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Prepared by MERRILL CORPORATION

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EXHIBIT 10.40    
  

 
 

SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT    
  

    SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT (this "Amendment"), dated as of April 25, 2001, among SPECIAL DEVICES, INCORPORATED, a corporation
organized under the laws of the State of Delaware (the "Borrower"), the lenders party to the Credit Agreement referred to below (collectively, the "Banks") and BANKERS TRUST COMPANY, as Administrative
Agent. All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement. 

W I T N E S S E T H:  

    WHEREAS, the Borrower, the Banks and the Administrative Agent are parties to a Credit Agreement, dated as of December 15, 1998 (as in effect on the date
hereof, the "Credit Agreement"); 

    WHEREAS,
the Borrower has determined that it is in its best interests (i) to sell all or substantially all of its assets that are used in the design, manufacture and sale of
precision-engineered pyrotechnic components and subsystems for use in aerospace applications (the "Aerospace Sale") and (ii) to enter into the Mesa Sale-Leaseback Transaction and
the Moorpark Sale-Leaseback Transaction simultaneously (collectively, the "Sale-Leaseback Transaction"); 

    WHEREAS,
to effectuate the Aerospace Sale, the Borrower, PS/EMC West, LLC (the "Buyer") and Pacific Scientific Corporation (the "Parent") have heretofore entered into an Asset
Purchase Agreement, dated as of March 27, 2001 (the "Aerospace Purchase Agreement"); 

    WHEREAS,
the Borrower has requested that the Banks (i) consent to the Aerospace Sale and (ii) modify the terms of the Sale-Leaseback Transaction from that
which exists in the Credit Agreement prior to giving effect to this Amendment, both as provided herein; 

    WHEREAS,
the Borrower also has requested certain other amendments to the Credit Agreement as provided herein; and 

    WHEREAS,
subject to the terms and conditions of this Amendment, the Banks hereby agree to grant the consents, modifications and amendments under the Credit Agreement as herein
provided; 

    NOW,
THEREFORE, it is agreed: 

I.  Consents under Credit Agreement.  

    1.  Notwithstanding
anything to the contrary contained in Section 3.03(d) or 9.02 of the Credit Agreement, the Banks hereby consent to the Aerospace Sale
pursuant to the Aerospace Purchase Agreement, so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) such sale is in an arm's-length transaction and
the Borrower receives at least fair market value (as determined in good faith by the Borrower), (iii) the total consideration received therefrom by the Borrower is 100% cash and is paid at the
time of the closing of such sale (except for the portion of such consideration which represents any post-closing working capital purchase price adjustment), (iv) such consideration
shall be at least $45,000,000 (subject to a pre-closing and a post-closing working capital purchase price adjustment as provided in the Aerospace Purchase Agreement) (the
"Gross Sale Proceeds") and the Net Sale Proceeds therefrom shall be at least $29,100,000, (v) 100% of the Net Sale Proceeds therefrom are applied upon receipt thereof soley as a mandatory
repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(h) and (i) of the Credit Agreement (for avoidance of doubt, it is acknowledged and agreed
that no portion of such Net Sale Proceeds shall be permitted to be reinvested pursuant to Section 4.02(d) of the Credit Agreement), (vi) to the extent that the Net Sale Proceeds from the
Aerospace Sale are not sufficient to repay all outstanding Term Loans in full at the time of the closing of the Aerospace Sale, the Borrower shall use a portion of the Gross Sale Proceeds not
constituting Net Sale Proceeds upon the receipt thereof to repay in full all remaining outstanding Term Loans at the time of the closing of the Aerospace Sale, 

 

and (vii) an amount (the "Revolver Blocked Amount") equal to $9,000,000 of non-Net Sale Proceeds from the Aerospace Sale is applied upon receipt thereof to repay outstanding
Revolving Loans (with no corresponding reduction to the Total Revolving Loan Commitment as a result of such repayment pursuant to this clause (vii)). To the extent Collateral is sold in
compliance with the preceding provisions of this Section 1, such Collateral shall be sold free and clear of the Liens created by the respective Security Documents and the Banks hereby authorize
the Administrative Agent and the Collateral Agent to take any actions deemed appropriate in order to effect such releases. 

    2.  Notwithstanding
anything to the contrary contained in Sections 9.02(xviii) and (xix) of the Credit Agreement, the Banks hereby consent to the
Sale-Leaseback Transaction, so long as (i) such transaction occurs after the consummation of the Aerospace Sale, (ii) no Default or Event of Default then exists or would
result therefrom, (iii) such transaction is in an arm's-length transaction and the Borrower receives at least fair market value (as determined in good faith by the Borrower), (iv) the
Mesa Sale-Leaseback Transaction and the Moorpark Sale-Leaseback Transaction occur simultaneously with each other as part of one transaction, (v) the total consideration
received therefrom by the Borrower is 100% cash (except for a seller note in an aggregate principal amount not to exceed $4,550,000) and is paid (or delivered) at the time of the closing of such
transaction and such note shall be pledged and delivered to the Collateral Agent pursuant to the Pledge Agreement, (vi) such consideration shall be at least $36,000,000 (the "Gross
Sale-Leaseback Proceeds") and the Net Sale Proceeds therefrom shall be at least $29,000,000 in cash, (vii) 100% of the Net Sale Proceeds therefrom are applied upon receipt thereof
as a mandatory reduction to the Total Revolving Loan Commitment pursuant to Section 3.03(d) of the Credit Agreement (with a corresponding mandatory repayment of outstanding Revolving Loans
pursuant to Section 4.02(a) of the Credit Agreement) (for avoidance of doubt, it is acknowledged and agreed that no portion of such Net Sale Proceeds shall be permitted to be reinvested
pursuant to Section 4.02(d) of the Credit Agreement), provided that, notwithstanding the foregoing, the Total Revolving Loan Commitment shall not
be reduced to below $8,500,000 as a result of the application of the Net Sale Proceeds from the Sale-Leaseback Transaction. To the extent Collateral is sold in compliance with the
preceding provisions of this Section 2, such Collateral shall be sold free and clear of the Liens created by the respective Security Documents and the Banks hereby authorize the Administrative
Agent and the Collateral Agent to take any actions deemed appropriate in order to effect such releases. 

    3.  Prior
to giving effect to this Amendment, the Borrower and the Banks acknowledge that the Total Revolving Loan Commitment is $25,000,000, although no more than
$22,500,000 of the Total Revolving Loan Commitment may be utilized by the Borrower as per the Fifth Amendment and Consent, dated as of January 12, 2001, to the Credit Agreement. At the time of
the consummation of the Aerospace Sale, the Banks agree that the Borrower shall have full access to the Total Revolving Loan Commitment then in effect subject to the terms and conditions of the Credit
Agreement and this Amendment (it being understood that, for the avoidance of doubt, the Total Revolving Loan Commitment shall still be reduced as, and to the extent, provided in Section 2 of
this Part I and as provided in the Credit Agreement and utilization thereof shall still be limited as provided in Section 4 of Part I of this Amendment). 

    4.  In
order to induce the Banks to grant the consents set forth in preceding Sections 1, 2 and 3 of this Part I, the following restrictions shall apply: 

     (i) During
the period commencing upon the Sixth Amendment Effective Date (as defined below) and continuing until the earlier of (x) such time as when the
Borrower shall have paid its estimated tax payments with respect to both its federal and state income tax obligations resulting from the Aerospace Sale (which date shall not be earlier than
October 15, 2001) and (y) the consummation of the Sale-Lease Back Transaction and the application of the Net Sale Proceeds therefrom as required by Section 2 of this
Part I, the Borrower shall at all times ensure that the Total Unutilized Revolving Loan Commitment is at least equal to the Revolver Blocked Amount 

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(although the Revolver Blocked Amount may be utilized to incur Revolving Loans in accordance with the terms of the Credit Agreement to pay the foregoing estimated tax payments on or after
October 15, 2001). Without limiting the provisions of Section 4.02(a) of the Credit Agreement, on any day during the period set forth above in this Section 4 that the Total
Unutilized Revolving Loan Commitment is less than the Revolver Blocked Amount, the Borrower shall prepay on such day the principal of Swingline Loans and, after all Swingline Loans have been repaid in
full (or if no Swingline Loans are outstanding), Revolving Loans in an amount equal to such deficiency; and 

    (ii) In
the event that the Sale-Leaseback Transaction occurs prior to October 15, 2001, the Borrower shall, at the time of the consummation of the
Sale-Leaseback Transaction and in addition to the other requirements of this Amendment, deposit with the Administrative Agent cash in an aggregate amount equal to the Revolver Blocked
Amount to be held as security for the remaining Obligations in a cash collateral account to be established by the Administrative Agent (although (x) from and after October 15, 2001 such
cash may be released to the Borrower to pay its estimated tax payments in respect of the Aerospace Sale to the extent that such cash has not theretofore been applied against the Obligations in
accordance with the cash collateral arrangements agreed to by the Administrative Agent and the Borrower (which cash collateral arrangements shall only permit the Banks to apply such cash against the
Obligations from and after the occurrence of an Event of Default under Section 10.01 or 10.05 of the Credit Agreement) and (y) after the Borrower has made such estimated tax payments as
provided above, any portion of such cash remaining on deposit with the Administrative Agent shall be released to the Borrower so long as no Default or Event of Default then exists). 

    5.  Notwithstanding
anything to the contrary contained in the Credit Agreement or in the Capital Call Agreement, from and after the consummation of the Aerospace Sale
and the application of the proceeds therefrom as provided in Section 1 of this Part I, the Capital Call Agreement shall be terminated and shall be of no further force or effect. 

II.  Amendments to Credit Agreement.  

    1.  Section 9.02(xxi) of
the Credit Agreement is hereby amended by deleting the number "30" appearing in the first sentence of said
Section 9.02(xxi) and inserting the number "33" in lieu thereof. 

    2.  Section 9.08
of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.08 is inserted in lieu thereof: 

    "9.08
Consolidated Interest Coverage Ratio. The Borrower will not permit the Consolidated Interest Coverage Ratio for any Test Period
to be less than 1.00:1.00." 

    3.  Section 9.09
of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.09 is inserted in lieu thereof: 

    "9.09
Maximum Leverage Ratio. (A) From and after the last day of the Borrower's fiscal quarter ending closest to
April 30, 2001 through but not including the date of the consummation of the Sale-Leaseback Transaction, the Borrower will not permit the Leverage Ratio at any time to be greater
than 9.00:1.00. 

    (B) From
and after the consummation of the Sale-Lease Back Transaction, the Borrower will not permit the Leverage Ratio at any time to be greater than
8.25:1.00." 

    4.  Section 9.10
of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.10 is inserted in lieu thereof: 

    "9.10
Minimum Consolidated EBITDA. (A) From and after the last day of the Borrower's fiscal quarter ending closest to
April 30, 2001 through but not including the date of the 

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consummation of the Sale-Leaseback Transaction, the Borrower will not permit Consolidated EBITDA for any Test Period ending during such period to be less than $13,500,000. 

    (B) From
and after the consummation of the Sale-Leaseback Transaction, the Borrower will not permit Consolidated EBITDA for any Test Period ending from and
after such time to be less than $12,000,000." 

    5.  The
definition of "Consolidated EBITDA" appearing in Section 11.01 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing
at the end of clause (x)(iii) thereof and inserting a comma in lieu thereof and (ii) inserting the following text immediately after the words "Consolidated EBIT for such period"
appearing in clause (x)(iv) thereof: 

"and
(v) up to $1,000,000 in the aggregate of payments, fines, penalties and legal and other expenses relating to the settlement of administrative, civil and criminal proceedings arising out of
the accidental initiation incident that occurred on April 24, 2000 at the Borrower's former facility located in Hollister, California to the extent that such charges were deducted in arriving
at Consolidated EBIT for such period". 

    6.  The
definition of "Revolving Loan Maturity Date" appearing in Section 11.01 of the Credit Agreement is hereby amended by deleting the date
"December 15, 2003" appearing therein and inserting the date "April 30, 2002" in lieu thereof. 

    7.  Section 11.01
of the Credit Agreement is hereby further amended by inserting in the appropriate alphabetical order the following new definitions: 

    "Aerospace
Sale" shall have the meaning provided for in the recitals to the Sixth Amendment and Consent, dated as of April 25, 2001, to this Agreement. 

    "Sale-Leaseback
Transaction" shall have the meaning provided for in the recitals to the Sixth Amendment and Consent, dated as of April 25, 2001, to this Agreement. 

    8.  Section 13.07(a)
of the Credit Agreement is hereby deleted in its entirety and the following new Section 13.07(a) is inserted in lieu thereof: 

    "13.07
Calculations; Computations; Accounting Terms. (a) The financial statements to be furnished to the Banks pursuant hereto
shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided that, except as otherwise specifically provided herein,
(w) all computations and all definitions used in determining compliance with Sections 9.07 through 9.10, inclusive, shall utilize accounting principles and policies in conformity with those
used to prepare the historical financial statements of the Borrower referred to in Section 7.05(a), (x) all computations and all definitions used in determining compliance with Sections
9.08 through 9.10, inclusive, shall be determined as if the Scot Sale (and the application of the proceeds therefrom) had occurred on the first day of the Borrower's fiscal quarter that began closest
to November 1, 1999, (y) all computations and all definitions used in determining compliance with Sections 9.08 through 9.10, inclusive, shall be determined as if the Aerospace Sale (and
the application of the proceeds therefrom) had occurred on the first day of the Borrower's fiscal quarter that began closest to February 1, 2000, and (z) from and after the consummation
of the Sale-Leaseback Transaction, all computations and all definitions used in determining compliance with Sections 9.08 through 9.10, inclusive, shall be determined as if the
Sale-Leaseback Transaction (and the application of the proceeds therefrom) had occurred on the first day of the Borrower's fiscal quarter that began closest to February 1, 2001." 

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IV.  Miscellaneous.  

    1.  In
order to induce the Banks to enter into this Amendment, the Borrower hereby represents and warrants that (i) all representations, warranties and
agreements contained in Section 7 of the Credit Agreement are true and correct in all material respects on and as of the Sixth Amendment Effective Date (unless such representations and
warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (ii) there exists no Default or Event of
Default on the Sixth Amendment Effective Date, in each case both before and after giving effect to this Amendment. 

    2.  This
Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other
Credit Document. 

    3.  This
Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed
and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative
Agent. 

    4.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.

    5.  This
Amendment shall become effective on the date (the "Sixth Amendment Effective Date") when (i) each Credit Party and the Required Banks shall have signed
a counterpart hereof (whether the same or different counterparts) and shall have delivered (including, without limitation, by way of facsimile transmission) the same to the Administrative Agent at the
Notice Office and (ii) the Aerospace Sale shall have been consummated on the terms and conditions set forth herein. This Amendment and the agreements contained herein shall be binding on the
successors and assigns of the parties hereto. 

    6.  From
and after the Sixth Amendment Effective Date, all references in the Credit Agreement and in the other Credit Documents to the Credit Agreement shall be deemed
to be references to the Credit Agreement as modified hereby. 

* * *  

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    IN
WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written. 

	 	 	SPECIAL DEVICES, INCORPORATED
	

 	
 	

By:	
 	

/s/ DONALD C. CAMPION   
 Name: Donald C. Campion

Title: E.V.P. & Chief Financial Officer
	

 	
 	
BANKERS TRUST COMPANY,
 

Individually and as Administrative Agent
	

 	
 	

By:	
 	

/s/ MARGUERITE SUTTON   
 Name: Marguerite Sutton

Title: Vice President
	

 	
 	
BANKBOSTON, N.A.
	

 	
 	

By:	
 	

 Name:                

Title:                
	

 	
 	
THE BANK OF NOVA SCOTIA
	

 	
 	

By:	
 	

/s/ JOHN QUICK   
 Name: John Quick

Title: Managing Director
	

 	
 	
CITY NATIONAL BANK
	

 	
 	

By:	
 	

 Name:                

Title:                
	

 	
 	
FIRST UNION NATIONAL BANK
	

 	
 	

By:	
 	

/s/ ALLAN SIEGEL   
 Name: Allan Siegel

Title: Managing Director

	

 	
 	
GENERAL ELECTRIC CAPITAL CORPORATION
	

 	
 	

By:	
 	

/s/ JAMES M. KOPACK   
 Name: James M. Kopack

Title: Senior Risk Manager
	

 	
 	
MORGAN STANLEY DEAN WITTER

  PRIME INCOME TRUST
	

 	
 	

By:	
 	

 Name:               

Title:                
	

 	
 	
NATIONAL CITY BANK
	

 	
 	

By:	
 	

/s/ MARK J. RINGEL   
 Name: Mark J. Ringel

Title: Vice President
	

 	
 	
PARIBAS
	

 	
 	

By:	
 	

/s/ EDWARD T. IRWIN   
 Name: Edward T. Irwin

Title: Managing Director
	

 	
 	

By:	
 	

/s/ RO TOYOSHIMA   
 Name: Ro Toyoshima

Title: Vice President
	

 	
 	
KZH STERLING LLC
	

 	
 	

By:	
 	

 Name:                

Title:                
	

 	
 	
UNION BANK OF CALIFORNIA, N.A.
	

 	
 	

By:	
 	

/s/ RICHARD DEGREY   
 Name: Richard DeGrey

Title: Vice President

	

 	
 	
ARK CLO 2000-1, LIMITED
	

 	
 	

By:	
 	

 Name: Patriarch Partners, LLC,

its Collateral Manager
	

 	
 	

By:	
 	

/s/ LYNN TILTON   
 Name: Lynn Tilton

Title: Authorized Signatory

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EXHIBIT 10.40

SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENTPrepared by MERRILL CORPORATION

   Exhibit 4.1  

 AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

AEROGEN, INC.  

    AEROGEN, INC., a corporation organized and existing under the laws of the state of Delaware (the
"Corporation") hereby certifies that: 

    1.  The
name of the Corporation is AeroGen, Inc. The name under which this corporation was originally incorporated is AeroGen (Delaware), Inc. 

    2.  The
date of filing of the Corporation's original Certificate of Incorporation was March 12, 1998. 

    3.  The
Amended and Restated Certificate of Incorporation of the Corporation as provided in Exhibit A hereto was duly adopted in accordance with the provisions
of Section 242 and Section 245 of the General Corporation Law of the State of Delaware by the Board of Directors of the Corporation. 

    4.  Pursuant
to Section 245 of the Delaware General Corporation Law, approval of the stockholders of the Corporation has been obtained. 

    5.  The
Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated by
reference. 

    IN WITNESS WHEREOF, the undersigned has signed this certificate this 15th day of November, 2000, and hereby affirms and acknowledges
under penalty of perjury that the filing of this Amended and Restated Certificate of Incorporation is the act and deed of AeroGen, Inc. 

	 	 	AEROGEN, INC.
	

 	
 	

By	

/s/ Jane E. Shaw
 Jane E. Shaw

Chief Executive Officer

1

 
EXHIBIT A  

 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF AEROGEN, INC.

a Delaware corporation  

ARTICLE I.  

    The name of the corporation is AEROGEN, INC.

ARTICLE II.  

    The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company. 

ARTICLE III.  

    The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of
Delaware ("DGCL"). 

ARTICLE IV.  

    A. Classes of Stock.  This corporation is authorized to issue two classes of stock to be designated, respectively,
"Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue One Hundred Million (100,000,000), of which Ninety Five Million (95,000,000) shares shall
be Common Stock, par value $0.001 per share, and Five Million (5,000,000) shares shall be Preferred Stock, par value $0.001 per share. 

    B. Rights, Preferences and Restrictions of Preferred Stock.  The Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is hereby authorized, by filing a certificate (a "Preferred Stock Designation") pursuant to DGCL, to fix or alter from time to time the designation, powers,
preferences and rights (voting or otherwise) granted upon, and the qualifications, limitations or restrictions of, any wholly unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall
resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. 

ARTICLE V.  

    For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of
the corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that: 

    A. Management of Business.  The management of the business and the conduct of the affairs of the corporation shall be
vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted by the Board of Directors. 

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    B. Board of Directors.  

        1. Subject to the rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned
to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the "Initial Public Offering"), the term of
office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Initial
Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of
stockholders following the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At
each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. During such
time or times that the corporation is subject to Section 2115(b) of the California General Corporation Law ("CGCL"), this Section B.1. of this Article V shall
become effective and be applicable only when the corporation is a "listed" corporation within the meaning of Section 301.5 of the CGCL. 

        2. In the event that the corporation is subject to Section 2115(b) of the CGCL AND is not a "listed"
corporation or ceases to be a "listed" corporation under Section 301.5 of the CGCL, Section B.1. of this Article V shall not apply and all directors shall be shall be elected at
each annual meeting of stockholders to hold office until the next annual meeting. 

        3. No person entitled to vote at an election for directors may cumulate votes to which such person is entitled,
unless, at the time of such election, the corporation is subject to Section 2115(b) of the CGCL AND is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, every stockholder entitled to vote at an election for directors may cumulate such stockholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to which such stockholder's shares are otherwise entitled, or distribute the stockholder's votes on the same principle among
as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder's votes unless (i) the names of such candidate or candidates have
been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting,
the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected. 

    Notwithstanding
the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 

    C. Removal of Directors.  

        1. During such time or times that the corporation is subject to Section 2115(b) of the
CGCL, the Board of Directors or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares
entitled to vote on such removal; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast
against such director's removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election in which the same total number of votes
were cast (or, if such action is taken by written consent, all shares entitled 

3

 

to vote were voted) and the entire number of directors authorized at the time of such director's most recent election were then being elected. 

        2. At any time or times that the corporation is not subject to Section 2115(b) of the CGCL and subject to any
limitations imposed by law, Section C.1. above shall no longer apply and removal shall be as provided in Section 141(k) of the DGCL. 

    D. Vacancies.  

        1. Subject to the rights of the holders of any series of Preferred Stock, any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only
by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director's successor shall have been elected
and qualified. 

        2. If at the time of filling any vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Delaware Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in offices
as aforesaid, which election shall be governed by Section 211 of the DGCL. 

        3. At any time or times that the corporation is subject to Section 2115(b) of the CGCL, if, after the filling
of any vacancy by the directors then in office who have been elected by stockholders shall constitute less than a majority of the directors then in office, then: 

            (a) Any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time
outstanding having the right to vote for those directors may call a special meeting of stockholders; or 

            (b) The Superior Court of the proper county shall, upon application of such stockholder or stockholders, summarily
order a special meeting of stockholders, to be held to elect the entire board, all in accordance with Section 305(c) of the CGCL. The term of office of any director shall terminate upon that
election of a successor. 

    E. Bylaw Amendments.  Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be altered or
amended or new Bylaws adopted by the affirmative vote of at least sixty-six and two-thirds percent (662/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote. The Board of Directors shall also have the power to adopt, amend, or repeal Bylaws. 

    F. Ballots.  The directors of the corporation need not be elected by written ballot unless the Bylaws so provide. 

    G. Action By Stockholders.  No action shall be taken by the stockholders of the corporation except at an annual or
special meeting of stockholders called in accordance with the Bylaws; no action shall be taken by the stockholders by written consent. 

    H. Advance Notice.  Advance notice of stockholder nominations for the election of directors and of business to be
brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation. 

4

 

    I. Special Meetings of Stockholders.  Special meetings of the stockholders may be called only by the Chairman of the
Board, the Chief Executive Officer, or a majority of the members of the Board of Directors. 

ARTICLE VI.  

    A. No Personal Liability. A director of the corporation shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director's duty of loyalty to the corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or knowing violations of law; (3) under section 174 of the Delaware General
Corporation law, or (4) for any transaction from which the director derived an improper personal benefit. 

    B. Indemnification.  Each person who is or is made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as
provided in the second paragraph hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof), was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right
to be paid by the corporation for any expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires,
the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under
this section or otherwise. The corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing
indemnification of directors and officers. 

    If
a claim under the first paragraph of this section is not paid in full by the corporation within thirty (30) days after a written claim has been received by the corporation,
the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense in any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the 

5

 

standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnity the claimant for the amount claimed, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 

    The
right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise. 

    C. Insurance.  The corporation may maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. 

    D. Repeal and Modification.  Any repeal or modification of the foregoing provisions of this Article 6 shall not
adversely affect any right or protection of a director, officer, employee or agent of the corporation existing at the time of such repeal or modification. 

    E. Vote Required to Amend or Repeal.  The amendment or repeal of this Article 6 shall require the approval of the
holders of shares representing at least sixty six and two-thirds percent (662/3%) of the shares of the corporation entitled to vote in the election of directors, voting as
one class. 

ARTICLE VII.  

    A.  The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, except as provided in paragraph B of this Article VII, and all rights conferred upon the stockholders herein are
granted subject to this reservation. 

    B.  Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the voting stock required by law, this Certificate of
Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (662/3%) of the voting power
of all of the then-outstanding shares of the voting stock, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI and VII. 

6

   CERTIFICATE OF DESIGNATION  

 OF  

 SERIES A JUNIOR PARTICIPATING PREFERRED STOCK  

 (Pursuant to Section 151 of the

Delaware General Corporation Law)  

    AEROGEN, INC., a corporation organized and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Company"), hereby certifies that the following resolution was adopted by the Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on June 5, 2001: 

    RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Company in accordance with the
provisions of its Amended and Restated Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $0.001 per share, of the Company and hereby states the
designation and number of shares, and fixes the relative designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof (in addition to the
provisions set forth in the Certificate of Incorporation of the Company, which are applicable to the Preferred Stock of all classes and series), as follows: 

Series A
Junior Participating Preferred Stock: 

    Section 1. Designation and Amount.  Five Hundred Thousand (500,000) shares of Preferred Stock, $0.001 par value,
are designated "Series A Junior Participating Preferred Stock" with the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions specified
herein (the "Junior Preferred Stock"). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Junior Preferred Stock. 

    Section 2. Dividends and Distributions.  

        (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Junior Preferred Stock with respect to dividends, the holders of shares of Junior Preferred Stock, in preference to the holders of Common Stock,
par value $0.001 per share (the "Common Stock"), of the Company, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day of April, July, October and January in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $l.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common 

1

 

Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        (B) The Company shall declare a dividend or distribution on the Junior Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock);  provided, that in the event no
dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date. 

        (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for
the
determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 

    Section 3. Voting Rights.  The holders of shares of Junior Preferred Stock shall have the following voting
rights: 

        (A) Subject to the provision for adjustment hereinafter set forth, each share of Junior Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        (B) Except as otherwise provided herein, in any other Certificate of Designation creating a series of Preferred Stock
or any similar stock, or by law, the holders of shares of Junior Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall
vote together as one class on all matters submitted to a vote of stockholders of the Company. 

        (C) Except as set forth herein, or as otherwise provided by law, holders of Junior Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the extent 

2

 

they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 

    Section 4. Certain Restrictions.  

        (A) Whenever quarterly dividends or other dividends or distributions payable on the Junior
Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not: 

            (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; 

            (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 

            (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or 

            (iv) redeem or purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of
stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. 

        (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 

    Section 5. Reacquired Shares.  Any shares of Junior Preferred Stock purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of
Incorporation, or in any other Certificate of Designation creating a series of Preferred Stock or any similar stock or as otherwise required by law. 

    Section 6. Liquidation, Dissolution or Winding Up.  Upon any liquidation, dissolution or winding up of the
Company, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock
unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, provided that the holders of shares of Junior Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of 

3

 

shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock,
except distributions made ratably on the Junior Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

    Section 7. Consolidation, Merger, Etc.  In case the Company shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of
Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event
the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

    Section 8. No Redemption.  The shares of Junior Preferred Stock shall not be redeemable. 

    Section 9. Rank.  The Junior Preferred Stock shall rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class of the Company's Preferred Stock. 

    Section 10. Amendment.  The Amended and Restated Certificate of Incorporation of the Company shall not be amended
in any manner which would materially alter or change the powers, preferences or special rights of the Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Junior Preferred Stock, voting together as a single class. 

4

 

    IN WITNESS WHEREOF, the undersigned have executed this certificate as of June 5, 2001. 

	 	 	/s/ Jane E. Shaw
Jane E. Shaw

Chief Executive Officer
	

 	
 	
/s/ Carol A. Gamble
Carol A. Gamble

Secretary

5

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