Amendment No.2 to Third Amended and Restated Investor Rights Agreement



 Exhibit 4.2(c) 
  
 Amendment No. 2 to 
 Third Amended and Restated
Investor Rights Agreement 
  
 THIS AMENDMENT NO. 2 to the Third Amended
and Restated Investor Rights Agreement dated March 16, 2006 (this “Amendment”) amends the Third Amended and Restated Investor Rights Agreement dated May 12, 2004, as amended (the “Future IRA”) by and among
Targacept, Inc. (the “Company”) and the holders of shares of the Company’s Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Stock”), Series B Convertible Preferred Stock, $0.001
par value per share (“Series B Stock”), or Series A Convertible Preferred Stock, $0.001 par value per share (“Series A Stock” and, together with the Series C Stock and Series B Stock, “Preferred
Stock”) party thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Future IRA. 
  
 R E C I T A L S: 
  
 WHEREAS, the Future IRA was entered into in contemplation of an initial public offering of the Company’s common stock in order to amend, effective as of the
closing of such initial public offering, the Company’s Second Amended and Restated Investor Rights Agreement dated November 26, 2002, as amended (the “Current IRA”), which is currently in effect; and 
  
 WHEREAS, by its terms, the Future IRA would not become effective or affect the Current
IRA unless and until the prospective initial public offering is completed and would not become effective at all if such initial public offering was not completed on or before June 30, 2005 (the “Trigger Date”); and 

 
 WHEREAS, Section 3 of the Future IRA provides that the Future IRA may be
amended only with the prior written consent of the Company and the holders of a majority of the outstanding Series A Registrable Securities and Series B Registrable Securities and at least 65% of the outstanding Series C Registrable Securities
(collectively, the “Required Investors”); and 
  
 WHEREAS,
the prospective initial public offering was not completed on or before the Trigger Date, and the Company and the undersigned holders of Preferred Stock, constituting the Required Investors, desire to amend the Future IRA as provided herein to
provide for a later Trigger Date; 
  
 NOW, THEREFORE, the undersigned
parties agree as follows: 
  
 1. Section 9 of the Future IRA is hereby
amended by replacing “June 30, 2005” therein with “September 30, 2006.” 
  
 2. As expressly amended hereby, the Future IRA shall continue in full force and effect. 
  
 [signature page follows] 







 IN WITNESS WHEREOF, this Amendment No. 2 to the Third Amended and Restated IRA is executed as of the day and
year first above written. 
  
 TARGACEPT, INC. 

 
 By: /s/ J. Donald deBethizy 
         Name: J. Donald deBethizy 
         Title: President and CEO 
  
 R.J. REYNOLDS TOBACCO HOLDINGS, INC. 
  
 By: /s/ Charles A. Blixt 
         Name: Charles A. Blixt 
         Title: President  
  
 EUCLIDSR PARTNERS, L.P. 
  
 By: EuclidSr Associates, L.P., 
         its general partner 
  
         By:/s/ Elaine V. Jones 
                 Elaine V. Jones 
                 General Partner 
  
 EUCLIDSR BIOTECHNOLOGY PARTNERS, L.P. 
 By: EuclidSr Biotechnology Associates, L.P., 
         its general partner 
  
         By: /s/ Elaine V. Jones 
                 Elaine V. Jones 
                 General Partner 
  
 BURRILL BIOTECHNOLOGY CAPITAL FUND, L.P. 
  
 By: Burrill & Company (Biotechnology GP), LLC, 

        its General Manager 
  
         By: /s/ GS Burrill 
                 G. Steven Burrill 
                 Managing Member 
  
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 GENAVENT FUND 
  
 By: SGAM Alternative Investments, its Manager 
  
         By: /s/ Jean-Yves Nothias 
                 Jean-Yves Nothias 
                 Managing Director 
  
 FCPR SGAM AI BIOTECHNOLOGY FUND 
  
 By: SGAM Alternative Investments, its Manager 
  
 By: /s/ Jean-Yves Nothias 
         Jean-Yves Nothias 
         Managing Director 
  
 FCPR CDC INNOVATION 2000, a venture 
 capital fund represented by CDC ENTREPRISES 
 INNOVATION, its management company 
 (“Societe de gestion”) with a share capital of 
 EUR 762,000 
  
 By:/s/ Chantal
Parpex 
 Name: Chantal Parpex 
 Title: CEO 
  
 AURIGA VENTURES, a venture capital fund 
 represented by Auriga Partners a French limited 
 company with a share capital of Frf 1,825,000 
  
 By: /s/ Bernard Daugeras 
         Bernard Daugeras, duly authorized therefor 
  
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 ADVENT PRIVATE EQUITY FUND II, 
 ‘A’ LIMITED PARTNERSHIP 
 ADVENT PRIVATE EQUITY FUND II, 
 ‘B’ LIMITED PARTNERSHIP 
 ADVENT PRIVATE EQUITY FUND II, 
 ‘C’ LIMITED PARTNERSHIP 
 ADVENT PRIVATE EQUITY FUND II, 
 ‘D’ LIMITED PARTNERSHIP 
  
 By: Advent Venture Partner, General Partner 
  
         By: /s/ Patrick Lee 
                 Name: Patrick Lee 
                 Title: General Partner  
  
 NOMURA PHASE4 VENTURES LIMITED AS MANAGER ON BEHALF OF INTERNATIONAL PLC AND NOMURA
PHASE4 VENTURES LP 
  
 By: /s/ Denise
Pollard-Knight 
         Name: Dr. Denise Pollard-Knight 
         Title: Head of Phase 4 Ventures 
  
 NEW ENTERPRISE ASSOCIATES 10, LIMITED PARTNERSHIP 
  
 By: NEA Partners 10, Limited Partnership, 
         General Partner 
  
 By: /s/ Eugene A. Trainor III 
         Name: Eugene A. Trainor III 
         General Partner 
  
 NEA VENTURES, 2002 LIMITED PARTNERSHIP 
  
 By: /s/ Pamela J. Clark 
         Pamela J. Clark 
         General Partner 
  
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 ACADEMY VENTURE FUND, LLC 
  
 By: Academy Ventures, LLC, Manager 
  
 By: /s/ John Ciannamea 
         Name: John Ciannamea 
         Title: Manager 
  
 CDIB BIOSCIENCE VENTURES I, INC. 
  
 By: /s/ Benny T. Hu 
         Name: Benny T. Hu 
         Title: President 
  
 EASTON HUNT CAPITAL PARTNERS, L.P. 
  
 By: EHC GP, LP, its General Partner 
 By: EHC Inc., its General Partner 
 By: /s/ Charles B. Hughes 
         Name: Charles B. Hughes

         Title: VP  
  
 JAFCO G-9(A) VENTURE CAPITAL 
 INVESTMENT LIMITED PARTNERSHIP 
  
 By: JAFCO CO., LTD., its general partner 
  
                 By: /s/ H. Agata 
                         Name: Hisaji Agata 
                         Title: Managing Director 
  
 JAFCO G-9(B) VENTURE CAPITAL 
 INVESTMENT LIMITED PARTNERSHIP 
  
 By: JAFCO CO., LTD., its general partner 
  
                 By: /s/ H. Agata 
                         Name: Hisaji Agata 
                         Title: Managing Director 
  
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 BISON CAPITAL, LLC 
  
 By: /s/ Greg Betterton 
         Name: Greg Betterton 
         Title: Manager 
  
 COGENE BIOTECH VENTURES, L.P. 
  
 By: Cogene Biotech Ventures GP, L.L.C., its General Partner 
  
 By: /s/ M. Robert Dussler 
         Name: M. Robert Dussler 
         Title: Vice President and Managing Director 
  
 ROCK CASTLE VENTURES, L.P. 
  
 By: Rock Castle Management LLC, its General Partner 
  
 By: /s/ Eric Y. Sato 
         Name: Eric Y. Sato 
         Title: Managing Member of General Partner 
  
 OXFORD BIOSCIENCE PARTNERS IV L.P. 
  
 By: OBP Management IV L.P., its general partner 
  
 By: /s/ Alan G. Walton 
         Name: Alan Walton 
         Title: Sr. G.P. 
  
 mRNA FUND II L.P. 
  
 By: OBP Management IV L.P., its general partner 
  
 By: /s/ Alan G. Walton 
         Name: Alan Walton 
         Title: Sr. G.P. 
  

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