's, repairmen's, employees', or
other like liens arising in the ordinary course of business, which either are
not delinquent or are being contested in good faith by the Lessee, as long as
the Equipment is not, in the Lessor's reasonable opinion, in danger of being
sold, confiscated, forfeited, or seized as a result of the liens.

The Lessee will promptly, at its sole expense, take any action that may be
necessary to discharge any lien except for the liens referred to in paragraphs
(1) and (2) arising at any time with respect to the Equipment.

16. WAIVER OF CONSEQUENTIAL DAMAGES. The Lessee will not be entitled to recover,
and hereby disclaims and waives any right that it may otherwise have to recover,
consequential damages as a result of any breach or alleged breach by the Lessor
of


<PAGE>

any of the agreements, representations, or warranties of the Lessor contained in
this Agreement.

17. LESSOR'S RIGHT TO PERFORM. If Lessee fails to make any payment required to
be made hereunder or fails to comply with any other provisions of this
Agreement, Lessor may make such payment or comply with such provisions, and the
amount of such payment and the reasonable expenses of Lessor incurred in
connection with such payment or compliance, shall be immediately payable by
Lessee to Lessor.

18. DEFAULT. Any one of the following occurrences shall, in the Lessor's sole
discretion, constitute a material default by Lessee of this Agreement:
(1) Failure by Lessee to make any payment of rent or other amount owing
hereunder when due;
(2) Failure of Lessee to perform or observe any other covenant, agreement, or
condition hereunder provided such failure shall have continued for more than 30
days;
(3) Any representation or warranty made by Lessee herein or in any document or
certificate furnished to Lessor in connection herewith shall prove to be
incorrect at any time;
(4) Lessee shall become insolvent or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver, or a trustee
or receiver shall be appointed for Lessee or for a substantial part of its
property or for the Equipment, or reorganization, arrangement, insolvency,
dissolution, or liquidation proceedings shall be instituted by or against
Lessee, if such proceedings are not dismissed within 60 days.
In such event, Lessor may declare this Agreement to be in default, and may
proceed in accordance with the provisions of Paragraph 19 hereof.

19.  REMEDIES.
(1) Remedies. On the occurrence of any event of default and at any time
afterwards as long as it continues, the Lessor may, at its option and without
notice to the Lessee, declare this Agreement to be in default and exercise one
or more of the following remedies:
(a) Declare the then Stipulated Loss Value immediately due and payable with
respect to any or all items of Equipment without notice or demand to Lessee;
(b) Sue for and recover all rent and other payments, then accrued or thereafter
accruing, with respect to any or all items of Equipment;
(c) Take possession of and render unusable any or all items of Equipment,
without demand or notice, wherever same may be located, without any court order
or other process of law and without liability for any damages occasioned by such
taking of possession (any such taking of possession will not constitute a
termination of this lease as to any or all items of Equipment unless Lessor
expressly so notifies Lessee in writing);
(d) Require Lessee to assemble any or all items of Equipment at the original
equipment location, such location to which the equipment may have been moved
with the prior written consent of Lessor, or such other location in reasonable
proximity to either of the foregoing as Lessor designates;
(e) Sell or otherwise dispose of any or all items of Equipment whether or not in
Lessor's possession, in a commercially reasonable manner at public or private
sale and with or without notice to Lessee and apply the net proceeds of such
sale, after deducting all costs of such sale, including, but not limited to,
costs of transportation, repossession, storage, refurbishing, advertising and
broker's fees, to the obligations of Lessee thereunder with Lessee remaining
liable for any deficiency and with any excess being retained by Lessor;
(f) Retain any repossessed items of Equipment and credit the reasonable value
thereof, after deducting all such sales related costs incurred to the date of
crediting, to the obligations of Lessee hereunder with Lessee remaining liable
for any deficiency and with Lessor having no obligation to reimburse Lessee on
account of any excess of such reasonable value over such obligations;
(g) Terminate this lease as to any or all items of Equipment;
(h) Utilize any other remedy available to Lessor at law or in equity.

In each case, plus the amount, if any, as reasonably calculated by the Lessor,
required for the Lessor to receive the same after tax economic return from this
lease that the Lessor would have received if the Lessee had performed all of its
obligations under this Agreement through the end of the lease term.

In addition to the foregoing, the Lessee will be liable for interest on unpaid
amounts at an annual interest rate of 18 percent from the date the same became
due until payment in full, and for all reasonable legal fees and other
reasonable costs and expenses incurred by the Lessor in connection with the
occurrence of any event of default or the exercise of its remedies.

A termination hereunder will occur only upon written notice by Lessor to Lessee
and only with respect to such items of Equipment as to which Lessor specifically
elects to terminate in such notice. Except as to such items with respect to
which there is a termination, this lease will remain in full force and effect
and Lessee will be and remain liable for the full performance of all its
obligations hereunder.

No right or remedy conferred herein is exclusive of any right or remedy
conferred herein or by law; but all such rights and remedies are cumulative of
every other right or remedy conferred hereunder or at law or in equity, by
statute or otherwise, and may be exercised concurrently or separately from time
to time.

(2) In effecting any repossession, the Lessor and its representatives and
agents, to the extent permitted by law, will:
(a) Have the right to enter on any premises where the Lessor reasonably believes
the Equipment is located;
(b) Not be liable, in conversion or otherwise, for the taking of any personal
property of the Lessee that is in or attached to the repossessed Equipment as
long as the Lessor promptly returns that property to the Lessee;
(c) Not be liable in any manner for any damage to any of the Lessee's property
in repossessing and holding the Equipment, except for damage caused by the
Lessor's gross negligence or willful misconduct; and
(d) Have the right to maintain possession of and dispose of the Equipment on any
premises owned by the Lessee or under the Lessee's control.

If reasonably required by the Lessor, the Lessee, at its sole expense, will
assemble and make the Equipment available at a place designated by the Lessor.
If the Equipment is returned to or repossessed by the Lessor, any rights in any
express or implied warranty previously assigned to the Lessee or otherwise held
by it will without further act, notice, or writing be assigned or reassigned to
the Lessor, if assignable. The Lessee will be liable to the Lessor for all
reasonable expenses, costs, and fees incurred in (1) repossessing, storing,
preserving, shipping, maintaining, repairing, and refurbishing the Equipment to
the condition required by this Agreement; and (2) preparing the Equipment for
sale or lease, advertising the sale or lease, and selling or re-letting the
Equipment.

No remedy referred to in this paragraph is intended to be exclusive, but, to the
extent permissible under applicable law, each will be cumulative and operate in
addition to any other remedy referred to above or otherwise available to the
Lessor at law or in equity. The exercise or beginning of exercise by the Lessor
of any one or more of its remedies will not preclude the simultaneous or later
exercise by the Lessor of any other remedies.

No express or implied waiver by the Lessor of any default or event of default
will be construed as a waiver of any future or subsequent default or event of
default.

20. CONDITIONS PRECEDENT. The obligation of Lessor contained in paragraph 1 of
this Agreement shall be subject to the following conditions precedent:
(1) There shall have occurred no material adverse change in the business or the
financial condition of Lessee from the date hereof until the Commencement Date
of any Supplement;
(2) Lessee shall have furnished Lessor with a certificate or other evidence
satisfactory to Lessor that insurance coverage as required by this Agreement is
in effect as to the item of Equipment desired to be leased;
(3) Unless specifically waived by Lessor, Lessee shall have furnished waivers,
in form and substance acceptable to Lessor, of all rights in or to the Equipment
of any landlord or mortgagee of any real property upon which the Equipment is or
is to be situated; and
(4) All other instruments and legal and corporate proceedings in connection with
the transactions contemplated by this Agreement shall be satisfactory in form
and substance to Lessor, and counsel to Lessor shall have received copies of all
documents which it may have requested in connection therewith.

If any of the above conditions is not satisfied at the time Lessee submits any
Supplement, Lessor, in its sole discretion, shall have no obligation under this
Agreement to lease the Equipment covered thereby to Lessee.

21. FINANCIALS. Lessee agrees that for so long as any item of equipment shall be
leased under the Agreement, Lessee will deliver or cause to be delivered to
Lessor (a) as soon as practicable after the end of each month, monthly financial
statements for the month just closed, including balance sheet, and related
statements of income and expense for such month, all in reasonable detail
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved and certified by Lessee's
chief financial officer; and (b) as soon as practicable, and in any event within
120 days after the close of each fiscal year of Lessee, the audited balance
sheet of Lessee as of the end of such fiscal year together with the related
statements of income and expense for such fiscal year together with the related
statements of income and expense for such fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved and certified by an
independent certified public accountant acceptable to Lessor.

22. REPRESENTATIONS, WARRANTIES AND COVENANTS. As a material inducement to
Lessor entering into this Agreement with Lessee, Lessee represents, warrants,
and covenants as follows:
(1) If Lessee is a corporation, or a limited liability company, Lessee is duly
organized and validly existing and is in good standing under the laws of the
state of its incorporation, and is duly qualified and licensed to do business as
a foreign corporation and is in good standing in those jurisdictions where such
qualifications are necessary to authorize Lessee to carry on its present
business and operations, and to own its properties or to perform its obligations
thereunder;
(2) If Lessee is a partnership, Lessee is duly organized and validly existing
under the partnership laws of its state of domicile and is duly authorized in
any foreign jurisdiction where such qualification is necessary to authorize
Lessee to carry on its present business and operations and to own its properties
and to perform its obligations thereunder;
(3) Lessee has full power, authority, and legal right to execute, deliver, and
carry out as Lessee the terms and provisions of this Agreement, and any other
necessary documents in connection with this transaction;
(4) If Lessee is a corporation or limited liability company, Lessee's execution,
delivery, and performance of this Agreement and the other documents and
agreements referred to herein, and the performance of its obligations under this
Agreement have all been authorized by all necessary corporate or company action,
do not require the approval or consent of stockholders, or of any trustee or
holders of any indebtedness or obligation of Lessee and will not violate any
law, governmental rule, regulation or order binding upon Lessee or any provision
of any indenture, mortgage, contract, or other agreement to which Lessee is a
party or by which it is bound or to which it is subject, and will not violate
any provision of the Certificate or Articles of Incorporation, Bylaws, any
preferred stock agreement, Articles of Organization or Operating Agreement of
Lessee;
(5) If Lessee is a partnership, Lessee's execution, delivery and performance of
this Agreement and the other documents and agreements referred to herein, and
the performance of its obligations under this Agreement have all been authorized
by all necessary partnership actions;
(6) There are no pending or threatened investigations, actions, or proceedings
before any court or administrative agency or other tribunal body, which seek to
question or set aside any of the transactions contemplated by this Agreement, or
which, if adversely determined, would materially affect the condition, business,
or operation of Lessee;
(7) Lessee is not in default in any material manner in the payment or
performance of any of its obligations or in the performance of any contract,
agreement, or other instrument to which it is a party or by which it or any of
its assets may be bound;
(8) The balance sheet of Lessee as of the end of its most recent fiscal year and
the related profit and loss statement of the Lessee for the fiscal year ended on
said date, including the related schedules and notes, together with the report
of an independent certified public accountant, heretofore delivered to Lessor,
are all true and correct and present fairly (I) the financial position of Lessee
as of the date of said balance sheet and (ii) the results of the operations of
Lessee for said fiscal year;
(9) All proceedings required to be taken to authorize the lease of the Equipment
from Lessor and to protect Lessor's interest in such Equipment, free and clear
of all liens and encumbrances whatsoever, have been taken;
(10) Lessee has no significant liabilities (contingent or otherwise) which are
not disclosed by or reserved against the financial statements referred to in (8)
above;
(11) All the financial statements referred to in (8) above have been prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistently maintained throughout the period involved;
(12) There has been no change which would have a material adverse effect on the
business or financial condition of Lessee from that set forth in the balance
sheet referred to in (8) above;
(13) No authorization, consent, approval, license, exemption of or filing or
registration with any court, governmental unit or department, commission, board,
bureau, agency, instrumentality or


<PAGE>

the like is required or necessary for the valid execution and delivery of the
Agreement, any bill of sale, and the other documents and agreements referred
to herein;
(14) This Master Lease, the Supplements, and any accompanying documents, having
been duly authorized, executed and delivered to Lessor, constitute legal, valid
and binding obligations of Lessee, enforceable against Lessee in accordance with
the terms hereof except as such terms may be limited by bankruptcy, insolvency,
or similar laws affecting the enforcement of creditor's rights generally;
(15) Each item of Equipment will constitute unused tangible business personal
property in the hands of Lessor within the meaning of the Internal Revenue Code
of 1986, as amended, on the Commencement Date specified in the Supplement
pertaining to said item of Equipment;
(16) The Equipment is personal property and neither real property nor a fixture;
(17) The Equipment will be used for commercial operations only, not for
personal, family, or household purposes.
(18) As of the Commencement Date of each item of Equipment, a reasonable
estimate of the estimated fair market value of such item of Equipment at the end
of the lease term thereof will be at least 20% of the Lessor's cost therefor
(without including in such value any increase or decrease for inflation or
deflation, and after subtracting from such value any cost for removal and
delivery of possession of Equipment to Lessor at the end of the lease term
thereof); and
(19) As of the Commencement Date of each item of Equipment, a reasonable
estimate of the estimated useful life of such item of Equipment at the end of
the original lease term will be at least two years beyond the lease term
thereof.

23. PURCHASE OPTION. Lessor and Lessee hereby agree that so long as no default
shall have occurred and be continuing, Lessee shall have the option to purchase
the Equipment at the expiration of the lease term for the purchase option price
set forth in the applicable Supplement. In order to exercise the option with
respect to all of the Equipment, Lessee must give Lessor written notice at least
90 days prior to the expiration of the lease term with respect thereto, and
remit the purchase price in cash to Lessor or its assigns on or before said
expiration date. After receipt of the purchase price in accordance with this
paragraph, Lessor will transfer to Lessee all of its right, title and interest
in the Equipment purchased, as-is, where-is, without recourse, representation or
warranty of any kind, express or implied. Fair Market Sales Value for the
purpose of this paragraph only shall be determined on the basis of and be equal
in amount to the value that would be obtained in a transaction between an
informed and willing buyer and an informed and willing seller, and the cost of
moving the Equipment from the location of current use shall not be a deduction
from such value.

24. CHOICE OF LAW. The rights and liabilities of the parties under this
Agreement, and each Supplement, shall be interpreted, enforced and governed in
all respects by the laws of the State of California. Lessee hereby consents and
subjects itself to the jurisdiction of every local, state, and federal court
within Santa Clara County, California, and agrees that except as otherwise
required by law, Lessee shall never file or maintain any action or proceeding in
connection with this Agreement, or any Supplement in any court outside the State
of California. Lessee hereby agrees that service of process in connection with
any such action upon Lessee may be in the manner provided by the laws of the
State of California.

25. ATTORNEY FEES AND COSTS. Lessee will pay or reimburse Lessor for all costs
and expenses, including repossession, equipment disposition and court costs and
attorney's fees (including a reasonable fee for services of salaried counsel
employed by Lessor), not offset against amounts recovered or credited as
contemplated in paragraph 19, incurred by Lessor in exercising any of its rights
or remedies thereunder or enforcing any of the terms, conditions or provisions
hereof. This obligation includes the payment or reimbursement of all such
amounts whether an action is ultimately filed and whether an action filed is
ultimately dismissed.

26. HEADINGS FOR CONVENIENCE ONLY. The headings for the paragraphs and
provisions in this Master Lease, as well as the other documents constituting the
Agreement, are intended solely for convenience of reference and are not intended
nor shall they be used to construe, explain, modify or place any meaning upon
any provisions hereof.

27. MODIFICATION. Neither this Master Lease or any other document or Supplement
constituting the Agreement can be modified or amended except by written
agreement signed and dated by both Lessor and Lessee.

28. COUNTERPARTS. This Master Lease and any other document or Supplement
constituting the Agreement may be executed in any number of counterparts. Any
document executed in counterparts shall remain one document. Each counterpart is
an original instrument.

29. PROVISIONS SEVERABLE. Should any provision of the Agreement be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect the remaining provisions hereof.

30. ENTIRE AGREEMENT. This Master Lease, the Commitment, Supplements, the
Proposal accepted by Lessee on July 27, 2000, and all other documents
constituting the Agreement constitute the entire agreement between the parties
and no other representation or statements shall be deemed binding, nor shall
there be any reliance by either Lessor or Lessee upon any representations,
agreements, statements, promises, understandings, or inducements made which are
not embodied in the written Agreement.

31. TIME. Time is of the essence of this Agreement and each and all of its
provisions.

Executed on _________________, 2000.


By execution hereof, the undersigned hereby certifies that (s)he has read this
Agreement, and that (s)he is duly authorized to execute this Master Equipment
Lease on behalf of Lessee.




                        LESSEE:
                        CONDUCTUS, INC., a Delaware corporation


                        By:/s/ Ron Wilderink
                           -----------------
                        Name:
                        Title:

                        LESSOR:
                        PENTECH FINANCIAL SERVICES, INC.,
                        a California corporation


                        By:/s/ Benjamin E. Millerbis
                           -------------------------
                                  Benjamin E. Millerbis
                        Title:    President