AMENDMENT #1 DATED 12/6/04 TO THIRD AMENDED AND RESTATED RIGHTS AGREEMENT



  
 Exhibit 4.2(b)

  
 Amendment No. 1 to 
 Third Amended and Restated Investor Rights Agreement 
  
 THIS AMENDMENT NO. 1 to the Third Amended and Restated Investor Rights Agreement dated December 6, 2004 (this “Amendment”) amends the
Third Amended and Restated Investor Rights Agreement dated May 12, 2004 (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 will not become effective or affect the Current IRA unless and until the prospective initial public offering is completed and will not become effective at all if such initial public offering is not
completed on or before December 31, 2004 (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 may not be 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 extend the Trigger Date; 
  
 NOW, THEREFORE, the undersigned parties agree as follows: 
  
 1. Section 2.1(a) of the Future IRA is hereby amended by deleting the first sentence in its entirety and replacing it with the following: 
  
 “Subject to the other provisions of this Section 2.1, Section 2.8 and
Section 2.9, if, at any time or from time to time following the Eligibility Date (but in no event prior to (x) six months after the effective date of the first registration of the Company’s securities on Form S-1 or (y) three months after the
effective date of any other registration of the Company’s securities, other than registrations on Form S-4, Form S-8 or comparable or successor forms and other than registrations for the account of selling stockholders on Form S-3 or a
comparable or successor form), the Company shall receive a written 

  









 
request (specifying that it is being made pursuant to this Section 2.1) from (i) Holders of at least a majority of the Series A Registrable Securities and
Series B Registrable Securities, considered together, or (ii) Holders of Series C Registrable Securities that the Company file a registration statement under the Act covering the registration for offer and sale of (A) in the case of clause (i)
above, at least thirty percent (30%) of all Series A Registrable Securities and Series B Registrable Securities, considered together, or (B) in the case of clause (ii) above, at least (1) thirty percent (30%) of all Series C Registrable Securities
or (2) a number of Series C Registrable Securities for which the total gross proceeds in a public offering reasonably expected to be received by the requesting Holders is at least $7,500,000, then the Company shall, within ten (10) business days
notify in writing all other Holders of such request.” 
  
 2.
Section 9 of the Future IRA is hereby amended by replacing “December 31, 2004” therein with “June 30, 2005.” 
  
 3. As expressly amended hereby, the Future IRA shall continue in full force and effect. 
  
 4. For the avoidance of doubt, as used in the Future IRA and the Current IRA, the term “Series C Stock” shall
include, without limitation, shares of Series C Stock issued and sold pursuant to the Series C Convertible Preferred Stock Purchase Agreement entered into on or about the date hereof. 
  
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 IN WITNESS WHEREOF, this Amendment No. 1 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 & 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/ G. S. Burrill

	 	 	 	 	 G. Steven Burrill

	 	 	 	 	 Managing Member



  
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	 GENAVENT FUND

		
	 By:
	 	 Société Générale Asset Management, S.A.,
 its Manager

		
	 By:
	 	 /s/ Ferriere

	 	 	 Corinne Ferriere

	 	 	 Deputy Head of Private Equity



  

			
	 FCPR SGAM AI BIOTECHNOLOGY FUND
 Represented
by SGAM Alternative Investments, its
 management company with a share capital of 35 576
 725 euros, having its registered office at 2, place de la Coupole, 92078 Paris – La Défense cedex France,
 registered with the Nanterre Trade and Companies
 registry under the number B 410 704 571

		
	 By:
	 	 /s/ Ferriere

	 	 	 Corinne Ferriere

	 	 	 Deputy Head of Private Equity



  

			
	 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/ T. Laugel

	 	 	 Name: T. Laugel

	 	 	 Title: Director d’investissement



  

					
	 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



  
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	NOMURA PHASE4 VENTURES LIMITED AS MANAGER ON BEHALF OF INTERNATIONAL PLC AND NOMURA PHASE4 VENTURES LP
		
	 By:
	 	 /s/ Denise Pollard-Knight

	 	 	 Name: Denise Pollard-Knight

	 	 	 Title: Head of Nomura Phase4 Ventures Ltd.

	
	NEW ENTERPRISE ASSOCIATES 10, LIMITED PARTNERSHIP
		
	By:	 	 NEA Partners 10, Limited Partnership, General Partner

		
	 By:
	 	 /s/ E. A. Trainor

	 	 	 Name: Eugene A. Trainor, III

	 	 	Administrative General Partner & Chief Operating Officer
	
	NEA VENTURES, 2002 LIMITED PARTNERSHIP
		
	 By:
	 	 /s/ Pamela J. Clark

	 	 	 Pamela J. Clark

	 	 	 General Partner

	
	CDIB BIOSCIENCE VENTURES I, INC.
		
	 By:
	 	 /s/ Benny T. Hu

	 	 	 Name: Benny T. Hu

	 	 	 Title: Chairman

	
	JAFCO G-9(A) VENTURE CAPITAL INVESTMENT LIMITED PARTNERSHIP
		
	By:	 	 JAFCO CO., LTD., its general partner

		
	 By:
	 	 /s/ Tomio Kezuka

	 	 	 Name: Tomio Kezuka

	 	 	 Title: Executive Vice President



  
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	 JAFCO G-9(B) VENTURE CAPITAL
 INVESTMENT LIMITED PARTNERSHIP

		
	 By:
	 	 /s/ Tomio Kezuka

	 	 	 Name: Tomio Kezuka

	 	 	 Title: Executive Vice President



  

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