Document:

AMENDED AND RESTATED NOTE AND SECURITY AGREEMENT

 Exhibit 10.4 
  
 Amended and Restated Note and Security Agreement 
  
 Winston-Salem. North Carolina 
  

			
	Date January 30, 2004	  	Up to $4,500,000

  
 FOR VALUE RECEIVED, Targacept, Inc., a
corporation organized and existing under the laws of the State of Delaware with its principal executive office located at 200 East First Street, Suite 300, Winston-Salem, North Carolina 27102-1465 (hereinafter the “Borrower”), hereby
promises to pay to the order of R.J. Reynolds Tobacco Holdings, Inc. (hereinafter the “Lender”) at its office where borrowed, or at such other place as Lender hereafter may direct from time to time in writing, in immediately available
funds of lawful money of the United States, the sum of Four Million Five Hundred Thousand Dollars (or the unpaid principal amount of all advances which the Lender actually makes hereunder to the Borrower, whichever is less) together with any unpaid
interest hereon from date of advance, in accordance with the terms contained in this Amended and Restated Note and Security Agreement (hereinafter referred to as this “Note”). The principal evidenced by this Note shall be advanced
periodically from time to time in accordance with the terms of this paragraph in up to four disbursements (each such disbursement is referred to herein as a “Tranche”). The first Tranche is in the amount of $2,500,000, was advanced to the
Borrower on May 1, 2002 and is payable in accordance with the terms set forth herein (the “First Tranche”). The Lender acknowledges that the Borrower is current as of the date of this Note with all payments due with respect to the First
Tranche. The remaining principal amount evidenced by this Note may be advanced in up to three Tranches, the aggregate principal amount of which shall not exceed $2,000,000 (referred to herein individually as an “Additional Tranche” and
collectively referred to herein as the “Additional Tranches”). 
  
 Upon
written request of the Borrower, which shall be made in writing and delivered to the Lender on a business day not more than 45 nor fewer than 5 business days prior to the desired date of disbursement the Lender shall, subject to the terms and
conditions set forth herein, advance an Additional Tranche to the Borrower provided that: (1) such written request shall set forth the principal amount of the proposed Additional Tranche, the proposed date of disbursement of the Additional Tranche
and a description of the equipment, goods and other property purchased or to be purchased with the proceeds of such Additional Tranche; (2) in no event shall the Lender be obligated to advance more than three Additional Tranches or shall the
aggregate initial principal amount of the First Tranche and all Additional Tranches exceed $4,500,000; (3) the Borrower’s written request may be made only so long as an Event of Default has not occurred hereunder and must be delivered to the
Lender such that the date that such Additional Tranche is disbursed occurs on or before December 31, 2004. The Collateral securing the Tranches shall be evaluated by Lender at the time of each requested disbursement of an Additional Tranche to
determine whether the Collateral has sufficient value to secure such Additional Tranche. In the event Lender makes a good faith determination that the Collateral is not of sufficient value to secure such Additional Tranche, Lender shall postpone
disbursement of the Additional Tranche until such time that Lender determines in good faith that the Collateral has sufficient value to secure it. Lender shall use its best efforts to make such determinations in a timely manner. On the date that
each Additional Tranche is advanced, the Borrower and the Lender shall execute a schedule supplementing Exhibit A to this Note, as the Lender shall reasonably request, to add additional Collateral that is to secure the Tranches, if any,
confirm the outstanding principal amount of the outstanding Tranches and to evidence the rate of interest applicable to the Additional Tranche and the repayment dates for the Additional Tranche, and each such supplemental schedule shall thereupon
become part of this Note. 
  
 Repayment: 
  
 xThe First Tranche shall be paid in 48 equal monthly
payments of $59,402.75 beginning June 1, 2002 and continuing on the first day of each month thereafter until May 1, 2006 when the entire outstanding principal amount of such First Tranche then outstanding and all accrued but unpaid interest shall be
paid in full. Each Additional Tranche shall be repaid in 48 equal monthly payments based on a 48-month amortization schedule beginning on the first day of the first calendar month that begins after the date such Additional Tranche is advanced and
continuing on the first day of each month thereafter until the 48th month thereafter when the entire outstanding
principal amount of such Additional Tranche then outstanding and all accrued but unpaid interest shall be paid in full. 
  
 If advances of the principal amount hereof are to be made by Lender to the Borrower after the date of this Note, Lender, at its sole discretion, is hereby authorized to
make such advances under this Note upon telephonic or written communication of a borrowing request from any person representing himself or herself to be the Borrower or, in the event the Borrower is an organization, a duly authorized officer or
representative of Borrower. 
  
 Interest: 
 Payable: 
  
 x in arrears. 
  
 x At the fixed rate per annum of 6.6% for the First Tranche. 
  
 x At an interest rate(s) per annum for each Additional Tranche established on the date such Applicable Tranche is advanced that approximates the hypothetical 4-year U.S. Treasury
rate (determined as of the day the Applicable Tranche is advanced) plus 3.5%. 
  
 In no case shall interest exceed the maximum rate permitted by applicable law. 
  
 In addition to any other collateral specified herein, to secure the indebtedness evidenced by this Note, together with any extensions, modifications, or renewals thereof, in whole or in part, as well as all other indebtedness, obligations
and liabilities of the Borrower to the Lender, now existing or hereafter incurred or arising, (hereinafter sometimes referred to as the “Obligations”), but excluding any obligations to Lender in its capacity as a holder of equity
securities of Borrower, the Borrower does hereby grant to the Lender a security interest in and to, and does hereby assign, pledge, transfer and convey to Lender, the property set forth on Exhibit A hereto, as such Exhibit shall be
supplemented from time to time, together with any and all additions and accessions thereto or replacements thereof and any products and/or proceeds of any of the foregoing (the “Collateral”). If, with respect to any Collateral in the form
of investment securities, a stock dividend is declared or any stock split-up made or right to subscribe issued, all the certificates for the shares representing such stock dividend or split-up or right to subscribe will be immediately delivered,
duly endorsed, to the Lender as additional Collateral. 
  
 The Lender shall have,
but shall not be limited to, the following rights, each of which may be exercised at any time or from time to time: (i) to transfer this Note and the Collateral, and any transferee shall have all the rights of the Lender hereunder and the Lender
shall be thereafter relieved from any liability with respect to any Collateral so transferred; and (ii) to vote any investment securities forming a part of the Collateral. 
  
  

 Borrower will at Lender’s request maintain insurance on the Collateral in amounts at least equal to the fair market
value of the Collateral and against casualty, public liability and property damage risks and such other risks as Lender may request. Borrower will pay all premiums for insurance when due. Unless and until requested by Lender, Borrower shall not be
required to name Lender as additional insured in such policy or to provide Lender a copy of the policy for or certificate evidencing such insurance, but when and if requested by Lender, the Borrower shall as promptly as reasonably practicable: (i)
cause all policies of such insurance to specify that Lender is an additional insured as its interests may appear and to provide that such insurance shall not be cancelable by Borrower or the insurer without at least 30 days advance written notice to
Lender and that proceeds are payable to Lender regardless of any act or omission of Borrower which would otherwise result in a denial of a claim; and (ii) deliver all policies or certificates thereof (with copies of such policies) to Lender. In the
event any or all of such insurance is cancelled, any returned premium thereon may be collected by Lender and applied by Lender to any part of the Obligations, either matured or unmatured. Lender is authorized to receive the proceeds of any insurance
loss and at the option of Lender shall apply such proceeds toward either the repair or replacement of the Collateral or the payment of the Obligations secured hereby. Borrower will also pay all taxes and other impositions on the Collateral as well
as the cost of repairs or maintenance to the Collateral. The loss, injury or destruction of the Collateral, with or without the fault of Borrower, shall not release the Borrower from any liability hereunder or in any way affect Borrower’s
liability hereunder. 
  
 The occurrence of any one or more of the following
conditions or events shall constitute an “Event of Default” hereunder: (i) any failure of Borrower to pay any of the Obligations when due or to observe or perform any agreement, covenant or promise hereunder; (ii) any default of Borrower
in the payment or performance of any other liabilities, indebtedness or obligations to Lender or to allow or permit any other liabilities, indebtedness or obligations to Lender to be accelerated; (iii) any failure of Borrower to observe or perform
any agreement, covenant or promise contained in any agreement, instrument or certificate executed in connection with the granting of a security interest in property to secure the Obligations; (iv) any warranty, representation or statement made or
furnished to the Lender by or on behalf of Borrower in connection with the loan evidenced by this Note proving to have been false in any material respect when made or furnished; (v) any loss, theft, substantial damage, destruction, sale, foreclosure
of or encumbrance to any of the Collateral, or the making of any levy, seizure or attachment thereof or thereon or the rendering of any judgment or lien or garnishment or attachment against Borrower; or (vi) the dissolution, liquidation or winding
up of Borrower, or the insolvency, or appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws, state or federal, by or
against, the Borrower. 
  
 Upon the occurrence of an Event of Default (and the
expiration of any applicable notice and/or grace periods), to the extent permitted by law, the Lender at its option may declare all of the Obligations to be immediately due and payable, all without notice or demand, and shall have in addition to and
independent of the right to declare the Obligations to be due and payable and any other rights of the Lender under this Note or any other agreement with Borrower, the remedies of a secured party under the Uniform Commercial Code as in effect in
North Carolina (the “Code”), including, without limitation thereto, the right to take possession of the Collateral, or the proceeds thereof and to sell or otherwise dispose thereof, and for this purpose, to sign in the name of Borrower any
transfer, conveyance or instrument necessary or appropriate in order for the Lender to sell or dispose of any of the Collateral, and the Lender may, so far as the Borrower can give authority therefor, enter upon the premises on which the Collateral
or any part thereof may be situated and remove the same therefrom, without being liable in any way to Borrower on account of entering any premises. The Lender may require the Borrower to assemble the Collateral and make the Collateral available to
the Lender at a place to be designated by the Lender which is reasonably convenient to both parties. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Lender
shall give the Borrower written notice of the time and place of any public sale thereof or of the time after which any private sale or other intended disposition thereof is to be made. The requirement of sending reasonable notice shall be met if
such notice is mailed, postage prepaid, or otherwise given, to the Borrower at the last address shown on the Lender’s records at least ten (10) days before such disposition. Lender shall comply with all applicable state or federal law
requirements in connection with a disposition of the Collateral. 
  
 The rights of
the Lender specified herein shall be in addition to, and not in limitation of, the Lender’s rights under the Code, or any other statute or rules of law conferring rights similar to those conferred by the Code, and under the provisions of any
other instrument or agreement executed by the Borrower to the Lender. All prior agreements to the extent inconsistent with the terms of this Note shall be construed in accordance with the provisions hereof. Any rights or remedies of the Lender may
be exercised or taken in any order or sequence whatsoever, at the sole option of the Lender. This agreement shall bind and inure to the benefit of the heirs, legatees, executors, administrators and assigns of Lender and Borrower. 
  
 The security agreement set forth herein and the security interest in the Collateral created
hereby shall terminate only when all of the Obligations have been paid in full. No waiver by the Lender of any default shall operate as a waiver of any other default or of the same default on a future occasion. All rights of the Lender hereunder
shall inure to the benefit of its successors and assigns, and all obligations of the Borrower shall bind the heirs, legal representatives, successors and assigns of the Borrower. Borrower and each endorser, surety or guarantor of this Note, whether
bound by this or by separate instrument or agreement, shall be jointly and severally liable for the indebtedness evidenced by this Note and hereby severally (i) waive presentment for payment, demand, protest, notice of nonpayment or dishonor and of
protest and any and all other notices and demands whatsoever; to the fullest extent permitted by applicable law; and (ii) consent that at any time, or from time to time, payment of any sum payable under this Note may be extended without notice
whether for a definite or indefinite time. The Borrower shall pay to Lender on demand all expenses, including reasonable attorneys’ fees and expenses, incurred by Lender in any way arising from or relating to the enforcement or attempted
enforcement of the Note and any related guaranty, collateral document or other document and the collection or attempted collection, whether by litigation or otherwise, of this Note. Time is of the essence. 
  
 This Note evidences the indebtedness heretofore evidenced by, and amends and restates in its
entirety, the Note and Security Agreement dated as of May 1, 2002 made by the Borrower in favor of the Lender. This Note is not in payment or satisfaction of the Note and Security Agreement dated as of May 1, 2002 nor is this Note in any way
intended to constitute a novation of the Note and Security Agreement dated as of May 1, 2002. 
  
 This Note, and the rights and obligations of the parties hereunder, shall be governed and construed in accordance with the laws of the State of North Carolina, except to the extent that the Code provides for the
application of other law with respect to the Collateral. 
  
 [Signature Page to Follow] 
  
  

 IN WITNESS WHEREOF, the Borrower and the Lender have executed this Note under seal the day and year set forth above.

  

									
	 	 	 	 	 Borrower:

			
	 Attest:
	 	 	 	 TARGACEPT, INC.

					
	 	 	 /s/    Alan A.
Musso        
	 	 	 	By:	 	 /s/    J. Donald
deBethizy        

	 Title:
	 	 VP & CFO
	 	 	 	 Title:
	 	 President & CEO

	 	 	 [Corporate Seal]
	 	 	 	 	 	 

  

									
	 	 	 	 	 Lender:

			
	 Attest:
	 	 	 	 R.J. REYNOLDS TOBACCO HOLDINGS, INC.

					
	 	 	 /s/    Daniel
Fawley        
	 	 	 	By:	 	 /s/    Lynn L.
Lane        

	 Title:
	 	 VP & Assistant Treasurer
	 	 	 	 Title:
	 	 SVP & Treasurer

	 	 	 [Corporate Seal]
	 	 	 	 	 	 

  
  

 Exhibit A 

 Appendix A 
  
 Loan Collateral Summary: 
  

						
	 2000 Post Spinout
	  	$	132,056.26	 	 
	 2001 Additions
	  	$	995,243.21	 	 
	 2002 Add-CIP
	  	$	1,290,937.55	 	includes some estimates
	 2002 Additions
	  	$	99,546.68	 	 
	 	  	
	
	 	 
	 	  	$	2,517,783.70	 	 
	 	  	
	
	 	 

 2000 Post Spinout 
  

				
	 9/30/2000 Laptop
	  	$	3,670.92
	 30-Sep Laptop
	  	$	4,176.30
	 30-Sep Laptop
	  	$	3,980.21
	 31-Oct Shredder
	  	$	4,125.62
	 20-Oct S/ware - Office Suite
	  	$	2,441.45
	 20-Oct 15 Dell pc’s
	  	$	25,440.97
	 20-Oct T-1
	  	$	3,879.28
	 20-Oct 26 MIS office 2000
	  	$	14,310.87
	 20-Oct NT Software
	  	$	3,964.22
	 20-Oct CISCO Switch, Tape Backup
	  	$	28,489.09
	 21-Nov Balance
	  	$	2,292.73
	 21-Nov Freezer
	  	$	1,805.81
	 21-Nov Balance
	  	$	1,144.85
	 22-Nov Epxon XGA
	  	$	5,099.34
	 13-Nov FAS software
	  	$	2,135.85
	 30-NovX10Giaga
	  	$	3,819.05
	 30-Nov PCI-Gigenet
	  	$	3,394.25
	 1-Dec IBM Thinkpad
	  	$	835.00
	 6-Dec 5 Dell monitors
	  	$	2,332.00
	 6-Dec 15 Dell workstations
	  	$	14,718.45
	 	  	
	

	 	  	$	132,056.26
	 	  	
	

 2001 Additions 
  

									
	DATE

	  	VENDOR

	  	 DESCRIPTION

	  	QUANTITY

	  	TOTAL

	 	  	 	  	DRUG DISCOVERY	  	 	  	 
	1/5/2001	  	Fisher	  	ROTVAPOR 24/40 R114A JCK/BTH	  	1	  	4,013.48
	3/14/2001	  	Gilson	  	215 LIQUID HANDLER	  	1	  	31,355.18
	3/24/2001	  	Phenomenex	  	RP 80A SYNERGY MAX	  	1	  	1,337.25
	 	  	 	  	Sales Tax	  	 	  	80.23
	3/27/2001	  	Fisher	  	R 200A ROT EVAP	  	1	  	3,695.72
	3/27/2001	  	Fisher	  	CATALYTIC PARR APPARATUS 115V 60HZ	  	1	  	2,777.33
	3/15/2001	  	Genevac	  	EVAPORATOR SYSTEM	  	1	  	31,650.00
	4/30/2001	  	Micromass	  	MASS SPEC UPGRADE/SYSTEM	  	1	  	25,948.80
	4/30/2001	  	Gilson	  	Compact Slave Pump/Cells	  	1	  	19,246.46
	5/31/2001	  	Isco	  	Separation System	  	1	  	18,993.08
	6/18/2001	  	VWR Scientific	  	Lg. Capacity Mixer	  	1	  	1,800.20
	8/7/2001	  	Fisher	  	Ref/Freezer115V	  	1	  	1,350.11
	9/30/2001	  	Fisher	  	Sonic Dismember Digital MDL 500	  	1	  	4,235.41
	11/30/2001	  	Waters	  	Mass Spec	  	1	  	149,542.55
	12/31/2001	  	Waters	  	2695 w/col htr/degas/sealwash	  	1	  	27,724.46
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	323,750.26
	 	  	 	  	 	  	 	  	

	 	  	 	  	BIOLOGICAL SCIENCES	  	 	  	 
	1/16/2001	  	Brandel	  	HARVESTER (TTP-48 PROBE); #1FL	  	1	  	9,942.60
	 	  	 	  	VACUUM PUMP W/ MIST PUMP	  	1	  	 
	 	  	 	  	Sales Tax	  	1	  	596.55
	2/21/2001	  	Millipore	  	MILLI Q ACADEMIC 120V/60HZ	  	2	  	7,029.26
	 	  	 	  	Q-GARD 2	  	2	  	 
	 	  	 	  	QUANTUM EX	  	2	  	 
	 	  	 	  	PRESS REGULATOR W/GAUGE	  	2	  	 
	2/13/2001	  	Beckman Coulter	  	GRIPPER TOOL SYS FOR BIOMEK 2000	  	1	  	10,054.32
	 	  	 	  	96-FILTRATION SYSTEM	  	1	  	 
	3/14/2001	  	Brandel	  	1 BIT 48K PROBE	  	1	  	1,450.00
	3/27/2001	  	PerkinElmer	  	1450 TRILUX 23 NET 16 PLATE	  	1	  	81,166.69
	 	  	 	  	Sales Tax	  	 	  	4,869.99
	5/10/2001	  	Brandel	  	Supfrafusion 2500	  	1	  	34,324.74
	6/30/2001	  	Carmet	  	Beckman J2-s1M	  	1	  	6,200.00
	 	  	 	  	Beckman JA20	  	1	  	1,700.00
	6/30/2001	  	VWR Scientific	  	Generator PTA107S	  	1	  	1,128.11
	7/31/2001	  	Inotech	  	Pressure Plate Inserts	  	var	  	2,970.00
	8/24/2001	  	Inotech	  	3300 Harvester Pump	  	1	  	1,365.00
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	162,797.26
	 	  	 	  	 	  	 	  	

  
  

 2001 Additions 
  

									
	 	  	 	  	 	  	 	  	—  

	 	  	 	  	 	  	 	  	486,547.52
	 	  	 	  	 	  	 	  	

	3/27/2001	  	 Apple Rock
	  	 Trade Show Display Board (Deposit)
	  	1	  	865.80
	4/30/2001	  	 Apple Rock
	  	 Trade Show Display Board (Bal)
	  	1	  	1,140.89
	7/27/2001	  	 ARM
	  	 Contract Tickler System
	  	1	  	4,529.00
	9/30/2001	  	 Best SW
	  	 FAS Suite/Cradle
	  	1	  	4,095.78
	10/25/2001	  	 Hodges
	  	 FAS Upgrade to Network
	  	1	  	3,042.16
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	13,673.63
	 	  	 	  	 	  	 	  	

	1/11/2001	  	 GraphPAd
	  	 PRISM FOR WINDOWS
	  	3	  	1,113.75
	 	  	 Silicon
	  	 REMFGD 195MHZ 1P OCTANE SI
	  	 	  	 
	12/15/2001	  	 Graphics
	  	 128MB/4G
	  	2	  	10,286.34
	 	  	 	  	 DESTN KIT PERIPHERALS 115V
	  	4	  	 
	 	  	 	  	 ADVANCED WKST EVIRONMENT 6.5
	  	2	  	 
	 	  	 	  	 REMFGD 21" G1 DISPLAY OCTANE
	  	2	  	 
	 	  	 	  	 KEYBOARD KIT US 02 AND OCTANE
	  	2	  	 
	 	  	 	  	 DELL GX100 600MHZ CELERON
	  	 	  	 
	2/19/2001	  	 NetUnlimited
	  	 PROCESSOR W/128MB RAM
	  	5	  	8,364.70
	 	  	 	  	 DELL PRECISION 330 1.3 GHZ
	  	 	  	 
	 	  	 	  	 PROCESSOR W/256MB RAM
	  	1	  	 
	2/5/2001	  	 NetUnlimited
	  	 LASERJET 2100TN INTERNAL NIC
	  	1	  	1,187.20
	 	  	 	  	 LASERJET 2100TN TONER CARTIDGE
	  	1	  	 
	 	  	 	  	 HEWLETT PACKARD LASERJET 2100TN
	  	 	  	 
	2/8/2001	  	 NetUnlimited
	  	 INTERNAL NIC
	  	2	  	2,194.20
	3/27/2001	  	 NetUnlimited
	  	 Dell 420 Workstation
	  	1	  	3,457.00
	3/27/2001	  	 NetUnlimited
	  	 Sony VAIO/HP Scanjet
	  	1	  	3,346.71
	5/10/2001	  	 Silicon
	  	 PCI CARD CAGE
	  	2	  	3,180.00
	5/31/2001	  	 NetUnlimited
	  	 Dell Pwer App Web 120 PIII
	  	1	  	3,198.02
	 	  	 	  	 Dell Optiplex GX 110 PIII
	  	4	  	4,405.36
	6/18/2001	  	 NetUnlimited
	  	 6 deLL Optiplex GX110 Computers
	  	6	  	6,604.04
	 	  	 	  	 4 Dell P78017" Color Monitor
	  	4	  	1,394.96
	7/27/2001	  	 G.Dunbar
	  	 Laptop
	  	1	  	3,669.97
	10/24/2001	  	 D. Lambe
	  	 Laptop
	  	1	  	3.417.78
	 	  	 NuGenesis
	  	 Software-Unify & Vision Software Licenses,
	  	 	  	 
	12/31/2001	  	 Tech.
	  	 Archive Software License
	  	 	  	125,443.60
	12/31/2001	  	 IBM
	  	 X Series 330 P111 1U Server
	  	3	  	21,518.00
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	202,781.63
	 	  	 	  	 	  	 	  	

	 	  	 	  	 PENTAD HARDWARE
	  	 	  	 
	4/30/2001	  	 RCH Products
	  	 Zappa Computer
	  	1	  	265,906.50
	6/18/2001	  	 NetUnlimited
	  	 Zappa Wiring
	  	 	  	713.56
	9/30/2001	  	 RCH Products
	  	 Octane R12k, Octane R10k, Software Care
	  	 	  	11,694.18
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	278,314.24
	 	  	 	  	 	  	 	  	

	 	  	 	  	 PENTAD SOFTWARE
	  	 	  	 
	04/30/001	  	 Harcourt
	  	 	  	 	  	13,526.19
	 	  	 Serena
	  	 	  	 	  	400.00
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	13,926.19
	 	  	 	  	 	  	 	  	

	 	  	 	  	 	  	 	  	995,243.21
	 	  	 	  	 	  	 	  	

  
  

 2002 CIP 
  

						
	 Cold Room
	  	$	48,234.00	 	 
	 Animal Housing System
	  	$	50,967.50	 	 
	 Furniture & Fixtures
	  	$	773,697.13	 	 
	 Artwork
	  	$	20,849.55	 	 
	 Signs
	  	$	14,226.00	 	 
	 Leasehold Improvements
	  	$	78,404.58	 	 
	 IT Switches/Communications
	  	$	106,679.96	 	 
	 Stability Chambers
	  	$	39,112.17	 	 
	 Estimates:

	  	 	 	 	 
	 Cage Wash System
	  	$	35,766.66	 	Final bills not received
	 AV Equipment
	  	$	115,000.00	 	Final bills not received
	 Additional Furniture Pieces
	  	$	8,000.00	 	Final bills not received
	 	  	
	
	 	 
	 	  	$	1,290,937.55	 	 
	 	  	
	
	 	 

 2002 Additions 
  

									
	 	  	 	  	MEDICINAL CHEMISTRY	  	 	  	 
	3/20/2002	  	 Fisher
	  	 Mettler Toledo Analytical Balance Model AB204-
	  	1	  	2,276.23
	2/28/2002	  	 Insight
	  	 HP Laserjet 1200
	  	3	  	1,137.00
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total Med Chem	  	 	  	3,413.23
	 	  	 	  	 	  	 	  	

	 	  	 	  	 P3
	  	 	  	 
	1/31/2002	  	 Fisher
	  	 Cold Trap Condenser Assembly
	  	1	  	25,973.48
	2/5/2002	  	 Aetrohm- Pea
	  	 Metrohm-Peak Personal IC System
	  	1	  	18,186.22
	 	  	 	  	 	  	 	  	

	 	  	 	  	 Total P3
	  	 	  	44,159.70
	 	  	 	  	 	  	 	  	

	 	  	 	  	BIOLOGICAL SCIENCES	  	 	  	 
	3/20/2002	  	 Brandel
	  	 BR-36 Auto Dispensing System; 2X1B
	  	1	  	3,850.00
	3/20/2002	  	 Brandel
	  	 18 Channel Perfusion Block, Tray, Reagent
	  	1	  	6,650.00
	3/20/2002	  	 VWR
	  	 Balance Basic 1510G CAPX10MG
	  	2	  	3,147.63
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total Biological Sciences	  	 	  	13,647.63
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total Drug Discovery & Biological Sciences	  	 	  	57,807.33
	 	  	 	  	 	  	 	  	

	 	  	 	  	Administrative	  	 	  	 
	1/31/2002	  	 Dell
	  	 Latitude C810,1.13Ghz, Pentium III
	  	1	  	3,135.37
	3/31/2002	  	 Dell
	  	 Laptop
	  	 	  	3,153.49
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total Administrative	  	 	  	6,288.86
	 	  	 	  	 	  	 	  	

	 	  	 	  	 IT
	  	 	  	 
	1/31/2002	  	 NuGenesis
	  	 Instrument Archive Server
	  	1	  	23,787.50
	2/27/2002	  	 Insight
	  	 Netshelter VX Base Enclosure
	  	1	  	1,569.00
	2/27/2002	  	 Dell
	  	 PC’s
	  	3	  	3,527.27
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total IT	  	 	  	28,883.77
	 	  	 	  	 	  	 	  	

	 	  	 	  	Clinical Research & Development	  	 	  	 
	2/27/2002	  	 Dell
	  	 Laptop
	  	 	  	3,153.49
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total Clinical Research & Development	  	 	  	3,153.49
	 	  	 	  	 	  	 	  	

	 	  	 	  	Total New Additions	  	 	  	99,546.68
	 	  	 	  	 	  	 	  	

  
  

 Amended and Restated Note and Security Agreement of 
 Targacept, Inc. in favor of R.J. Reynolds Tobacco Holdings, Inc. dated January 30,2004 
  
 Form of Supplemental Schedule to Exhibit A 
  
 Additional Collateral: 
  
 Attach spreadsheet including, without limitation: 
  

1. Number of Additional Tranche 
  
 2. Date of Additional Tranche 
  
 3. Interest Rate Applicable to Additional Tranche 
  
 4. First Payment of Additional Tranche Due 
  
 5. Last Payment of
Additional Tranche Due 
  
 6. Amount of Each Monthly Payment in respect of
Additional Tranche 
  
 7. Aggregate Amount of Each Monthly Payment in respect of
all Tranches 
  
 8. Aggregate Principal Amount Outstanding on all TranchesAMENDED AND RESTATED TARGACEPT INC EQUITY INCENTIVE PLAN

 Exhibit 10.5(a) 
  
 2000 EQUITY INCENTIVE PLAN 
  
 OF 
  
 TARGACEPT, INC. 
  
 Adopted as of:        
  
 August 22nd, 2000 

 2000 EQUITY INCENTIVE PLAN 
 OF 
 TARGACEPT, INC. 
  

	1.	Purpose 

  
 The purpose of the 2000 Equity Incentive Plan of Targacept, Inc. (the “Plan”) is to encourage and enable selected employees, directors,
independent contractors, consultants and advisors of Targacept, Inc. (the “Corporation”) and related corporations to acquire or to increase their holdings of common stock of the Corporation, $0.001 par value per share (the “Common
Stock”), and other proprietary interests in the Corporation in order to promote a closer identification of their interests with those of the Corporation and its stockholders, thereby further stimulating their efforts to enhance the efficiency,
soundness, profitability, growth and stockholder value of the Corporation. This purpose will be carried out through the granting of benefits (collectively referred to herein as “Awards”) to selected participants, including the granting of
incentive stock options (“Incentive Options”) intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), nonqualified stock options (“Nonqualified Options”), stock appreciation
rights (“SARs”), stock awards in the form of bonus stock (“Bonus Stock”) and restricted stock awards (“Restricted Stock Awards”), and performance awards in the form of performance shares (“Performance Shares”)
and performance units (“Performance Units”). Incentive Options and Nonqualified Options shall be referred to herein collectively as “Options.” Bonus Stock and Restricted Stock Awards shall be referred to herein collectively as
“Stock Awards.” Performance Shares and Performance Units shall be referred to herein collectively as “Performance Awards.” 
  

	2.	Administration of the Plan 

  
 (a) The Plan shall be administered by the Board of Directors of the Corporation (the “Board”) unless the Board, in its sole discretion,
delegates all or part of its administrative authority with respect to the Plan to a committee of the Board (the “Committee”). For purposes herein, the Board, and, upon its delegation of the administrative responsibilities for the Plan to
the Committee, the Committee, shall be referred to as the “Administrator.” In the event that the Corporation shall become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), the Committee shall be comprised solely of two or more “non-employee directors,” as said term is defined in Rule 16b-3 under the Exchange Act, unless the Board determines that such committee composition is not necessary or
advisable. Further, in the event that the Corporation becomes subject to the requirements of Section 162(m) of the Code, the Committee shall, unless the Board determines otherwise, be comprised solely of two or more “outside directors,” as
such term is defined under Section 162(m) or the regulations thereunder, or otherwise in accordance with Section 162(m) and such regulations. 
  
 (b) Any action of the Administrator with respect to the Plan may be taken by a written instrument signed by all of the members of the Board or Committee,
as appropriate, and any such action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called. Subject to the provisions of the Plan, the Administrator shall have
full and sole authority in its discretion to take any action with respect to the Plan including, without limitation, the authority (i) to determine all matters relating to Awards, including selection of individuals to be granted Awards, the types of
Awards, the number of shares of the Common Stock, if any, subject to an Award, and all terms, conditions, restrictions and limitations of an Award and shares of Common Stock subject to an Award; (ii) to prescribe the form or forms of 

 
the agreements (as defined in Section 11) evidencing any Awards granted under the Plan; (iii) to establish, amend and rescind rules and regulations for the
administration of the Plan; and (iv) to construe and interpret the Plan and agreements evidencing Awards granted under the Plan, to establish and interpret rules and regulations for administering the Plan and to make all other determinations deemed
necessary or advisable for administering the Plan. The Administrator shall also have authority, in its sole discretion, to accelerate the date that any Award which was not otherwise exercisable or vested shall become exercisable or vested in whole
or in part without any obligation to accelerate such date with respect to any other Award granted to any recipient. In addition, the Administrator shall have the authority and discretion to establish terms and conditions of Awards as the
Administrator determines to be necessary or appropriate to conform to the applicable requirements or practices of jurisdictions outside of the United States. All determinations of the Administrator with respect to the Plan will be final and binding
on the Corporation and all persons having or claiming an interest in any Award granted under the Plan. No member of the Board or Committee, as applicable, shall be liable while acting as Administrator for any action or determination made in good
faith with respect to the Plan or any Award or agreement. 
  
 (c)
Notwithstanding the other provisions of Section 2, the Administrator may delegate to the Chief Executive Officer or President of the Corporation the authority to grant Awards, and to make any or all of the determinations reserved for the
Administrator in the Plan and summarized in Section 2(b) with respect to such Awards, to eligible individuals; provided, however, that, to the extent required by Section 16 of the Exchange Act or Section 162(m) of the Code, the individual, at the
time of said grant or other determination, (i) is not deemed to be an officer or director of the Corporation within the meaning of Section 16 of the Exchange Act; and (ii) is not deemed to be a covered employee (as defined in Section 21 (a)). To the
extent that the Administrator has delegated authority to grant Awards pursuant to this Section 2(c) to the Chief Executive Officer or President, references to the Administrator shall include references to such person, subject, however, to the
requirements of the Plan, Rule 16b-3 and other applicable law. 
  

	3.	Effective Date 

  
 The effective date of the Plan shall be August 22, 2000 (the “Effective Date”). Awards may be granted under the Plan on and after the Effective
Date, but no Awards will be granted after August 21, 2010. 
  

	4.	Shares of Stock Subject to the Plan; Award Limitations 

  
 (a) Subject to adjustment as provided in Section 4(c), the maximum number of shares of Common Stock that may be issued
pursuant to Awards shall not exceed 2,011,259 shares. To the extent required pursuant to Section 162(m) of the Code, during any 12-month period, (i) no Participant may receive shares of Common Stock pursuant to the grant of awards under the Plan for
more than 600,000 shares of Common Stock, and (ii) no Participant may receive awards under the Plan payable in cash having an aggregate dollar value in excess of $600,000, subject to adjustment as provided in Section 4(c) herein. Shares issued and
delivered under the Plan shall be authorized but unissued shares of the Corporation, treasury shares, or shares purchased on the open market or by private purchase. 
  
 (b) The Corporation hereby reserves sufficient authorized shares of Common Stock to meet the grant of Awards hereunder. Any
shares subject to an Award that is subsequently forfeited, expires or is terminated may again be the subject of an Award granted under the Plan. To the extent 

 
that any shares of Common Stock subject to an Award are not delivered to a Participant (or his beneficiary) because the Award is forfeited, canceled, settled
in cash, or used to satisfy applicable tax withholding obligations, such shares shall not be deemed to have been issued for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. If the purchase
price of an Award granted under the Plan is satisfied by tendering or withholding shares of Common Stock, only the number of shares issued net of the shares of Common Stock tendered or withheld shall be deemed issued for purposes of determining the
maximum number of shares of Common Stock available for issuance under the Plan. 
  
 (c) If there is any change in the shares of Common Stock because of a reorganization, recapitalization, merger, consolidation, stock dividend, stock split, reverse stock split, subdivision, combination,
reclassification or other change in the capital stock structure of the Corporation or a related corporation affecting the Common Stock, the number of shares of Common Stock reserved for issuance under the Plan shall be correspondingly adjusted, and
the Administrator shall make such adjustments to Awards or to any provisions of this Plan as the Administrator deems equitable to prevent dilution or enlargement of Awards. 
  

	5.	Eligibility 

  
 An Award may be granted only to an individual who satisfies the following eligibility requirements on the date the Award is granted: 
  
 (a) The individual is either (i) an employee of the Corporation or a related
corporation, (ii) a director of the Corporation or a related corporation, or (iii) an independent contractor, consultant or advisor (collectively, “independent contractors”) providing bona fide services to the Corporation or a related
corporation not in connection with the offer and sale of securities in a capital-raising transaction. For this purpose, an individual shall be considered to be an “employee” only if there exists between the individual and the Corporation
or a related corporation the legal and bona fide relationship of employer and employee. 
  
 (b) With respect to the grant of Incentive Options, the individual is an employee who does not own, immediately before the time that the Incentive Option is granted, stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Corporation. Notwithstanding the foregoing, an individual who owns more than ten percent of the total combined voting power of the Corporation may be granted an Incentive Option if the option
price (as determined pursuant to Section 6(b), is at least 110% of the fair market value of the Common Stock (as defined in Section 6(b)(ii)), and the option period (as defined in Section 6(c)(i)) does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributable to him under Section 424(d) of the Code.

  
 (c) The individual, being otherwise eligible under this
Section 5, is selected by the Administrator as an individual to whom an Award shall be granted (a “Participant”). 
  

	6.	Options 

  
 (a) Grant of Options: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant Options to such
eligible individuals in such numbers, upon such terms and at such times as the Administrator shall determine. Both Incentive Options and Nonqualified Options may be granted under the Plan; provided, however, that Incentive Options may 

 
only be granted to employees of the Corporation or a related corporation. To the extent that an Option is designated as an Incentive Option but does not
qualify as such under Section 422 of the Code, the Option (or portion thereof) shall be treated as a Nonqualified Option. 
  
 (b) Option Price: The price per share at which an Option may be exercised (the “option price”) shall be established by the Administrator
at the time the Option is granted and shall be set forth in the terms of the agreement evidencing the grant of the Option; provided that, (i) in no event shall the option price be less than the par value per share of the Common Stock; and (ii) in
the case of an Incentive Option, the option price shall be no less than 100% of the fair market value per share of the Common Stock on the date the Option is granted. In addition, the following rules shall apply: 
  
 (i) An Incentive Option shall be considered to be granted on
the date that the Administrator acts to grant the Option, or on any later date specified by the Administrator as the effective date of the Option. A Nonqualified Option shall be considered to be granted on the date the Administrator acts to grant
the Option or any other date specified by the Administrator as the date of grant of the Option. 
  
 (ii) For the purposes of the Plan, the “fair market value” per share of the Common Stock shall be determined in good faith by
the Administrator and, except as may otherwise be determined by the Administrator, fair market value shall be determined in accordance with the following provisions: (A) if the shares of Common Stock are listed for trading on the New York Stock
Exchange or the American Stock Exchange, the fair market value shall be the closing sales price of the shares on the New York Stock Exchange or the American Stock Exchange (as applicable) on the date immediately preceding the date the Option is
granted, or, if there is no transaction on such date, then on the trading date nearest preceding the date the Option is granted for which closing price information is available, and, provided further, if the shares are quoted on the Nasdaq National
Market or the NASDAQ SmallCap Market of the Nasdaq Stock Market, the fair market value shall be the closing sales price for such stock (or the average of closing bid and asked prices, if no sales were reported) as quoted on such system on the date
immediately preceding the date the Option is granted for which such information is available; or (B) if the shares of Common Stock are not listed or reported in any of the foregoing, then the fair market value shall be determined by the
Administrator in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any other manner consistent with the Code and accompanying regulations. 
  
 (iii) In no event shall there first become exercisable by an
employee in any one calendar year Incentive Options granted by the Corporation or any related corporation with respect to shares having an aggregate fair market value (determined at the time an Incentive Option is granted) greater than $100,000;
provided that, if such limit is exceeded, then the first $100,000 of shares to become exercisable in such calendar year will be Incentive Options and the Options (or portion thereof) for shares with a value in excess of $100,000 that first became
exercisable in that calendar year will be Nonqualified Options. In the event the Code or the regulations promulgated thereunder are amended after the effective date of this Plan to provide for a different limit on the fair market value of shares
permitted to be subject to Incentive Options, then such different limit shall be automatically incorporated herein and will apply to any Incentive Option granted after the date of such amendment. 

 (c) Option Period and Limitations on the Right to Exercise Options 
  
 (i) The term of an Option (the “option period”)
shall be determined by the Administrator at the time the Option is granted. With respect to Incentive Options, such period shall not extend more than ten years from the date on which the Option is granted (unless otherwise limited by Section 5(b)).
Any Option or portion thereof not exercised before expiration of the option period shall terminate. The period or periods during which an Option may be exercised and other terms and conditions to exercise shall be determined by the Administrator.

  
 (ii) An Option may be exercised by giving
written notice to the Corporation at such place as the Administrator or its designee shall direct. Such notice shall specify the number of shares to be purchased pursuant to an Option and the aggregate purchase price to be paid therefor, and shall
be accompanied by the payment of such purchase price. Unless an individual option agreement provides otherwise, such payment may be in the form of cash or check, and, where expressly approved by the Administrator, payment may also be made:

  
 (A) By delivery (by either actual delivery or
attestation) of shares of Common Stock (valued at the date of exercise at their fair market value by the Administrator by applying the provisions of Section 6(b)(ii)) that have been owned by the Participant for more than six (6) months and are
otherwise acceptable to the Administrator; 
  
 (B) By withholding shares of Common Stock (valued at the date of exercise at their fair market value by the Administrator by applying the provisions of Section 6(b)(ii)) otherwise issuable upon exercise of the Option; 
  
 (C) With respect only to purchases upon exercise of an
Option after a public market for the Common Stock exists, by delivery of written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the
amount of sale or loan proceeds to pay the option price; or 
  
 (D) By any combination of the foregoing. 
  
 For the purposes herein, a “public market” for the Common Stock shall be deemed to exist (i) upon consummation of a firm commitment underwritten public offering of the Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) if the Administrator otherwise determines that there is an established public market for the Common Stock. 
  
 (iii) Unless an individual agreement provides otherwise, no
Option granted to a Participant who was an employee at the time of grant shall be exercised unless the Participant is, at the time of exercise, an employee as described in Section 5(a), and has been an employee continuously since the date the Option
was granted, subject to the following: 
  
 (A) An
Option shall not be affected by any change in the terms, conditions or status of the Participant’s employment, provided that the Participant continues to be an employee of the Corporation or a related corporation. 

 (B) The employment relationship of a Participant shall be treated as continuing intact
for any period that the Participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed ninety days, or, if longer, as long as the Participant’s right to re-employment is
guaranteed either by statute or by contract. The employment relationship of a Participant shall also be treated as continuing intact while the Participant is not in active service because of disability. For purposes of the Plan,
“disability” shall have the meaning ascribed to the term in any stockholders agreement, employment agreement, consulting agreement or other similar agreement, if any, to which the Participant is a party, or if no such agreement applies,
“disability” shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The Administrator shall determine whether a Participant is disabled within the meaning of this paragraph, and, if applicable, the date of a Participant’s termination of
employment of service for any reason (the “termination date”). 
  
 (C) Unless an individual agreement provides otherwise, if the employment of a Participant is terminated because of disability within the meaning of subparagraph (B), or if the Participant dies while he is an employee
or dies within ninety (90) days after the termination of his employment because of disability, the Option may be exercised only to the extent exercisable on the date of the Participant’s termination date, except that the Administrator may in
its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the termination date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be
applicable: (X) the close of the period of one year next succeeding the termination date or such other time period as may be specified in the applicable agreement; or (Y) the close of the option period. In the event of the Participant’s death,
such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. 
  
 (D) Unless an individual agreement provides otherwise, if the employment of the Participant is terminated
for any reason other than disability (as defined in subparagraph (B)), death or for “cause,” his Option may be exercised to the extent exercisable on the Participant’s termination date, except that the Administrator may in its
discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the date of such termination of employment. The Option must be exercised, if at all, prior to the first to occur of the following,
whichever shall be applicable: (X) the close of the period of ninety (90) days next succeeding the termination date or such other time period as may be specified in the applicable agreement; or (Y) the close of the option period. If the Participant
dies following such termination of employment and prior to the earlier of the dates specified in (X) or (Y) of this subparagraph (D), the Participant shall be treated as having died while employed under subparagraph (C) immediately preceding
(treating for this purpose the Participant’s date of termination of employment as the termination date). In the event of the Participant’s death, such Option shall be 

 
exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. 
  
 (E) Unless an individual agreement provides otherwise, if
the employment of the Participant is terminated for “cause,” his Option shall lapse and no longer be exercisable as of the effective time of his termination of employment, as determined by the Administrator. For purposes of the Plan, (X)
the Participant’s termination shall be for “cause” if such termination results from the Participant’s termination for “cause” under his employment, consulting or other agreement with the Corporation or a related
corporation, if any; or (Y) if the Participant has not entered into any such employment, consulting or other agreement, then the Participant’s termination shall be for “cause” if termination results due to the Participant’s (i)
dishonesty or conviction of a crime; (ii) failure to perform his duties for the Corporation or a related corporation to the satisfaction of the Corporation; or (iii) engaging in conduct that could be materially damaging to the Corporation without a
reasonable good faith belief that such conduct was in the best interest of the Corporation. The determination of “cause” shall be made by the Administrator and its determination shall be final and conclusive. 
  
 (F) Notwithstanding the foregoing, the Administrator shall
have authority, in its discretion, to extend the period during which an Option may be exercised or modify the other terms and conditions of exercise, or both; provided that, in the event that any such extension or modification shall cause an
Incentive Option to be designated as a Nonqualified Option, no such extension or modification shall be made without the written consent of the Participant. 
  
 (iv) Unless an individual agreement provides otherwise, an Option granted to a Participant who was a non-employee director of an
independent contractor of the Corporation or a related corporation at the time of grant (and who does not thereafter become an employee, in which case he shall be subject to the provisions of Section 6(c)(iii)) may be exercised only to the extent
exercisable on the date of the Participant’s termination of service to the Corporation or a related corporation (unless the termination was for cause), and must be exercised, if at all, prior to the first to occur of the following, as
applicable: (X) the close of the period of ninety (90) days next succeeding the termination date or such other time period as may be specified in the applicable agreement; or (Y) the close of the option period. If the services of such a Participant
are terminated for cause (as defined in Section 6(c)(iii)(E)), his Option shall lapse and no longer be exercisable as of the effective time of his termination of services, as determined by the Administrator. Notwithstanding the foregoing, the
Administrator may in its discretion accelerate the date for exercising all or any part of an Option which was not otherwise exercisable on the termination date, extend the period during which an Option may be exercised, modify the other terms and
conditions of exercise, or any combination of the foregoing. 
  
 (v) A Participant or his legal representatives, legatees or distributees shall not be deemed to be the holder of any shares subject to an Option and shall not have any rights as a stockholder unless and until
certificates for such shares are delivered to him or them under the Plan. 

 (vi) A certificate or certificates for shares of Common Stock acquired upon exercise of
an Option shall be issued in the name of the Participant (or his beneficiary) and distributed to the Participant (or his beneficiary) as soon as practicable following receipt of notice of exercise and payment of the purchase price. 
  
 (d) Nontransferability of Options 
  
 (i) Incentive Options shall not be transferable (including
by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession. Nonqualified Options shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate
succession, except as may be permitted by the Administrator in its sole discretion in a manner consistent with the registration provisions of the Securities Act. Except as may be permitted by the preceding sentence, an Option shall be exercisable
during the Participant’s lifetime only by him or by his guardian or legal representative. The designation of a beneficiary does not constitute a transfer. 
  

(ii) If a Participant is subject to Section 16 of the Exchange Act, shares of Common Stock acquired upon exercise of an Option may not,
without the consent of the Administrator, be disposed of by the Participant until the expiration of six months after the date the Option was granted. 
  

	7.	Stock Appreciation Rights 

  
 (a) Grant of SARs: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant SARs to such eligible
individuals, in such numbers, upon such terms and at such times as the Administrator shall determine. SARs may be granted to an optionee of an Option (hereinafter called a “Related Option”) with respect to all or a portion of the shares of
Common Stock subject to the Related Option (a “Tandem SAR”) or may be granted separately to an eligible key employee (a “Freestanding SAR”). Subject to the limitations of the Plan, SARs shall be exercisable in whole or in part
upon such terms and conditions as are provided in the agreement relating to the grant of the SAR. 
  
 (b) Tandem SARs: A Tandem SAR may be granted either concurrently with the grant of the Related Option or (if the Related Option is a Nonqualified
Option) at any time thereafter prior to the complete exercise, termination, expiration or cancellation of such Related Option. Tandem SARs shall be exercisable only at the time and to the extent that the Related Option is exercisable (and may be
subject to such additional limitations on exercisability as the Administrator may provide in the agreement), and in no event after the complete termination or full exercise of the Related Option. For purposes of determining the number of shares of
Common Stock that remain subject to such Related Option and for purposes of determining the number of shares of Common Stock in respect of which other Awards may be granted, upon the exercise of Tandem SARs, the Related Option shall be considered to
have been surrendered to the extent of the number of shares of Common Stock with respect to which such Tandem SARs are exercised. Upon the exercise or termination of the Related Option, the Tandem SARs with respect thereto shall be canceled
automatically to the extent of the number of shares of Common Stock with respect to which the Related Option was so exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a Tandem SAR, the Participant shall be entitled
to receive from the Corporation, for each share of Common Stock with respect to which the Tandem SAR is being exercised, consideration equal in value to the excess of the fair market value of a share of Common Stock on the date of exercise over the
Related Option price per 

 
share; provided, that the Administrator may, in any agreement granting Tandem SARs, establish a maximum value payable for such SARs. 
  
 (c) Freestanding SARs: Unless an individual agreement provides
otherwise, the base price of a Freestanding SAR shall be not less than 100% of the fair market value of the Common Stock (as determined in accordance with Section 6(b)(ii)) on the date of grant of the Freestanding SAR. Subject to the limitations of
the Plan, upon the exercise of a Freestanding SAR, the Participant shall be entitled to receive from the Corporation, for each share of Common Stock with respect to which the Freestanding SAR is being exercised, consideration equal in value to the
excess of the fair market value of a share of Common Stock on the date of exercise over the base price per share of such Freestanding SAR; provided, that the Administrator may, in any agreement granting Freestanding SARs, establish a maximum value
payable for such SARs. 
  
 (d) Exercise of SARs:

  
 (i) Subject to the terms of the Plan, SARs
shall be exercisable in whole or in part upon such terms and conditions as are provided in the agreement relating to the grant of the SAR. The period during which an SAR may be exercisable shall not exceed ten years from the date of grant or, in the
case of Tandem SARs, such shorter option period as may apply to the Related Option. Any SAR or portion thereof not exercised before expiration of the period stated in the agreement relating to the grant of the SAR shall terminate. 
  
 (ii) SARs may be exercised by giving written notice to the
Corporation at such place as the Administrator shall direct. The date of exercise of the SAR shall mean the date on which the Corporation shall have received notice from the Participant of the exercise of such SAR. 
  
 (iii) No SAR may be exercised unless the Participant is, at
the time of exercise, an eligible Participant, as described in Section 5, and has been a Participant continuously since the date the SAR was granted, subject to the provisions of Sections 6(c)(iii) and (iv). 
  
 (e) Consideration: The consideration to be received upon the exercise
of the SAR by the Participant shall be paid in cash, shares of Common Stock (valued at fair market value on the date of exercise of such SAR in accordance with Section 6(b)(ii)) or a combination of cash and shares of Common Stock, as elected by the
Administrator, subject to the terms of the Plan and the applicable agreement. The Corporation’s obligation arising upon the exercise of the SAR may be paid currently or on a deferred basis with such interest or earnings equivalent (if any) as
the Administrator may determine. A certificate or certificates for shares of Common Stock acquired upon exercise of an SAR for shares shall be issued in the name of the Participant (or his beneficiary) and distributed to the Participant (or his
beneficiary) as soon as practicable following receipt of notice of exercise. No fractional shares of Common Stock will be issuable upon exercise of the SAR and, unless otherwise provided in the applicable agreement, the Participant will receive cash
in lieu of fractional shares. 
  
 (f) Limitations: The
applicable SAR agreement shall contain such terms, conditions and limitations consistent with the Plan as may be specified by the Administrator. Unless otherwise so provided in the applicable agreement or the Plan, any such terms, conditions or
limitations relating to a Tandem SAR shall not restrict the exercisability of the Related Option. 

 (g) Nontransferability: 
  
 (i) SARs shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by
will or the laws of intestate succession (except to the extent, if any, that a Related Option is a Nonqualified Option and is transferable pursuant to Section 6(d)). The designation of a beneficiary does not constitute a transfer. SARs may be
exercised during the Participant’s lifetime only by him or by his guardian or legal representative. 
  
 (ii) If the Participant is subject to Section 16 of the Exchange Act, shares of Common Stock acquired upon exercise of an SAR may not,
without the consent of the Administrator, be disposed of by the Participant until the expiration of six months after the date the SAR was granted. 
  

	8.	Stock Awards 

  
 (a) Grant and Vesting of Stock Awards: Subject to the terms of the Plan, the Administrator may in its sole and absolute discretion grant Stock
Awards to such eligible individuals, for such numbers of shares, upon such terms and at such times as the Administrator shall determine. Stock Awards shall be payable in shares of Common Stock. The Administrator may grant Stock Awards in the form of
shares of Bonus Stock that vest immediately upon grant and that are not subject to any forfeiture conditions. The Administrator also may grant Stock Awards in the form of Restricted Stock Awards that are subject to certain conditions, which
conditions must be met in order for the Stock Award to vest and be earned (in whole or in part) and no longer subject to forfeiture. Such conditions may include but are not limited to continued service for a certain period of time, attainment of
performance objectives, retirement, displacement, disability, death, or a combination of these factors. Performance objectives may vary from Participant to Participant and between groups of Participants and shall be based on such corporate, business
unit and/or individual performance factors and criteria as the Administrator in its sole discretion may deem appropriate, which factors may include but are not limited to cash flow, return on equity, return on assets, total return to stockholders,
earnings per share, clinical development milestones, operations expense efficiency milestones or any combination of the foregoing. The Administrator also shall determine the nature, length and starting date, if any, during which a Stock Award may
vest (the “restriction period”). The Administrator shall have sole authority to determine whether and to what degree Stock Awards have vested and been earned and to establish and interpret the terms and conditions of Stock Awards and the
provisions herein. The Administrator shall also have authority, in its sole discretion, to accelerate the date that any Award which was not otherwise vested shall become vested in whole or in part without any obligation to accelerate such date with
respect to any other Award granted to any recipient. 
  
 (b)
Forfeiture of Stock Awards: Unless an individual agreement provides otherwise, if the employment or service of a Participant shall terminate for any reason and all or part of a Stock Award has not vested pursuant to the terms of the Plan and
related agreement, such Award, to the extent not then vested, shall be forfeited immediately upon such termination and the Participant shall have no further rights with respect thereto. 
  
 (c) Dividend and Voting Rights; Share Certificates: Unless an individual agreement provides otherwise, (i) a
Participant shall have no dividend rights, voting rights, or other rights as a stockholder with respect to shares subject to a Stock Award that has not yet vested and been earned; (ii) a certificate or certificates for shares of Common Stock subject
to a Stock Award shall be issued 

 
in the name of the Participant (or his beneficiary) and distributed to the Participant (or his beneficiary) as soon as practicable after the shares subject
to the Award shall be earned and vested; and (iii) no certificate shall be issued hereunder in the name of the Participant (or his beneficiary) except to the extent the shares represented thereby have been earned and vested. Notwithstanding the
foregoing, if the individual agreement provides that the shares subject to a Stock Award shall be issued prior to the vesting of the Award, the Corporation shall have the right to retain custody of the certificates evidencing the shares subject to
the Stock Award and to require the Participant to deliver to the Corporation a stock power, endorsed in blank, with respect to such Award. 
  
 (d) Nontransferability: 
  
 (i) Stock Awards that have not vested and been earned shall not be transferable (including by sale, assignment, pledge or hypothecation)
other than by will or the laws of intestate succession. The recipient of a Stock Award shall not sell, transfer, assign, pledge or otherwise encumber shares subject to the Award until the restriction period has expired and until all conditions to
vesting have been met. The transfer of shares subject to a Stock Award following vesting of the Award may be subject to such restrictions on transfer as may be imposed pursuant to Section 17 or pursuant to other restrictions established by the
Corporation. 
  
 (ii) If a recipient of a Stock
Award is subject to Section 16 of the Exchange Act, shares of Common Stock subject to such Award may not, without the consent of the Administrator, be sold or otherwise disposed of within six months following the date of grant of such Award.

  

	9.	Performance Awards 

  
 (a) Grant and Earning of Performance Awards: Subject to the terms of the Plan, Performance Awards in the form of either Performance Shares or
Performance Units, or a combination thereof, may be granted to Participants upon such terms and at such times as shall be determined by the Administrator. An award of Performance Shares is a grant of a right to receive shares of Common Stock or the
cash value thereof (or a combination thereof) which is contingent upon the achievement of performance or other objectives during a specified period. An award of Performance Units is a grant of a right to receive a designated dollar value amount of
Common Stock which is contingent upon the achievement of performance or other objectives during a specified period. Subject to Section 4(a), above, the Administrator shall have complete discretion in determining the number of Performance Units or
Performance Shares granted to each Participant. The Administrator shall determine the nature, length and starting date of the period during which a Performance Award may be earned (the “performance period”), and shall determine the
conditions which must be met in order for a Performance Award to be granted or to vest or be earned (in whole or in part), which conditions may include but are not limited to specified performance objectives, completion of the performance period, or
a combination of such conditions. The Administrator shall determine the performance objectives to be used in valuing Performance Awards and shall determine the extent, if any, to which such Awards have been earned. Performance objectives may vary
from Participant to Participant and between groups of Participants and shall be based oh such corporate, business unit and/or individual performance factors and criteria as the Administrator in its sole discretion may deem appropriate, which factors
may include but are not limited to cash flow, return on equity, return on assets, total return to stockholders, earnings per share, clinical development milestones, operations expense efficiency milestones or any combination of the foregoing. The

 
Administrator shall have sole authority to determine whether and to what degree Performance Awards have been earned and are payable and to interpret the
terms and conditions of Performance Awards and the provisions herein. The Administrator also shall determine the form and terms of payment of Performance Awards. The Administrator, in its sole and absolute discretion, may accelerate the date that
any Performance Award granted to a Participant shall be deemed to be earned in whole or in part, without any obligation to accelerate such date with respect to other Awards. 
  
 (b) Form of Payment: Payment of the amount to which a Participant shall be entitled upon earning a Performance Award
shall be made in cash, shares of Common Stock, or a combination of cash and shares of Common Stock, as determined by the Administrator in its sole discretion. Payment may be made in a lump sum or installments on such terms as may be established by
the Administrator. 
  
 (c) Forfeiture of Performance
Awards: Unless an individual agreement provides otherwise, if the employment or service of a Participant shall terminate for any reason and the Participant has not earned all or part of a Performance Award pursuant to the terms of the Plan and
related agreement, such Award, to the extent not then earned, shall be forfeited immediately upon such termination and the Participant shall have no further rights with respect thereto. 
  
 (d) Dividend and Voting Rights; Share Certificates: Unless an individual agreement provides otherwise, (i) a
Participant shall have no dividend rights, voting rights, or other rights as a stockholder with respect to shares, if any, subject to a Performance Award that has not yet been earned; (ii) a certificate or certificates for shares of Common Stock, if
any, subject to a Performance Award shall be issued in the name of the Participant (or his beneficiary) and distributed to the Participant (or his beneficiary) as soon as practicable after the Award has been earned; and (iii) no certificate shall be
issued hereunder in the name of the Participant (or his beneficiary) except to the extent that the Award has been earned. 
  
 (e) Nontransferability: 
  
 (i) Performance Awards which have not been earned shall not be transferable (including by sale, assignment, pledge or hypothecation) other
than by will or the laws of intestate succession. The recipient of a Performance Award shall not sell, transfer, assign, pledge or otherwise encumber any shares subject to the Award until the performance period has expired and until the conditions
to earning the Award have been met. The transfer of shares subject to a Performance Award following vesting of the Award may be subject to such restrictions on transfer as may be imposed pursuant to Section 17 or pursuant to other restrictions
established by the Corporation. 
  
 (ii) If a
recipient of a Performance Award is subject to Section 16 of the Exchange Act, shares of Common Stock, if any, subject to such Award may not, without the consent of the Administrator, be sold or otherwise disposed of within six months following the
date of grant of such Award. 
  

	10.	Withholding 

  
 Prior to the delivery of any certificate for shares or any other benefit conferred under the Plan, the Corporation shall require any recipient of an Award
to pay to the Corporation in cash the amount of any local, state or federal withholding tax or other amount required by any governmental 

 
authority to be withheld and paid over by the Corporation to such authority for the account of such recipient. Notwithstanding the foregoing, the
Administrator may, in its sole discretion, permit the recipient to satisfy such obligation in whole or in part, and any other local, state or federal income tax obligations relating to such an Award, by electing (the “election”) to have
the Corporation withhold shares of Common Stock from the shares to which the recipient is entitled. The number of shares to be withheld shall have a fair market value as of the date that the amount of tax to be withheld is determined as nearly equal
as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator. 
  

	11.	Agreement 

  
 The grant of any Award under the Plan shall be evidenced by the execution of an agreement (the “agreement”) between the Corporation and the
Participant. Such agreement shall state terms, conditions and restrictions applicable to the Award and any may state such other terms, conditions and restrictions, including but not limited to terms, conditions and restrictions applicable to shares
subject to an Award, as may be established by the Administrator. 
  

	12.	Code Section 162(m) Performance-Based Compensation Compliance 

  
 To the extent that Section 162(m) of the Code is applicable, the Administrator shall have discretion to determine the
extent, if any, that Awards conferred under the Plan to covered employees, as such term is defined in Section 21(a), are intended to comply with the qualified performance-based compensation exception to employer compensation deductions set forth in
Section 162(m) of the Code. 
  

	13.	Section 16(b) Compliance 

  
 To the extent that any Participants in the Plan are subject to Section 16(b) of the Exchange Act, it is the general intention of the Corporation that
transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act and the Plan shall be construed in favor of the Plan transactions meeting the requirements of Rule 16b-3 or any successor rules thereto. If any Plan provision is later
found not to be in compliance with Section 16 of the Exchange Act, the provisions shall be deemed null and void. Notwithstanding anything in the Plan to the contrary, the Administrator, in its sole and absolute discretion, may bifurcate the Plan so
as to restrict, limit or condition the use of any provision of the Plan to participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other
participants. 

	14.	No Right or Obligation of Continued Employment or Service 

  
 Nothing contained in the Plan shall confer upon a Participant the right to continue in the employment or service of the
Corporation or a related corporation as an employee, director or independent contractor or interfere in any way with the right of the Corporation or a related corporation to terminate the Participant’s employment or service at any time. Except
as otherwise provided in the Plan or a related agreement, (i) all rights of a Participant with respect to that portion of his Award which has not yet been exercised, vested or earned shall terminate upon termination of employment or service of the
Participant with the Corporation or a related corporation, and (ii) Awards granted under the Plan to a Participant shall not be affected by any change in the duties or position of the Participant, as long as such individual remains an employee of or
in service to the Corporation or a related corporation. 
  

	15.	Unfunded Plan; Not a Retirement Plan 

  
 (a) Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the
Corporation or any related corporation including, without limitation, any specific funds, assets or other property which the Corporation or any related corporation, in their discretion, may set aside in anticipation of a liability under the Plan. A
participant shall have only a contractual right to the Common Stock or amounts, if any, distributable or payable under the Plan, unsecured by any assets of the Corporation or any related corporation. Nothing contained in the Plan shall constitute a
guarantee that the assets of such corporations shall be sufficient to pay any benefits to any person. 
  
 (b) In no event shall any amounts accrued, distributable or payable under the Plan be treated as compensation for the purpose of determining the amount of
contributions or benefits to which any person shall be entitled under any retirement plan sponsored by the Corporation or a related corporation that is intended to be a qualified plan within the meaning of Section 401 (a) of the Code. 
  

	16.	Amendment and Termination of the Plan and Awards 

  

The Plan and any Award granted pursuant to the Plan may be amended or terminated at any time by the Board of Directors of the Corporation; provided,
that (i) amendment or termination of an Award shall not, without the consent of the recipient of an Award, adversely affect the rights of the recipient with respect to an outstanding Award; and (ii) approval of an amendment to the Plan by the
stockholders of the Corporation shall only be required in the event stockholder approval of any such amendment is required by applicable law, rule or regulation. 
  

	17.	Restrictions on Shares; Corporation’s Right of Repurchase 

  
 (a) The Administrator may impose such restrictions on Awards and any shares representing Awards hereunder as it may deem
advisable, including without limitation restrictions under the Securities Act, under the requirements of any stock exchange or similar organization and under any blue sky or state securities laws applicable to such shares. Notwithstanding any other
Plan provision to the contrary, the Corporation shall not be obligated to issue or deliver shares of Common Stock under the Plan or make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution
or action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act). The Corporation 

 
will be under no obligation to register shares of Common Stock with the Securities and Exchange Commission or to effect compliance with the exemption,
registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Corporation will have no liability for any inability or failure to do so. The Corporation may cause a restrictive
legend to be placed on any certificate issued pursuant to an Award hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel. 
  
 (b) As a condition to the issuance and delivery of Common Stock hereunder, or
the grant of any benefit pursuant to the terms of the Plan, and unless an individual agreement provides otherwise, the Corporation may require a Participant or other person to become a party to a stockholders agreement (including but not limited to
that certain Stockholders Agreement dated as of August 22, 2000, by and among Targacept, Inc. and its stockholders, as it may be amended), buy-sell agreement, redemption agreement, repurchase agreement or other agreement between the Corporation and
stockholders of the Corporation or among stockholders of the Corporation or such other agreements imposing such restrictions as may be required by the Corporation. 
  

	18.	Significant Transactions 

  
 Notwithstanding any other provision of the Plan to the contrary, and unless an individual agreement provides otherwise, in the event of a Significant
Transaction (as defined in Section 18(d)): 
  
 (a) All Options and
SARs outstanding as of the date of such Significant Transaction of shall become fully exercisable, whether or not then otherwise exercisable; 
  
 (b) Any restrictions including but not limited to the restriction period or performance period applicable to any Stock Award or Performance Award shall be
deemed to have expired, and such Awards shall become fully vested, earned and payable to the fullest extent of the original grant of the applicable Award; and 
  

(c) Notwithstanding the foregoing, in the event of a merger, share exchange, sale or disposal of substantially all of the assets of the Corporation,
reorganization or other business combination affecting the Corporation or a related corporation, the Administrator may, in its sole and absolute discretion, determine that any or all Awards granted pursuant to the Plan shall not vest, be earned or
become exercisable on an accelerated basis, if the Corporation or the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of Awards granted under the Plan or the grant of
substitute awards (in either case, with substantially similar or equivalent terms as Awards granted under the Plan), as in the opinion of the Administrator is equitable or appropriate to protect the rights and interests of participants under the
Plan. For the purposes herein, if the Committee is acting as the Administrator, the Committee authorized to make the determinations provided for in this Section 18(c) shall be appointed by the Board of Directors, two-thirds of the members of which
shall have been directors of the Corporation prior to the sale, merger, share exchange, reorganization or other business combinations affecting the Corporation or a related corporation. 

 (d) For the purposes herein, a “Significant Transaction” shall be deemed to have occurred upon
the occurrence of any of the following: 
  
 (i)
The closing of a firm commitment underwritten public offering of the Corporation’s Common Stock pursuant to an effective registration statement under the Securities Act; 
  
 (ii) The date any entity or person that (A) does not beneficially own Common Stock as of the effective date
of the Plan and does not have any affiliate that beneficially owns Common Stock as of the effective date of the Plan shall have become the beneficial owner of, or shall have obtained voting control over, fifty percent (50%) or more of the
outstanding Common Stock of the Corporation or (B) beneficially owns Common Stock as of the effective date of the Plan or has one or more affiliates that beneficially own Common Stock as of the effective date of the Plan, together with its
affiliates, shall have become the beneficial owner of, or shall have obtained voting control over, sixty-seven percent (67%) or more of the outstanding Common Stock of the Corporation; or 
  
 (iii) The date the stockholders of the Corporation approve a
definitive agreement (X) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be
converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership
of Common Stock of the surviving corporation immediately after the merger as immediately before, or (Y) to sell or otherwise dispose of all or substantially all the assets of the Corporation. 
  
 (For purposes herein, the term “person” shall mean any individual,
corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored
or maintained by the Corporation or any subsidiary thereof, the term “affiliate” shall have the meaning given the term in Rule 12b-2 under the Exchange Act and the term “beneficial owner” shall have the meaning given the term in
Rule 13d-3 under the Exchange Act.) 
  

	19.	Applicable Law 

  
 The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws provisions of any
state. 
  

	20.	Stockholder Approval 

  
 The Plan is subject to approval by the stockholders of the Corporation, which approval must occur, if at all, within twelve (12) months of the effective
date of the Plan. Awards granted prior to such stockholder approval shall be conditioned upon and shall be effective only upon approval of the Plan by such stockholders on or before such date. 

	21.	Certain Definitions 

  
 For purposes of the Plan, the following terms shall have the meaning indicated unless otherwise provided herein: 
  
 (a) “Covered employee” shall have the meaning given the term in
Section 162(m) of the Code or the regulations thereunder. 
  
 (b)
“Parent” or “parent corporation” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each corporation other than the Corporation owns stock possessing 50% or
more of the total combined voting power of all classes of stock in another corporation in the chain. 
  
 (c) “Predecessor” or “predecessor corporation” means a corporation which was a party to a transaction described in Section 424(a) of
the Code (or which would be so described if a substitution or assumption under that Section had occurred) with the Corporation, or a corporation which is a parent or subsidiary of the Corporation, or a predecessor of any such corporation.

  
 (d) “Related corporation” means any parent,
subsidiary or predecessor of the Corporation. 
  
 (e)
“Subsidiary” or “subsidiary corporation” means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each corporation other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in another corporation in the chain. 
  
 IN WITNESS WHEREOF, this 2000 Equity Incentive Plan of Targacept, Inc., is, by the authority of the Board of Directors of the Corporation, executed in
behalf of the Corporation, effective the 22nd day of August, 2000. 
  

			
	TARGACEPT, INC.
		
	By:	 	 /s/ J. Donald deBethizy

	 	 	 J. Donald deBethizy, President

  

	
	 ATTEST:

	
	 /s/ August Borschke

	 Secretary

	
	 [Corporate Seal]

 Exhibit A 
  

2001 Declaration of Amendment to 
 2000 Equity Incentive Plan of Targacept, Inc. 
  
 THIS DECLARATION OF AMENDMENT is executed this 18th day of December, 2001, by TARGACEPT, INC., a Delaware
corporation (the “Company”), to the 2000 Equity Incentive Plan of Targacept, Inc. (the “Plan”). 
  
 R E C I T A L S: 
  
 WHEREAS, pursuant to Section 16 of the Plan, the Company’s Board of Directors and stockholders have approved the amendments to the Plan set forth below. 
  
 NOW, THEREFORE, IT IS DECLARED, that, effective as of the date hereof: 
  

	 	1.	Section 4(a) of the Plan is amended by deleting “2,011,259” therefrom and replacing it with “2,661,259.” 

  

	 	2.	Section 5 of the Plan is amended by deleting it in its entirety and replacing it with the following. 

  
 “5. Eligibility 
  
 An Award may be granted only to a person who satisfies the following eligibility requirements on the date the Award is granted:

  
 (a) The person is either (i) an employee of
the Corporation or a related entity, (ii) a director of the Corporation or a related entity, or (iii) an independent contractor, consultant or advisor (collectively, “independent contractors”) providing bona fide services to the
Corporation or a related entity not in connection with the offer and sale of securities in a capital raising transaction. For this purpose, an individual shall be considered to be an “employee” only if there exists between the individual
and the Corporation or a related entity the legal and bona fide relationship of employer and employee. 
  
 (b) With respect to the grant of Incentive Options, the person is an individual employee who does not own, immediately before the time
that the Incentive Option is granted, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation. Notwithstanding the foregoing, an individual who owns more than ten percent of the total
combined voting power of the Corporation may be granted an Incentive Option if the option price (as determined pursuant to Section 6(b), is at least 110% of the fair market value of the Common Stock (as defined in Section 6(b)(ii)), and 

 
the option period (as defined in Section 6(c)(i)) does not exceed five years. For this purpose, an individual will be deemed to own stock that is
attributable to him under Section 424(d) of the Code. 
  
 (c) The person, being otherwise eligible under this Section 5, is selected by the Administrator as a person to whom or to which an Award shall be granted (a “Participant”).” 
  

	 	3.	Each reference in the Plan to “individual” or “individuals,” when used to refer to a Participant(s) or a potential Participant(s) in the Plan (other than
references contained in Section 5, which are addressed above), shall be deemed to a reference to “person” or “persons.” 

  

	 	4.	Except as set forth herein, the Plan shall remain in full force and effect. 

  
 IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of Targacept, Inc. as of the day and year first above written. 
  

			
	TARGACEPT, INC.
		
	By:	 	 /s/ J. Donald deBethizy

	 	 	 J. Donald deBethizy
 President and Chief Executive
Officer

  

 2 

 May 2002 Declaration of Amendment to 
 2000 Equity Incentive Plan of Targacept, Inc. 
  
 THIS MAY 2002 DECLARATION OF AMENDMENT is executed this 24th day of February 2003, effective as of May 15, 2002, by TARGACEPT, INC., a Delaware corporation (the “Company”), to the 2000 Equity Incentive Plan of Targacept, Inc., as amended (the
“Plan”). 
  
 RECITALS: 
  
 WHEREAS, pursuant to Section 16 of the Plan, the Company’s Board of
Directors has approved the amendment to the Plan set forth below. 
  
 NOW, THEREFORE, IT IS DECLARED, that, effective as of the date hereof: 
  

	 	5.	The first sentence of Section 8(d)(i) of the Plan is hereby amended to read: 

  

“Stock awards that have not vested and been earned shall not be transferable (including by sale, assignment, pledge or hypothecation) other than
by will or the laws of intestate succession, except as may be permitted by the Administrator in its sole discretion in a manner consistent with the registration provisions of the Securities Act.” 
  

	 	6.	Except as set forth herein, the Plan shall remain in full force and effect. 

  
 IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of Targacept, Inc. as of the day and year first above written. 
  

			
	TARGACEPT, INC.
		
	By:	 	 /s/ J. Donald deBethizy

	 	 	 J. Donald deBethizy
 President and Chief Executive
Officer

 2002 Declaration of Amendment to 
 2000 Equity Incentive Plan of Targacept, Inc. 
  
 THIS 2002 DECLARATION OF AMENDMENT is executed this 26th day of November 2002, by TARGACEPT, INC., a Delaware corporation (the “Company”), to
the 2000 Equity Incentive Plan of Targacept, Inc., as amended (the “Plan”). 
  
 RECITALS: 
  
 WHEREAS, pursuant to
Section 16 of the Plan, the Company’s Board of Directors and stockholders have approved the amendments to the Plan set forth below. 
  
 NOW, THEREFORE, IT IS DECLARED, that, effective as of the date hereof: 
  

	 	1.	Section 4(a) of the Plan is amended by deleting “2,661,259” therefrom and replacing it with “5,661,259.” 

  

	 	2.	Except as set forth herein, the Plan shall remain in full force and effect. 

  
 IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of Targacept, Inc. as of the day and year first above written. 
  

			
	TARGACEPT, INC.
		
	By:	 	 /s/ J. Donald deBethizy

	 	 	 J. Donald deBethizy

	 	 	 President and Chief Executive Officer

 EXHIBIT A 
  

2003 Declaration of Amendment to 
 2000 Equity Incentive Plan of Targacept, Inc. 
  
 THIS 2003 DECLARATION OF AMENDMENT is executed this 20th day of August 2003, by TARGACEPT, INC., a Delaware corporation (the “Company”), to the 2000 Equity Incentive Plan of Targacept, Inc., as amended (the “Plan”).

  
 RECITALS: 
  
 WHEREAS, pursuant to Section 16 of the Plan, the Company’s Board of
Directors have approved the amendments to the Plan set forth below. 
  
 NOW, THEREFORE, IT IS DECLARED, that: 
  

	 	1.	Section 4(a) of the Plan is amended, subject to approval of the Company’s stockholders, by deleting “5,661,259” therefrom and replacing it with “9,216,657.”

  

	 	2.	Section 18(d)(i) of the Plan is amended to read as provided below by incorporating therein the underlined language indicated below: 

  
 “The closing of a firm commitment underwritten public offering of the
Corporation’s Common Stock pursuant to an effective registration statement under the Securities Act (except that the foregoing shall not constitute a “Significant Transaction” with respect to Awards granted on and after August
20,2003);” 
  

	 	3.	Except as expressly modified herein, all of the terms of the Plan shall continue in full force and effect. 

  
 IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of
Targacept, Inc. as of the day and year first above written. 
  

			
	TARGACEPT, INC.
		
	By:	 	 /s/ J. Donald deBethizy

	 	 	 J. Donald deBethizy

	 	 	 President and Chief Executive Officer

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