Document:

Netlogic Microsystems, Inc. 2008 New Employee Inducement Incentive Plan

 Exhibit 10.27 
 NETLOGIC MICROSYSTEMS, INC. 
 2008 NEW EMPLOYEE INDUCEMENT INCENTIVE PLAN 
 JANUARY 16, 2008 
  

 NETLOGIC MICROSYSTEMS, INC. 
 NEW EMPLOYEE INDUCEMENT INCENTIVE PLAN 
 1.    Purposes 
 1.1    General Purpose. The Company, by means of the Plan, seeks to retain the services of persons not previously an employee
or director of the Company, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the Company within the meaning of Rule 4350(i)(1)(A)(iv) of the Nasdaq Marketplace
Rules, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 
 1.2    Available Awards. The purpose of the Plan is to provide a means by which eligible recipients of Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting
of the following Stock Awards: Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and Stock Grants. 
 2.    Definitions 
 As used in this Plan, the following terms shall have the following meanings: 
 2.1    Accelerate, Accelerated, and Acceleration means: (a) when used with respect to
an Option or Stock Appreciation Right, that as of the time of reference the Option or Stock Appreciation Right will become exercisable with respect to some or all of the shares of Stock for which it was not then otherwise exercisable by its terms;
(b) when used with respect to Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise applicable to the Stock or Units shall expire with respect to some or all of the shares of Restricted Stock or Units then still
otherwise subject to the Risk of Forfeiture; and (c) when used with respect to Performance Units, that the applicable Performance Goals shall be deemed to have been met as to some or all of the Units. 
 2.2    Acquisition means a merger or consolidation of the Company with or into another person or the sale, transfer, or
other disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions. 
 2.3    Affiliate means any corporation, partnership, limited liability company, business trust, or other entity controlling, controlled by or under common control with the Company.

 2.4    Award means any grant or sale pursuant to the Plan of Options, Stock Appreciation Rights,
Performance Units, Restricted Stock, Restricted Stock Units or Stock Grants. 

 2.5    Award Agreement means an agreement between the Company and the
recipient of an Award, setting forth the terms and conditions of the Award. 
 2.6    Board means the
Company Board of Directors. 
 2.7    Change of Control means the occurrence of any of the following after
the date of the approval of the Plan by the Board: 
 (a)  an Acquisition, unless securities possessing more than 50% of the total
combined voting power of the survivor’s or acquiror’s outstanding securities (or the securities of any parent thereof) are held by a person or persons who held securities possessing more than 50% of the total combined voting power of the
Company’s outstanding securities immediately prior to that transaction, or 
 (b)  any person or group of persons (within the
meaning of Section 13(d)(3) of the Exchange Act) directly or indirectly acquires beneficial ownership (determined pursuant to SEC Rule 13d-3 promulgated under the said Exchange Act) of securities possessing more than 50% of the total
combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders that the Board does not recommend such stockholders accept, other than (i) the Company or
an Affiliate, (ii) an employee benefit plan of the Company or any of its Affiliates, (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, or (iv) an underwriter
temporarily holding securities pursuant to an offering of such securities, or 
 (c)  over a period of 36 consecutive months or
less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be composed
of individuals who either (i) have been Board members continuously since the beginning of that period, or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members
described in the preceding clause (i) who were still in office at the time that election or nomination was approved by the Board; or 
 (d)  a majority of the Board votes in favor of a decision that a Change of Control has occurred. 
 2.8    Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and any regulations issued from time to time thereunder. 
 2.9    Committee means the Compensation Committee of the Board, which in general is responsible for the administration
of the Plan, as provided in Section 5 of the Plan. For any period during which no such committee is in existence, “Committee” shall mean the Independent Board, and all authority and responsibility assigned to the Committee under the
Plan shall be exercised, if at all, by the Independent Board. 
 2.10    Company means NetLogic
Microsystems, Inc., a corporation organized under the laws of the State of Delaware. 
  

 2 

 2.11    Continuous Employment means the absence of any interruption or
termination of service as an employee, director or consultant of the Company or any Subsidiary. Continuous Employment shall not be considered interrupted during any period of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company and any Parent, Subsidiary or successor of the Company. 
 2.12    Effective Date means the date on which this Plan has been approved by the Board, including the Independent Board. 
 2.13    Exchange Act means the Securities Exchange Act of 1934, as amended. 
 2.14    Grant Date means the date as of which an Option is granted, as determined under Section 6.1(a). 
 2.15    Independent Board means a majority of the independent directors on the Board. “Independent” has the meaning given under NASD Marketplace
Rule 4200. 
 2.16    Market Value means the value of a share of Stock on a particular date determined
by such methods or procedures as may be established by the Committee. Unless otherwise determined by the Committee, the Market Value of Stock as of any date is the closing price for the Stock as reported on the applicable market of the NASDAQ Stock
Market (or on any national securities exchange or other established market on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was
reported. 
 2.17    Nonstatutory Option means any Option that is not an Incentive Option. 
 2.18    Option means an option to purchase shares of Stock. 
 2.19    Optionee means a Participant to whom an Option shall have been granted under the Plan. 
 2.20    Parent means a parent corporation of the Company, whether now or hereafter existing, as defined by
Section 424(e) of the Code. 
 2.21    Participant means any holder of an outstanding Award under the
Plan. 
 2.22    Performance Criteria means the criteria that the Committee select for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria used to establish Performance Goals shall be determined by the Committee and may include one or more of the following
measures: pre- or after-tax net earnings, sales growth, operating earnings, operating cash flow, return on net assets, return on stockholders’ equity, return on assets, return on capital, Stock price growth, stockholder returns, gross or net
profit margin, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee will objectively
define the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant. 
  

 3 

 2.23    Performance Goals means, for a Performance Period, the written
goals established by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company
performance or the performance of a division, business unit, Subsidiary, or an individual. 
 2.24    Performance
Period means the one or more periods, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals will be measured for purposes of determining a Participant’s
right to, and the payment of, a Performance Unit. 
 2.25    Performance Unit means a right granted to a
Participant under Section 6.5, to receive cash, Stock or other Awards, the payment of which is contingent on achieving Performance Goals established by the Committee. 
 2.26    Plan means this 2008 New Employee Inducement Incentive Plan of the Company, as amended from time to time, and
including any attachments or addenda hereto. 
 2.27    Restricted Stock means a grant or sale of shares of
Stock to a Participant subject to a Risk of Forfeiture. 
 2.28    Restricted Stock Units means rights to
receive shares of Stock at the close of a Restriction Period, subject to a Risk of Forfeiture. 
 2.29    Restriction Period means the period of time, established by the Committee in connection with an Award of Restricted Stock, during which the shares of Restricted Stock are subject to a Risk of
Forfeiture described in the applicable Award Agreement. 
 2.30    Risk of Forfeiture means a limitation on
the right of the Participant to retain Restricted Stock or Restricted Stock Units, including a right in the Company to reacquire shares of Restricted Stock at less than their then Market Value, arising because of the occurrence or non-occurrence of
specified events or conditions. 
 2.31    Securities Act means the Securities Act of 1933, as amended.

 2.32    SEC means the Securities and Exchange Commission. 
 2.33    Stock means common stock, par value $0.01 per share, of the Company, and such other securities as may be
substituted for Stock pursuant to Section 7. 
 2.34    Stock Appreciation Right means a right to
receive any excess in the Market Value of shares of Stock (except as otherwise provided in Section 6.2(c)) over a specified exercise price. 
 2.35    Stock Grant means the grant of shares of Stock not subject to restrictions or other forfeiture conditions. 
 2.36    Subsidiary means a subsidiary corporation of the Company, whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  

 4 

 2.37    Vesting Commencement Date means, with respect to an Option or
Stock Appreciation Right, the date, determined by the Committee, on which the vesting of the Option or Stock Appreciation Right shall commence, which may be the Grant Date or a date prior to or after the Grant Date. 
 3.    Shares Subject to the Plan; Term of the Plan 
 3.1    Number of Shares. Subject to Sections 7.1 and 13, the aggregate number of Shares that have been reserved for issuance pursuant to this Plan is 250,000 Shares. Shares that are:
(a) subject to issuance upon vesting of an Award but cease to be subject to such Award for any reason other than the vesting of such Award; (b) subject to an Award granted hereunder but are forfeited; or (c) subject to an Award that
otherwise terminates or is settled without Shares being issued shall revert to and again become available for issuance under the Plan. The Shares used to pay the withholding taxes related to an Award shall not again become available for issuance
under the Plan. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding but unvested Awards granted under this Plan. 
 3.2    Term. Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any
time in the period commencing on the Effective Date of approval of the Plan by the Board and ending immediately prior to the twentieth anniversary thereof. Awards granted pursuant to the Plan within that period shall not expire solely by reason of
the termination of the Plan. 
 4.    Administration 
 In all events the Plan shall be administered by the Independent Board or Committee in compliance with rule 4350(i)(1)(A)(iv) (and any successor thereto) of the National Association of Securities Dealers, Inc.
(“NASD”). The grant of any Award under the Plan must be approved by a majority of the members of the Board (each of whom is an “independent director” as defined in the rules of the NASD) or by the Company’s independent
compensation committee (as intended under the rules of the NASD). The Plan shall be administered by the Committee, provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and
responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder. Subject to the provisions of the Plan,
the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan, including the new employee to receive the Award and
the form of Award. All Awards of Stock or which otherwise entitle the Award recipient to acquire any shares of Stock shall be made from the authorized but unissued shares of Stock of the Company. The Committee, or the Independent Board, shall
determine in its sole discretion how many shares of Stock to issue under this Plan in the aggregate. In making its determinations, the Committee may take into account the nature of the services to be rendered by the new employees, their present and
potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee also shall have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award 

  

 5 

 
Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan including, but not
limited to, the cancellation, amendment, renewal, or reclassification of outstanding Options and other Awards, subject to the provisions of Section 13, and to correct any defect, supply any omission or reconcile any inconsistency in the Plan,
any Award and any Award Agreement. The Committee’s determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons having or claiming any interest under the Plan or an Award made
pursuant to hereto. 
 5.    Authorization of Grants 
 5.1    Eligibility. Persons eligible for Stock Awards shall consist of Employees whose potential contribution, in the judgment of the Committee, will benefit the future success of the
Company and/or an Affiliate. Offers of Stock Awards may be made prior to the commencement of employment with the Company or an Affiliate, but Stock Awards may be granted only effective on or after the commencement of such employment to persons not
previously an Employee or Director of the Company, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the Company within the meaning of Rule 4350(i)(1)(A)(iv) of
the NASD Marketplace Rules (or applicable replacement rules or regulations). In addition, notwithstanding any other provision of the Plan to the contrary, all Stock Awards must be granted either by the Independent Board or the Committee. 

5.2    General Terms of Awards. Each grant of an Award shall be subject to all applicable terms and conditions of the Plan
(including but not limited to any specific terms and conditions applicable to that type of Award set out in the following Section), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe. No
prospective Participant shall have any rights with respect to an Award, unless and until such Participant has executed an Award agreement evidencing the Award, delivered a fully executed copy thereof to the Company, and otherwise complied with the
applicable terms and conditions of such Award. 
 5.3    Effect of Termination of Employment, Disability or Death.

 (a)  Termination of Employment, Etc. Unless the Committee shall provide otherwise with respect to any Award, if the
Participant’s employment or other association with the Company or its Affiliates ends for any reason other than by total disability or death, including because of the Participant’s employer ceasing to be an Affiliate, (a) any
outstanding Option or Stock Appreciation Right of the Participant shall cease to be exercisable in any respect not later than 90 days following that event and, for the period it remains exercisable following that event, shall be exercisable only to
the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement.
Military or sick leave or other personal leave approved by an authorized representative of the Company shall not be deemed a termination of employment or other association, provided that it does not exceed the longer of 90 days or the period
during which the absent Participant’s reemployment rights, if any, are guaranteed by statute or by contract. 
  

 6 

 (b)  Disability of Participant. If a Participant’s employment or other association
with the Company and its Affiliates ends due to disability (as defined in Section 22(e)(3) of the Code), and such Participant was in Continuous Employment from the Grant Date until the date of termination of service, any outstanding Option or
Stock Appreciation Right may be exercised at any time within six months following the date of termination of service, but only to the extent of the accrued right to exercise at the time of termination of service, subject to the condition that no
Option or Stock Appreciation Right shall be exercised after its expiration in accordance with its terms. 
 (c)  Death of
Participant. In the event of the death during the Option period, or period during Stock Appreciation Right may be exercised, of a Participant who is at the time of his or her death an employee, director or consultant and who was in Continuous
Employment as such from the Grant Date until the date of death, the Option or Stock Appreciation Right of the Participant may be exercised at any time within 12 months following the date of death by such Participant’s estate or by a person who
acquired the right to exercise the Option or Stock Appreciation Right by bequest, inheritance or otherwise as a result of the Participant’s death, but only to the extent of the accrued right to exercise at the time of death, subject to the
condition that no Option or Stock Appreciation Right shall be exercised after its expiration in accordance with its terms. 
 5.4    Transferability of Awards. Except as otherwise provided in this Section 5.4, Awards shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution. All of a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the Participant’s legal
representative. However, the Committee may, at or after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient through a gift or domestic relations order in
settlement of marital property rights to any of the following donees or transferees and may be reacquired by the Participant from any of such donors or transferees: 
 (a)  any “family member,” which includes any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee); 
 (b)  a trust in which family members have more than fifty percent (50%) of the beneficial interests; 
 (c)  a foundation in which “family members” (or the Participant) control the management of assets; and 
 (d)  any other entity in which “family members” (or the Participant) own more than fifty percent (50%) of the voting interests.

 provided, that (x) any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first
approved by the Committee, acting in its sole discretion; (y) the Award Agreement pursuant to which such Awards are granted, and any 

  

 7 

 
amendments thereto, must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section 5.4; and
(z) subsequent transfers of transferred Awards shall be prohibited except in accordance with this Section 5.4. Following transfer, any such Awards shall continue to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that the term hereof or in the Award Agreement shall continue to be applied with respect to the original Participant, following which any Options or Stock Appreciation Rights shall be exercisable by the transferee
only to the extent, and for the periods specified in the Award Agreement or Section 5.3, as applicable. 
 6.    Specific Terms
of Awards 
 6.1    Options. 
 (a)  Date of Grant. The granting of an Option shall take place at the time that legally effective action to grant the award is taken by the Committee or the Independent Board. 
 (b)  Exercise Price. The price at which shares of Stock may be acquired under each Option shall be determined by the Committee in its
sole discretion. 
 (c)  Option Period. No Option may be exercised on or after the tenth anniversary of the Grant Date.

 (d)  Exercisability. An Option may be immediately exercisable or become exercisable in such installments, cumulative or
non-cumulative, as the Committee may determine. Unless the Committee specifically determines otherwise at the time of the grant of the Option, each Option shall vest and become exercisable, cumulatively, as to one-fourth of the shares at the first
anniversary of the Vesting Commencement Date and as to one thirty-sixth of the remaining shares subject to the Option at the end of each successive month thereafter until all of the shares subject to the Option have vested, subject to the
Optionee’s Continuous Employment. In the case of an Option not otherwise immediately exercisable in full, the Committee may Accelerate such Option in whole or in part at any time. 
 (e)  Method of Exercise. An Option may be exercised by the Optionee giving written notice, in the manner provided in Section 14,
specifying the number of shares with respect to which the Option is then being exercised. The notice shall be accompanied by payment in the form of cash or check payable to the order of the Company in an amount equal to the exercise price of the
shares to be purchased or, if the Committee had so authorized on the grant of the Option or (and subject to such conditions, if any, as the Committee may deem necessary to avoid adverse accounting effects to the Company) by delivery to the Company
of: 
 (i)  shares of Stock having a Market Value equal to the exercise price of the shares to be purchased provided that such
shares either: (1) have been owned by the Optionee for more than six months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were obtained by the Optionee in the public market; 
  

 8 

 (ii)  unless prohibited by applicable law, the Optionee’s executed promissory note in the
principal amount equal to the exercise price of the shares to be purchased and otherwise in such form as the Committee shall have approved; 
 (iii)  by waiver of compensation due or accrued to the Optionee for services rendered. 
 If the Stock is traded on an established market,
payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to
the Company). Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Option. Within 30 days thereafter but subject to the remaining provisions of the Plan, the
Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates for the number of shares then being purchased. Such shares shall be fully paid and nonassessable. 
 6.2    Stock Appreciation Rights. 
 (a)  Tandem or Stand-Alone. Stock Appreciation Rights may be granted in tandem with an Option (at or, in the case of a Nonstatutory Option, after, the award of the Option), or alone and unrelated to
an Option. Stock Appreciation Rights in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem Stock Appreciation Rights are exercised.

 (b)  Exercise Price. Stock Appreciation Rights shall have such exercise price as the Committee may determine, except that
in the case of Stock Appreciation Rights in tandem with Options, the exercise price of the Stock Appreciation Rights shall equal the exercise price of the related Option. 
 (c)  Other Terms. Except as the Committee may deem inappropriate or inapplicable in the circumstances, Stock Appreciation Rights shall be subject to terms and conditions substantially similar to those
applicable to a Nonstatutory Option. In addition, a Stock Appreciation Right related to an Option which can only be exercised during limited periods following a Change of Control may entitle the Participant to receive an amount based upon the
highest price paid or offered for Stock in any transaction relating to the Change of Control or paid during the 30-day period immediately preceding the occurrence of the Change of Control in any transaction reported in the stock market in which the
Stock is normally traded. 
 6.3    Restricted Stock. 
 (a)   Purchase Price. Shares of Restricted Stock shall be issued under the Plan for such consideration, in cash, other property or
services, or any combination thereof, as is determined by the Committee. 
 (b)  Issuance of Certificates. Each Participant
receiving a Restricted Stock Award, subject to subsection (c) below, shall be issued a stock certificate in respect of such shares of Restricted Stock, or if issued in uncertificated form, shall be registered in the name 

  

 9 

 
of the Participant on the books of the Company’s transfer agent and registrar. Such certificate or uncertificated shares shall be registered in the name
of such Participant, and, if applicable, the certificate or the books of the Company’s transfer agent and registrar shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award substantially in
the following form: 
 The transferability of this certificate and the shares represented by this certificate are subject to
the terms and conditions of the NetLogic Microsystems, Inc. 2008 New Employee Inducement Incentive Plan and an Award Agreement entered into by the registered owner and NetLogic Microsystems, Inc. Copies of such Plan and Agreement are on file in the
offices of NetLogic Microsystems, Inc. 
 (c)  Escrow of Shares. The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Participant deliver a stock power, endorsed in blank,
relating to the Stock covered by such Award. 
 (d)  Restrictions and Restriction Period. During the Restriction Period
applicable to shares of Restricted Stock, such shares shall be subject to limitations on transferability and a Risk of Forfeiture arising on the basis of such conditions related to the performance of services, Company or Affiliate performance or
otherwise as the Committee may determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems
appropriate. 
 (e)  Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except as otherwise provided in the
Plan or the applicable Award Agreement, at all times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted Stock, the Participant shall have all of the rights of a stockholder of the Company, including the
right to vote, and the right to receive any dividends with respect to, the shares of Restricted Stock. The Committee, as determined at the time of Award, may permit or require the payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional Restricted Stock to the extent shares for reinvestment were authorized at the time of grant. 
 (f)  Lapse of Restrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock, the certificates for such shares shall be delivered to the Participant promptly if not theretofore
so delivered. 
 6.4    Restricted Stock Units. 
 (a)  Character. Each Restricted Stock Unit shall entitle the recipient to a share of Stock at a close of such Restriction Period as the
Committee may establish and subject to a Risk of Forfeiture arising on the basis of such conditions relating to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be 

  

 10 

 
waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate. 
 (b)  Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made in a single lump sum following the close of the
applicable Restriction Period unless the applicable Award Agreement provides for a later settlement date in compliance with Section 409A of the Code. At the discretion of the Committee, Participants may be entitled to receive payments
equivalent to any dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned. Unless the
Committee shall provide otherwise, any such dividend equivalents shall be paid, if at all, without interest or other earnings. 
 6.5    Performance Units. 
 (a)  Character. Each Performance Unit shall entitle the
recipient to the value of a specified number of shares of Stock, over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified Performance Period to the extent specified
Performance Goals shall have been achieved. 
 (b)  Earning of Performance Units. The Committee shall set Performance Goals
in its discretion which, depending on the extent to which they are met within the applicable Performance Period, will determine the number and value of Performance Units that will be paid out to the Participant. After the applicable Performance
Period has ended, the holder of Performance Units shall be entitled to receive payout on the number and value of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the
corresponding Performance Goals have been achieved. 
 (c)  Form and Timing of Payment. Payment of earned Performance Units
shall be made in a single lump sum following the close of the applicable Performance Period. At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Stock which have been earned in
connection with grants of Performance Units which have been earned, but not yet distributed to Participants. Subject to compliance with Section 409A of the Code, the Committee may permit or, if it so provides at grant require, a Participant to
defer such Participant’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or goals with respect to Performance Units. If any such deferral
election is required or permitted, the Committee shall establish rules and procedures for such payment deferrals. 
 6.6    Stock Grants. Stock Grants shall be awarded solely in recognition of significant contributions to the success of the Company or its Affiliates, in lieu of compensation otherwise already due and in such
other limited circumstances as the Committee deems appropriate. Stock Grants shall be made without forfeiture conditions of any kind. 
 6.7    Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan, granted to a Participant who is, at the time of 

  

 11 

 
grant or during the term of the Award, resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or
appropriate in order that the Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected
by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United
States. The Committee may establish supplements to, or amendments, restatements, or alternative versions of, the Plan for the purpose of granting and administrating any such modified Award. 
 7.    Adjustment Provisions 
 7.1    Adjustment for Corporate Actions. All of the share numbers set forth in the Plan reflect the capital structure of the Company as of the Effective Date. Subject to Section 7.2, if subsequent to that
date the outstanding shares of Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed with respect to shares of Stock, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an appropriate and proportionate adjustment will be made in (i) the numbers and kinds of shares or other
securities subject to the then outstanding Awards, (ii) the exercise price for each share or other unit of any other securities subject to then outstanding Options and Stock Appreciation Rights (without change in the aggregate purchase price as
to which such Options or Rights remain exercisable), (iii) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a Company repurchase right, (iv) and the number of shares reserved for
issuance under the Plan pursuant to Section 3. 
 7.2    Treatment in Certain Acquisitions. 
 (a)  Subject to any provisions of then outstanding Awards granting greater rights to the holders thereof, in the event of a Change of Control
or an Acquisition that constitutes a Change of Control in which outstanding Awards are not Accelerated in full, any then outstanding Awards shall nevertheless Accelerate in full if not assumed or replaced by comparable Awards referencing shares
of the capital stock of the successor or acquiring entity or the entity in control of such successor or acquiring entity, and thereafter (or after a reasonable period following the Acquisition, as determined by the Committee) terminate. As to any
one or more outstanding Awards which are not otherwise Accelerated in full by reason of such Acquisition, the Committee may also, either in advance of an Acquisition or at the time thereof and upon such terms as it may deem appropriate, provide for
the Acceleration of such outstanding Awards in the event that the employment of the Participants should subsequently terminate following the Acquisition. Each outstanding Award that is assumed in connection with an Acquisition, or is otherwise to
continue in effect subsequent to the Acquisition, will be appropriately adjusted, immediately after the Acquisition, as to the number and class of securities and other relevant terms in accordance with Section 7.1. 
  

 12 

 (b)  For the purposes of this Section 7.2, an Award shall be considered assumed or
replaced by a comparable Award if, following the Acquisition, the Award confers the right to purchase, for each share of Stock subject to the Award immediately prior to the Acquisition, the consideration (whether stock, cash or other securities or
property) received in the Acquisition by holders of Stock on the effective date of the Acquisition (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of
Stock); provided, however, that if such consideration received in the Acquisition was not solely common stock of the successor corporation or its Parent or Subsidiary, the Committee may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Award for each share of Stock subject to the Award to be solely common stock of the successor corporation or its Parent or Subsidiary equal in fair market value to the per share
consideration received by holders of Stock in the Acquisition. 
 7.3    Dissolution or Liquidation. Upon
dissolution or liquidation of the Company, other than as part of an Acquisition or similar transaction, each outstanding Option and Stock Appreciation Right shall terminate, but the Optionee or Stock Appreciation Right holder shall have the right,
immediately prior to the dissolution or liquidation, to exercise the Option or Stock Appreciation Right to the extent exercisable on the date of dissolution or liquidation. Upon dissolution or liquidation of the Company, other than as part of an
Acquisition or similar transaction, each other outstanding Award shall be forfeited. 
 7.4    Adjustment of Awards
Upon the Occurrence of Certain Unusual or Nonrecurring Events. In the event of any corporate action not specifically covered by the preceding sections, including, but not limited to, an extraordinary cash distribution on Stock, a corporate
separation or other reorganization or liquidation, the Committee may make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances. The Committee may make
adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in this Section 7.4) affecting the Company or the financial
statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan. 
 7.5    Related Matters. Any adjustment in Awards made
pursuant to this Section 7 shall be determined and made, if at all, by the Committee and shall include any correlative modification of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of Forfeiture,
applicable repurchase prices for Restricted Stock, and Performance Goals and other financial objectives which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Awards are not
substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 7. No fraction of a share shall be purchasable or deliverable upon exercise, but in the event any
adjustment hereunder of the number of shares covered by an Award shall cause such number to include a fraction of a share, such number of shares shall be adjusted to the nearest smaller whole number of shares. No adjustment of an Option exercise
price per share pursuant to this Section 7 shall result in an exercise price which is less than the par value of the Stock. 
  

 13 

 8.    Settlement of Awards 
 8.1    In General. Options and Restricted Stock shall be settled in accordance with their terms. All other Awards may be
settled in cash, Stock, or other Awards, or a combination thereof, as determined by the Committee at or after grant and subject to any contrary Award Agreement. The Committee may not require settlement of any Award in Stock pursuant to the
immediately preceding sentence to the extent issuance of such Stock would be prohibited or unreasonably delayed by reason of any other provision of the Plan. 
 8.2    Violation of Law. Notwithstanding any other provision of the Plan or the relevant Award Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of shares of
Stock covered by an Award may constitute a violation of law, then the Company may delay such issuance and the delivery of a certificate for such shares until (i) approval shall have been obtained from such governmental agencies, other than the
Securities and Exchange Commission, as may be required under any applicable law, rule, or regulation and (ii) in the case where such issuance would constitute a violation of a law administered by or a regulation of the Securities and Exchange
Commission, one of the following conditions shall have been satisfied: 
 (a)  the shares are at the time of the issue of such
shares effectively registered under the Securities Act; or 
 (b)  the Company shall have determined, on such basis as it deems
appropriate (including an opinion of counsel in form and substance satisfactory to the Company) that the sale, transfer, assignment, pledge, encumbrance or other disposition of such shares or such beneficial interest, as the case may be, does not
require registration under the Securities Act or any applicable State securities laws. 
 The Company shall make all reasonable efforts to bring about the
occurrence of said events 
 8.3    Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to
Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the charter, certificate or articles, or by laws, of the Company. 
 8.4    Investment Representations. The Company shall be under no obligation to issue any shares covered by any Award unless
the shares to be issued pursuant to Awards granted under the Plan have been effectively registered under the Securities Act, or the Participant shall have made such written representations to the Company (upon which the Company believes it may
reasonably rely) as the Company may deem necessary or appropriate for purposes of confirming that the issuance of such shares will be exempt from the registration requirements of the Securities Act and any applicable state securities laws and
otherwise in compliance with all applicable laws, rules and regulations, including but not limited to that the Participant is acquiring the shares for his or her own account for the purpose of investment and not with a view to, or for sale in
connection with, the distribution of any such shares. 
 8.5    Registration. If the Company shall deem it
necessary or desirable to register under the Securities Act or other applicable statutes any shares of Stock issued or to be issued 

  

 14 

 
pursuant to Awards granted under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act or other applicable statutes, then
the Company shall take such action at its own expense. The Company may require from each recipient of an Award, or each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement,
prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and may require reasonable indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and
liabilities arising from use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made. In addition, the Company may require of any such person that he or she agree that, without the prior written consent of the Company or the managing underwriter in any
public offering of shares of Stock, he or she will not sell, make any short sale of, loan, grant any option for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any shares of Stock during the 180-day period commencing on the
effective date of the registration statement relating to the underwritten public offering of securities. Without limiting the generality of the foregoing provisions of this Section 8.5, if in connection with any underwritten public offering of
securities of the Company the managing underwriter of such offering requires that the Company’s directors and officers enter into a lock-up agreement containing provisions that are more restrictive than the provisions set forth in the preceding
sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of whether such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be deemed to have agreed to,
the same lock-up terms as those to which the Company’s directors and officers are required to adhere; and (b) at the request of the Company or such managing underwriter, each such person shall execute and deliver a lock-up agreement in
form and substance equivalent to that which is required to be executed by the Company’s directors and officers. 
 8.6    Placement of Legends; Stop Orders; etc. Each share of Stock to be issued pursuant to Awards granted under the Plan may bear a reference to the investment representation made in accordance with
Section 8.4 in addition to any other applicable restriction under the Plan, the terms of the Award and, if applicable, to the fact that no registration statement has been filed with the Securities and Exchange Commission in respect to such
shares of Stock. All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other
requirements of any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such
restrictions. 
 8.7    Tax Withholding. Whenever shares of Stock are issued or to be issued pursuant to Awards
granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law
(whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under the Plan shall be conditional on
satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the recipient of an Award. However, in such cases 

  

 15 

 
Participants may elect, subject to the approval of the Committee, to satisfy an applicable withholding requirement, in whole or in part, by having the
Company withhold shares to satisfy their tax obligations. Participants may only elect to have shares withheld having a Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the
transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems appropriate. 
 9.    Reservation of Stock 
 The Company shall at all times during the term of the
Plan and any outstanding Awards granted hereunder reserve or otherwise keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith. 
 10.    Limitation of Rights in Stock; No Special Service Rights 

 A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to
an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his agent, or if uncertificated shares are to be issued, until such shares have been registered in the name of the Participant on the books
of the transfer agent and registrar of the Stock. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the certificate of
incorporation and the bylaws of the Company. Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the
Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or certificate of incorporation or by laws to the
contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the Company and its Affiliates.

 11.    Unfunded Status of Plan 
 The Plan is intended to constitute an “unfunded” plan for incentive compensation, and the Plan is not intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Options, Stock Appreciation Rights and other Awards hereunder,
provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. 
  

 16 

 12.    Nonexclusivity of the Plan 
 The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such arrangements may be either applicable generally or only in specific cases. 
 13.    Termination and Amendment of the Plan 
 The Independent Board may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable. Unless the Independent Board otherwise expressly provides, no amendment of the Plan shall
affect the terms of any Award outstanding on the date of such amendment. In any case, no termination or amendment of the Plan may, without the consent of any recipient of an Award granted hereunder, adversely affect the rights of the recipient under
such Award. 
 The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as
amended is consistent with the terms of the Plan, but no such amendment shall impair the rights of the recipient of such Award without his or her consent. 
 14.    Notices and Other Communications 
 Any notice, demand, request or other communication hereunder to
any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or
overnight mail, addressed or telecopied, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the
attention of its Chief Financial Officer, or to such other address or telecopier number or electronic mail address, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other
communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; (iii) in the case of facsimile transmission, when
confirmed by facsimile machine report; and (iv) in the case of electronic mail, when directed to an electronic mail address at which the receiving party has consented to receive notice, provided, that such consent is deemed revoked if
the sender is unable to deliver by electronic transmission two consecutive notices and such inability becomes known to the secretary or assistant secretary of the Company or to the transfer agent, or other person responsible for giving notice.

 15.    Governing Law 
 The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted and enforced in accordance with California law, without regard to the conflicts of laws principles of such state. 
  

 17Targacept, Inc. 2006 Stock Incentive Plan

 Exhibit 10.6(a) 
 TARGACEPT, INC. 
 2006 STOCK INCENTIVE PLAN 
 (As Amended and Restated Through November 28, 2007) 

 TARGACEPT, INC. 
 2006 STOCK INCENTIVE PLAN 
 (As Amended and Restated Through November 28, 2007) 

 

	1.	Definitions 

 In addition to other terms
defined herein, the following terms shall have the meanings given below: 
 (a) Administrator means the Board, and, upon its delegation
of all or part of its authority to administer the Plan to the Committee, the Committee. 
 (b) Affiliate means any Parent or
Subsidiary of the Corporation, and also includes any other business entity which is controlled by, under common control with or controls the Corporation; provided, however, that the term “Affiliate” shall be construed in a manner in
accordance with the registration provisions of applicable federal securities laws. 
 (c) Annual Option means an Option granted on an
annual basis to a Nonemployee Director of the Corporation as provided in Section 8. 
 (d) Award means, individually or
collectively, a grant under the Plan of an Option (including an Incentive Option, Nonqualified Option or a Director Option); a Stock Appreciation Right (including a Related SAR or a Freestanding SAR); a Restricted Award (including a Restricted Stock
Award or a Restricted Unit Award); a Performance Award (including a Performance Share Award or a Performance Unit Award); a Phantom Stock Award; a Dividend Equivalent Award; or any other award granted under the Plan. 
 (e) Award Agreement means an agreement (which may be in written or electronic form, in the Administrator’s discretion, and which includes any
amendment or supplement thereto) between the Corporation and a Participant specifying the terms, conditions and restrictions of an Award granted to the Participant. An Agreement may also state such other terms, conditions and restrictions, including
but not limited to terms, conditions and restrictions applicable to shares or any other benefit underlying an Award, as may be established by the Administrator. 
 (f) Board or Board of Directors means the Board of Directors of the Corporation. 
 (g)
Cause shall mean, unless the Administrator determines otherwise, a Participant’s termination of employment or service resulting from the Participant’s (i) termination for “cause” as defined under the
Participant’s employment, consulting or other agreement with the Corporation or an Affiliate, if any, or (ii) if the Participant has not entered into any such employment, consulting or other agreement (or if any such agreement does not
address the effect of a “cause” termination), then the Participant’s termination shall be for “Cause” if termination results due to the Participant’s (A) dishonesty; (B) refusal to perform his duties for the
Corporation; (C) engaging in fraudulent conduct; or (D) engaging in any 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. 

 (h) Change in Control: 
 (i) General: Except as may be otherwise provided in an individual Award Agreement or as may be otherwise required in order to
comply with Code Section 409A, a Change in Control shall be deemed to have occurred on the earliest of the following dates: 
 (A) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, thirty percent (30%) or more of the outstanding Common Stock of the Corporation;

 (B) The date the stockholders of the Corporation approve a definitive agreement (X) to merge or consolidate the
Corporation with or into another corporation or other business entity (each, a “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 the holders of Common Stock immediately prior to the merger or consolidation continue to own at least 50%
of Common Stock, or if the Corporation is not the surviving corporation, the common stock (or other voting securities) of the surviving corporation immediately after the merger as immediately before; provided, however, that if consummation of such
merger or consolidation is subject to the approval of federal, state or other regulatory authorities, then, unless the Administrator determines otherwise, a “Change in Control” shall not be deemed to occur until the later of the date of
stockholder approval of such merger or consolidation or the date of final regulatory approval of such merger or consolidation; or (Y) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or 
 (C) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the
nomination for election by the Corporation’s stockholders of each new Director was approved by the vote of two-thirds of the members of the Board (or a committee of the Board, if nominations are approved by a Board committee rather than the
Board) then still in office who were in office at the beginning of the 12-month period. 
 (For the 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, and the term “beneficial owner” shall have the meaning given the term in Rule 13d-3 under the Exchange Act.) 

(D) The Administrator shall have full and final authority, in its discretion, to determine whether a Change in Control of the
Corporation has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto. 
 (ii) Definition Applicable to Awards subject to Code Section 409A: Notwithstanding the preceding provisions of
Section 1(h)(i), in the event that any Awards granted under the Plan are deemed to be deferred compensation subject to the provisions of Code Section 409A, then distributions related to such Awards may be permitted, in the
Administrator’s discretion, upon the 

  

 2 

 
occurrence of one or more of the following events (as they are defined and interpreted under Code Section 409A): (A) a change in the ownership of
the Corporation, (B) a change in effective control of the Corporation, or (C) a change in the ownership of a substantial portion of the assets of the Corporation. 
 (i) Code means the Internal Revenue Code of 1986, as amended. Any reference herein to a specific Code section shall be deemed to include all
related regulations or other guidance with respect to such Code section. 
 (j) Committee means the Compensation Committee of the
Board appointed to administer the Plan. 
 (k) Common Stock means the common stock of Targacept, Inc., $0.001 par value. 

(l) Corporation means Targacept, Inc., a Delaware corporation, together with any successor thereto. 
 (m) Covered Employee shall have the meaning given the term in Section 162(m) of the Code. 
 (n) Director means a member of the Board or of the board of directors of an Affiliate. 
 (o) Director Option means an Option granted to a Nonemployee Director of the Corporation as provided in Section 8. Director Options may be
Initial Options or Annual Options as provided in Section 8. 
 (p) Disability shall, except as may be otherwise determined by the
Administrator (taking into account any Code Section 409A considerations), have the meaning given in any employment agreement, consulting agreement or other similar agreement, if any, to which a Participant is a party, or, if there is no such
agreement (or if any such agreement does not address the effect of termination due to disability), “Disability” shall mean the inability 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 have discretion to determine if a termination due to Disability
has occurred. 
 (q) Displacement shall, as applied to any Participant, be as defined in any employment agreement, consulting
agreement or other similar agreement, if any, to which the Participant is a party, or, if there is no such agreement (or if any such agreement does not address the effect of a termination due to displacement), “Displacement” shall mean the
termination of the Participant’s employment or service due to the elimination of the Participant’s job or position without fault on the part of the Participant (as determined by the Administrator). 
 (r) Dividend Equivalent Award means a right granted to a Participant pursuant to Section 13 to receive the equivalent value (in cash or
shares of Common Stock) of dividends paid on Common Stock. 
 (s) Effective Date means the effective date of the Plan, as provided in
Section 4. 
 (t) Employee means any person who is an employee of the Corporation or any Affiliate (including entities which
become Affiliates after the Effective Date of the Plan). For this purpose, an individual shall be considered to be an Employee only if there exists between the individual and the 

  

 3 

 
Corporation or an Affiliate the legal and bona fide relationship of employer and employee (taking into account any Code Section 409A considerations);
provided, however, that, with respect to Incentive Options, “Employee” means any person who is considered an employee of the Corporation or any Parent or Subsidiary for purposes of Treas. Reg. Section 1.421-1(h) (or any successor
provision related thereto). 
 (u) Exchange Act means the Securities Exchange Act of 1934, as amended. 
 (v) Fair Market Value per share of the Common Stock shall be established in good faith by the Administrator and, unless otherwise
determined by the Administrator, the 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, the American Stock Exchange or the
Nasdaq Stock Market, the Fair Market Value shall be the closing sales price per share of the shares on the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market (as applicable) on the date an Option is granted or other
determination is made (such date of determination being referred to herein as a “valuation date”), or, if there is no transaction on such date, then on the trading date nearest preceding the valuation date for which closing price
information is available, and, provided further, if the shares are not listed for trading on the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market, the Fair Market Value shall be the average between the highest bid and
lowest asked prices for such stock on the date of grant or other valuation date as reported on the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Incorporated or a comparable service; 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 based on such valuation measures or other factors as it deems appropriate. Notwithstanding the foregoing, (i) with respect
to the grant of Incentive Options, 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 Section 422; and (ii) Fair Market Value shall be determined in accordance with Code Section 409A to the extent required. 
 (w) Freestanding SAR means an SAR that is granted without relation to an Option, as provided in Section 9. 
 (x)
Incentive Option means an Option that is designated by the Administrator as an Incentive Option pursuant to Section 7 and intended to meet the requirements of incentive stock options under Code Section 422. 
 (y) Independent Contractor means an independent contractor, consultant or advisor providing services to the Corporation or an Affiliate.

 (z) Initial Option means an Option granted to a Nonemployee Director of the Corporation upon initial election or appointment to the
Board, as provided in Section 8. 
 (aa) Nonemployee Director means a Director of the Board who is not an Employee of the
Corporation or an Affiliate and who is eligible to receive a Director Option pursuant to Section 8. 
 (bb) Nonqualified Option
means an Option granted under Section 7 or Section 8 that is not intended to qualify as an incentive stock option under Code Section 422. 
 (cc) Option means a stock option granted under Section 7 or Section 8 that entitles the holder to purchase from the Corporation a stated number of shares of Common Stock at the price set forth in an
Award Agreement. 
  

 4 

 (dd) Option Period means the term of an Option, as provided in Section 7(d) and
Section 8(f). 
 (ee) Option Price means the price at which an Option may be exercised, as provided in Section 7(b) and
Section 8(e). 
 (ff) Parent means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code. 
 (gg) Participant means an individual employed by, or providing services to, the Corporation or an
Affiliate who satisfies the requirements of Section 6 and is selected by the Administrator to receive an Award under the Plan. 
 (hh)
Performance Award means a Performance Share Award and/or a Performance Unit Award, as provided in Section 11. 
 (ii)
Performance Measures mean one or more performance factors which may be established by the Administrator with respect to an Award. Performance factors may be based on such corporate, business unit or division and/or individual performance
factors and criteria as the Administrator in its discretion may deem appropriate; provided, however, that, such performance factors shall be limited to one or more of the following (as determined by the Administrator in its discretion):
(i) cash flow; (ii) return on equity; (iii) return on assets; (iv) earnings per share; (v) achievement of clinical development or regulatory milestones; (vi) operations expense efficiency milestones;
(vii) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (viii) net income; (ix) operating income; (x) book value per share; (xi) return on investment;
(xii) return on capital; (xiii) improvements in capital structure; (xiv) expense management; (xv) profitability of an identifiable business unit or product; (xvi) maintenance or improvement of profit margins;
(xvii) stock price or total stockholder return; (xviii) market share; (xix) revenues or sales; (xx) costs; (xxi) working capital; (xxii) economic wealth created; (xxiii) strategic business criteria;
(xxiv) efficiency ratio(s); (xxv) achievement of division, group, function or corporate financial, strategic or operational goals; and (xxvi) comparisons with stock market indices or performances of metrics of peer companies. To the
extent that Section 162(m) of the Code is applicable, the Administrator shall, within the time and in the manner prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Measures it
selects to use for Participants during any specific performance period. Such performance factors may be adjusted or modified due to extraordinary items, transactions, events or developments, or in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Corporation or the financial statements of the Corporation, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles or business conditions, in each case as
determined by the Administrator. 
 (jj) Performance Share means an Award granted under Section 11, in an amount determined by
the Administrator and specified in an Award Agreement, stated with reference to a specified number of shares of Common Stock, that entitles the holder to receive shares of Common Stock, a cash payment or a combination of Common Stock and cash (as
determined by the Administrator), subject to the terms of the Plan and the terms and conditions established by the Administrator. 
 (kk)
Performance Unit means an Award granted under Section 11, in an amount determined by the Administrator and specified in an Award Agreement, that entitles the holder to receive Shares of Common Stock, a cash payment or a combination of
Common Stock and cash (as determined by the Administrator), subject to the terms of the Plan and the terms and conditions established by the Administrator. 
  

 5 

 (ll) Phantom Stock Award means an Award granted under Section 12, entitling a Participant to
a payment in cash, shares of Common Stock or a combination of cash and Common Stock (as determined by the Administrator), following the completion of the applicable vesting period and compliance with the terms of the Plan and other terms and
conditions established by the Administrator. The unit value of a Phantom Stock Award shall be based on the Fair Market Value of a share of Common Stock. 
 (mm) Plan means the Targacept, Inc. 2006 Stock Incentive Plan, as amended and restated through November 28, 2007, and as it may be hereafter amended and/or restated. 
 (nn) Prior Plan or Prior Plans means the 2000 Equity Incentive Plan of Targacept, Inc., as amended, and any other employee stock incentive
plan maintained by the Corporation prior to the Effective Date of the Plan. 
 (oo) Public Offering Date means the date on which the
Underwriting Agreement between the Corporation and the managing underwriters of the Corporation’s initial public offering of its Common Stock was executed and delivered. 
 (pp) Related SAR means an SAR granted under Section 9 that is granted in relation to a particular Option and that can be exercised only upon
the surrender to the Corporation, unexercised, of that portion of the Option to which the SAR relates. 
 (qq) Restricted Award means
a Restricted Stock Award and/or a Restricted Stock Unit Award, as provided in Section 10. 
 (rr) Restricted Stock Award means
shares of Common Stock awarded to a Participant under Section 10. Shares of Common Stock subject to a Restricted Stock Award shall cease to be restricted when, in accordance with the terms of the Plan and the terms and conditions established by
the Administrator, the shares vest and become transferable and free of substantial risks of forfeiture. 
 (ss) Restricted Stock Unit
means a Restricted Award granted to a Participant pursuant to Section 10 which is settled (i) by the delivery of one share of Common Stock for each Restricted Stock Unit, (ii) in cash in an amount equal to the Fair Market Value of one
share of Common Stock for each Restricted Stock Unit, or (iii) in a combination of cash and Shares equal to the Fair Market Value of one share of Common Stock for each Restricted Stock Unit, as determined by the Administrator. A Restricted
Stock Unit Award represents the promise of the Corporation to deliver shares, cash or a combination thereof, as applicable, at the end of the Restriction Period, subject to compliance with the terms of the Plan and the terms and conditions
established by the Administrator. 
 (tt) Retirement shall, as applied to any Participant, be as defined in any employment agreement,
consulting agreement or other similar agreement, if any, to which the Participant is a party, or, if there is no such agreement (or if any such agreement does address the effect of termination due to retirement), “Retirement” shall mean
retirement in accordance with the retirement policies and procedures established by the Corporation, as determined by the Administrator (taking into account any Code Section 409A considerations). 
 (uu) SAR means a stock appreciation right granted under Section 9 entitling the Participant to receive, with respect to each share of Common
Stock encompassed by the exercise of such SAR, the excess of the Fair Market Value on the date of exercise over the SAR base price, subject to the terms of the Plan and any other terms and conditions established by the Administrator. References to
“SARs” include both Related SARs and Freestanding SARs, unless the context requires otherwise. 
  

 6 

 (vv) Securities Act means the Securities Act of 1933, as amended. 
 (ww) Subsidiary means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 (xx) Termination Date means the date of termination of a Participant’s employment or service for any reason, as determined by
the Administrator in its discretion. 
  

	2.	Purpose 

 The purpose of the Plan is to
encourage and enable selected Employees, Directors and Independent Contractors of the Corporation and its Affiliates to acquire or to increase their holdings of Common Stock of the Corporation 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, growth and stockholder value of the Corporation. This
purpose will be carried out through the granting of Awards to selected Employees, Independent Contractors and Directors, including the granting to selected Participants of Options in the form of Incentive Stock Options and Nonqualified Options; SARs
in the form of Related SARs and Freestanding SARs; Restricted Awards in the form of Restricted Stock Awards and Restricted Stock Units; Performance Awards in the form of Performance Shares and Performance Units; Phantom Stock Awards; Director
Options in the form of Initial Options and Annual Options; and/or Dividend Equivalent Awards. 
  

	3.	Administration of the Plan 

 (a) The Plan
shall be administered by the Board of Directors of the Corporation or, upon its delegation, by the Committee. Unless the Board determines otherwise, the Committee shall be comprised solely of two or more “non-employee directors,” as such
term is defined in Rule 16b-3 under the Exchange Act, or as may otherwise be permitted under Rule 16b-3. Further, to the extent required by Section 162(m) of the Code, the Plan shall be administered by a committee comprised of two or more
“outside directors” (as such term is defined in Section 162(m)) or as may otherwise be permitted under Section 162(m). For the purposes of the Plan, the term “Administrator” shall refer to the Board and, upon its
delegation to the Committee of all or part of its authority to administer the Plan, to the Committee. Notwithstanding the foregoing, the Board shall have sole authority to grant discretionary Awards (that is, Awards other than Director Options) to
Directors who are not employees of the Corporation or its Affiliates. 
 (b) Subject to the provisions of the Plan, the Administrator shall
have full and final 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; (ii) to prescribe the form or forms of Award Agreements 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, Awards and Award Agreements made under the Plan, to interpret rules and
regulations for administering the Plan and to make all other determinations deemed necessary or advisable for administering the Plan. In addition, (i) the Administrator shall have the authority, in its sole discretion, to accelerate the date
that any Award 

  

 7 

 
which was not otherwise exercisable, vested or earned shall become exercisable, vested or earned in whole or in part without any obligation to accelerate
such date with respect to any other Award granted to any recipient; and (ii) the Administrator also may in its sole discretion modify or extend the terms and conditions for exercise, vesting or earning of an Award (in each case, taking into
account any Code Section 409A considerations). The Administrator may determine that a Participant’s rights, payments and/or benefits with respect to an Award (including but not limited to any shares issued or issuable and/or cash paid or
payable with respect to an Award) shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such
events may include, but shall not be limited to, termination of employment or service for cause, violation of policies of the Corporation or an Affiliate, breach of non-solicitation, noncompetition, confidentiality or other restrictive covenants
that may apply to the Participant, or other conduct by the Participant that is determined by the Administrator to be detrimental to the business or reputation of the Corporation or any Affiliate. In addition, the Administrator shall have the
authority and discretion to establish terms and conditions of Awards (including but not limited to the establishment of subplans) as the Administrator determines to be necessary or appropriate to conform to the applicable requirements or practices
of jurisdictions outside of the United States. In addition to action by meeting in accordance with applicable laws, 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. 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, an Award or an Award Agreement. The members of the Board or Committee, as applicable, shall be entitled to
indemnification and reimbursement in the manner provided in the Corporation’s certificate of incorporation and bylaws and/or under applicable law. 
 (c) Notwithstanding the other provisions of Section 3, the Administrator may delegate to one or more officers 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 3(b) with respect to such Awards (subject to any restrictions imposed by applicable laws, rules and regulations and such terms and conditions as may be established by the
Administrator); provided, however, that, to the extent required by Section 16 of the Exchange Act or Section 162(m) of the Code, the Participant, 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 under Section 162(m) of the Code. To the extent that the Administrator has delegated
authority to grant Awards pursuant to this Section 3(c) to one or more officers of the Corporation, references to the Administrator shall include references to such officer or officers, subject, however, to the requirements of the Plan, Rule
16b-3, Section 162(m) of the Code and other applicable laws, rules and regulations. 
  

	4.	Effective Date 

 The Effective Date of the
Plan shall be the day prior to the Public Offering Date. The Plan was amended effective June 14, 2007 and further amended and restated effective November 28, 2007. Awards may be granted under the Plan on and after the Effective Date, but
not after the date that is the tenth anniversary less one day after the Effective Date. Awards that are outstanding at the end of the Plan term (or such earlier termination date as may be established by the Board pursuant to Section 15(a))
shall continue in accordance with their terms, unless otherwise provided in the Plan or an Award Agreement. 
  

 8 

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

 (a) Shares of Stock Subject to the Plan: Subject to adjustments as provided in Section 5(d), the aggregate number of shares of Common Stock that may be issued pursuant to Awards granted under the Plan
shall not exceed the sum of (i) 2,700,000 shares, plus (ii) no more than 30,968 shares of Common Stock remaining available for issuance as of the Effective Date of the Plan under any Prior Plan, plus (iii) no more than 1,631,110
shares of Common Stock if and to the extent that any of such shares are subject to an award granted under a Prior Plan, which award is forfeited, cancelled, terminated, expires or lapses for any reason without the issuance of shares pursuant to the
award. Shares delivered under the Plan shall be authorized but unissued shares, treasury shares or shares purchased on the open market or by private purchase. The Corporation hereby reserves sufficient authorized shares of Common Stock to meet the
grant of Awards hereunder. 
 (b) Award Limitations: Notwithstanding any provision in the Plan to the contrary, the following
limitations shall apply to Awards granted under the Plan, in each case subject to adjustments pursuant to Section 5(d): 
 (i) The maximum number of shares of Common Stock that may be issued under the Plan pursuant to the grant of Incentive Options shall not exceed 4,362,078 shares, or such lesser number of shares as may be available under the Plan pursuant to
Section 5(a) herein; 
 (ii) In any calendar year, no Participant may be granted Options and SARs that are not related to
an Option for more than 500,000 shares of Common Stock; 
 (iii) No Participant may be granted Awards in any calendar year for
more than 500,000 shares of Common Stock; and 
 (iv) No Participant may be paid more than $1,000,000 with respect to any
cash-settled award or awards which were granted during any single calendar year. 
 (For purposes of Section 5(b)(ii) and (iii), an Option and Related
SAR shall be treated as a single Award.) 
 (c) Shares Not Subject to Limitations: The following will not be applied to the share
limitations of Section 5(a) above: (i) dividends, including dividends paid in shares, or dividend equivalents paid in cash in connection with outstanding Awards; (ii) Awards which by their terms are settled in cash rather than the
issuance of shares; (iii) any shares subject to an Award under the Plan which Award is forfeited, cancelled, terminated, expires or lapses for any reason or any shares subject to an Award which shares are repurchased or reacquired by the
Corporation; and (iv) any shares surrendered by a Participant or withheld by the Corporation to pay the Option Price or purchase price for an Award or shares or used to satisfy any tax withholding requirement in connection with the exercise,
vesting or earning of an Award if, in accordance with the terms of the Plan, a Participant pays such Option Price or purchase price or satisfies such tax withholding by either tendering previously owned shares or having the Corporation withhold
shares. 
 (d) Adjustments: If there is any change in the outstanding shares of Common Stock because of a merger, consolidation or
reorganization involving the Corporation or an Affiliate, or if the Board of Directors of the Corporation declares a stock dividend, stock split distributable in shares of Common Stock, reverse stock split, combination or reclassification of the
Common Stock, or if there is a similar change in the capital stock structure of the Corporation or an Affiliate affecting the Common Stock, the 

  

 9 

 
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 and to any provisions of this Plan as the Administrator deems equitable to prevent dilution or enlargement of Awards or as may be otherwise advisable. 
  

	6.	Eligibility 

 An Award may be granted only to
an individual who satisfies all of the following eligibility requirements on the date the Award is granted: 
 (a) The individual is either
(i) an Employee, (ii) a Director, or (iii) an Independent Contractor. 
 (b) With respect to the grant of Incentive Options,
the individual is otherwise eligible to participate under Section 6, is an Employee of the Corporation or a Parent or Subsidiary and does not own, immediately before the time that the Incentive Option is granted, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Corporation or a Parent or Subsidiary. Notwithstanding the foregoing, an Employee who owns more than 10% of the total combined voting power of the Corporation or a Parent or
Subsidiary may be granted an Incentive Option if the Option Price is at least 110% of the Fair Market Value of the Common Stock, and the Option Period 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) With respect to the grant of substitute awards or assumption of awards in
connection with a merger, consolidation, acquisition, reorganization or similar business combination involving the Corporation or an Affiliate, the recipient is otherwise eligible to receive the Award and the terms of the award are consistent with
the Plan and applicable laws, rules and regulations (including, to the extent deemed applicable, the federal securities laws registration provisions, Code Section 409A and Code Section 424(a)). 
 (d) The individual, being otherwise eligible under this Section 6, is selected by the Administrator as an individual to whom an Award shall be
granted (as defined above, a “Participant”). 
  

	7.	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, subject to such terms and conditions, and at such times as the Administrator shall
determine. Both Incentive Options and Nonqualified Options may be granted under the Plan, as determined by the Administrator; provided, however, that Incentive Options may only be granted to Employees of the Corporation or a Parent or Subsidiary. 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. An Option may be granted with or without a
Related SAR. 
 (b) Option Price: The Option Price shall be established by the Administrator and stated in the Award Agreement
evidencing the grant of the Option; provided, that (i) the Option Price of an Incentive Option shall be no less than 100% of the Fair Market Value per share of the Common Stock as determined on the date the Option is granted (or 110% of the
Fair Market Value with respect to Incentive Options granted to an Employee who owns stock possessing more than 10% of the total voting power of all classes of stock of the Corporation or a Parent or Subsidiary, as provided in Section 6(b));
(ii) the 

  

 10 

 
Option Price of a Nonqualified Option shall be no less than 85% of the Fair Market Value per share of the Common Stock on the date the Option is granted; and
(iii) in no event shall the Option Price per share of any Option be less than the par value per share of the Common Stock. Notwithstanding the foregoing, the Administrator may in its discretion authorize the grant of substitute or assumed
options of an acquired entity with an Option Price not equal to at least 100% of the Fair Market Value of the stock on the date of grant if the terms of such substitution or assumption otherwise comply, to the extent deemed applicable, with Code
Section 409A and Code Section 424(a). 
 (c) Date of Grant: An Option shall be considered to be granted on the date that the
Administrator acts to grant the Option or on such other date as may be established by the Administrator in accordance with applicable laws. 
 (d) Option Period and Limitations on the Right to Exercise Options: 
 (i) The Option Period shall be
determined by the Administrator at the time the Option is granted and shall be stated in the Award Agreement. With respect to Incentive Options, the Option Period shall not extend more than 10 years from the date on which the Option is granted (or
five years with respect to Incentive Options granted to an Employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a Parent or Subsidiary, as provided in Section 6(b)).
Any Option or portion thereof not exercised before expiration of the Option Period shall terminate. The period or periods during which, and conditions pursuant to which, an Option may vest and become exercisable shall be determined by the
Administrator in its discretion, subject to the terms of the Plan. 
 (ii) An Option may be exercised by giving written notice
to the Corporation in form acceptable to the Administrator at such place and subject to such conditions as may be established by the Administrator or its designee. 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 payment of such purchase price. The total number of shares that may be acquired upon exercise of an Option shall be rounded down to the nearest whole share. Unless an
Award Agreement provides otherwise, such payment shall be in the form of cash or cash equivalent; provided that, where permitted by the Administrator and applicable laws, rules and regulations (and subject to such terms and conditions as may be
established by the Administrator), payment may also be made: 
 (A) By delivery (by either actual delivery or attestation) of
shares of Common Stock owned by the Participant for such time period, if any, as may be determined by the Administrator and otherwise acceptable to the Administrator; 
 (B) By shares of Common Stock withheld upon exercise; 
 (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; 
 (D) By such other payment methods as may be approved by the Administrator and which are acceptable under applicable law; or 
  

 11 

 (E) By any combination of the foregoing methods. 
 Shares tendered or withheld in payment on the exercise of an Option shall be valued at their Fair Market Value on the date of exercise. For the purposes
of the Plan, 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, or (ii) if the Administrator otherwise determines that there is an established public market for the Common Stock. 
 (iii) Unless the Administrator determines 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 6(a), and has been an Employee continuously since the date the Option was granted, subject to the following: 
 (A) 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 90 days, or, if longer, as long as the Participant’s right to reemployment 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. The Administrator shall have sole authority to determine whether a Participant is disabled under the Plan and, if applicable, the Participant’s Termination Date. 
 (B) Unless the Administrator determines otherwise (taking into account any Code Section 409A considerations), if the employment of a
Participant is terminated because of Disability or death, the Option may be exercised only to the extent vested and exercisable on the Participant’s Termination Date, except that the Administrator may in its sole discretion (taking into account
any Code Section 409A considerations) accelerate the date for exercising all or any part of the Option which was not otherwise vested and 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 one-year period following the Termination Date (or such other period stated in the Award 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. 
 (C) Unless the Administrator determines otherwise (taking into account any Code Section 409A considerations), if the employment of
the Participant is terminated for any reason other than Disability, death or for “Cause,” his Option may be exercised to the extent vested and exercisable on his Termination Date, except that the Administrator may in its sole discretion
(taking into account any Code Section 409A considerations) accelerate the date for exercising all or any part of the Option which was not otherwise vested and 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 three months next succeeding the Termination Date (or such other period stated in the Award 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 (C), the Participant shall be treated as having died while employed under
subparagraph (B) (treating for this purpose the Participant’s 

  

 12 

 
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. 
 (D) Unless
the Administrator determines otherwise (taking into account any Code Section 409A considerations), if the employment of the Participant is terminated for “Cause,” his Option shall lapse and no longer be exercisable as of his
Termination Date, as determined by the Administrator. 
 (E) Notwithstanding the foregoing, the Administrator may, in its sole
discretion (taking into account any Code Section 409A considerations), accelerate the date for exercising all or any part of an Option which was not otherwise vested and exercisable on the Termination Date, extend the period during which an
Option may be exercised, modify the terms and conditions to exercise, or any combination of the foregoing. 
 (iv) Unless the
Administrator determines otherwise (taking into account any Code Section 409A considerations), an Option granted to a Participant who was a Director but who was not an Employee at the time of grant may be exercised only to the extent vested and
exercisable on the Participant’s Termination Date (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 six months next
succeeding the Termination Date (or such other period stated in the Award Agreement); or (Y) the close of the Option Period. If the services of a Participant are terminated for Cause, his Option shall lapse and no longer be exercisable as of
his Termination Date, as determined by the Administrator. Notwithstanding the foregoing, the Administrator may in its sole discretion (taking into account any Code Section 409A considerations), 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 to exercise, or any combination of the foregoing. 
 (v) Unless the Administrator determines otherwise (taking into account any Code Section 409A considerations), an Option granted to a
Participant who was an Independent Contractor 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 7(d)(iii)) may be exercised only to the extent vested and
exercisable on the Participant’s Termination Date (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 three months next
succeeding the Termination Date (or such other period stated in the Award Agreement); or (Y) the close of the Option Period. If the services of a Participant are terminated for Cause, his Option shall lapse and no longer be exercisable as of
his Termination Date, as determined by the Administrator. Notwithstanding the foregoing, the Administrator may in its sole discretion (taking into account any Code Section 409A considerations), 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 to exercise, or any combination of the foregoing. 
 (e) Notice of Disposition: If shares of Common Stock acquired upon exercise of an Incentive Option are disposed of within two years following the
date of grant or one year following the transfer of such shares to a Participant upon exercise, the Participant shall, promptly following such disposition, notify the Corporation in writing of the date and terms of such disposition and provide such
other information regarding the disposition as the Administrator may reasonably require. 
  

 13 

 (f) Limitation on Incentive Options: In no event shall there first become exercisable by an
Employee in any one calendar year Incentive Options granted by the Corporation or any Parent or Subsidiary with respect to shares having an aggregate Fair Market Value (determined at the time an Incentive Option is granted) greater than $100,000. To
the extent that any Incentive Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered a Nonqualified Option. 
 (g) Nontransferability: Incentive Options shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession or, in the
Administrator’s discretion, as may otherwise be permitted in accordance with Treas. Reg. Section 1.421-1(b)(2) or any successor provision thereto. 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 a manner consistent with the registration provisions of the Securities Act. An Option shall be exercisable during the
Participant’s lifetime only by him, by his guardian or legal representative or by a transferee in a transfer permitted by this Section 7(g). The designation of a beneficiary in accordance with Section 19(g) does not constitute a
transfer. 
  

	8.	Director Options 

 (a) General: Each
Nonemployee Director who is otherwise eligible under this Section 8 shall be granted a Director Option or Director Options as provided in Section 8. Director Options shall be designated as Nonqualified Options. Director Options shall be
subject to the other terms and conditions of the Plan except as otherwise provided in Section 8. 
 (b) Eligibility: A Director
Option may be granted only to an individual who is a Nonemployee Director of the Corporation on the date the Director Option is granted. A Nonemployee Director may also be eligible for other Awards (including but not limited to Options granted
pursuant to Section 7), subject to the terms of the Plan and the Administrator’s discretion. 
 (c) Grant of Initial Options
Upon Initial Election or Appointment to the Board: Each Nonemployee Director who is first elected or appointed to the Board after the Public Offering Date shall receive an Initial Option to purchase 25,000 shares of Common Stock. The date of
grant of such an Initial Option shall be the fifth business day after the date of the annual meeting of stockholders as to those Nonemployee Directors who are first elected at an annual meeting of stockholders and the fifth business day after the
date of election or appointment to the Board as to those Nonemployee Directors who are first elected or appointed to the Board other than at an annual meeting of stockholders. In addition, a Nonemployee Director who serves as chairman of the Board
shall also receive an Initial Option for 10,000 shares when first elected or appointed as chairman. The date of grant of such Initial Option shall be the fifth business day after the date on which the Director is first elected or appointed as
chairman of the Board. 
 (d) Grant of Annual Options: Each Nonemployee Director also shall be granted, on an annual basis commencing
with the 2007 annual meeting of stockholders, a Director Option to purchase 7,500 shares of Common Stock (or, a Director Option for 12,500 shares, in the case of the chairman of the Board), provided that the Nonemployee Director continues to serve
as a member of the Board as of the date of grant. The date of grant of such an Annual Option shall be the fifth business day after the date of the annual or other stockholders meeting at which directors are elected. For the avoidance of 

  

 14 

 
doubt, a Nonemployee Director elected for the first time to the Board at an annual meeting of stockholders shall only receive an Initial Option in connection
with such election, and shall not receive an Annual Option on the fifth business day following such meeting as well. 
 (e) Option
Price: The price per share of Common Stock at which a Director Option may be exercised shall be 100% of the Fair Market Value per share of the Common Stock on the date the Option is granted. 
 (f) Option Period and Limitations on the Right to Exercise Options: 
 (i) The Option Period of a Director Option shall be 10 years from the date of grant. Initial Options shall become exercisable as provided
in Section 8(f)(i)(A), and Annual Options shall become exercisable as provided in Section 8(f)(i)(B). To the extent that all or part of an Option becomes exercisable but is not exercised, such Option shall accumulate and be exercisable by
the Director in whole or in part at any time before the expiration of the Option Period. The total number of shares that may be acquired upon the exercise of an Initial Option or Annual Option shall be rounded down to the nearest whole share. Any
Director Option or portion thereof not exercised before expiration of the Option Period shall terminate. 
 (A) Initial
Options. An Initial Option shall vest and become exercisable with respect to one-third of the shares subject to the Option on the earlier of (w) the first anniversary of the date of grant or (x) the business day immediately preceding
the date of the Corporation’s annual meeting of stockholders that occurs in the calendar year immediately following the calendar year in which the date of grant occurs, provided that the Nonemployee Director remains in service on such earlier
date. An Initial Option shall vest and become exercisable with respect to the remaining two-thirds of the shares subject to the Option in pro rata quarterly installments over the second and third years following the date of grant so that an Initial
Option will be vested and exercisable in full on the earlier of (y) the third anniversary of the date of grant or (z) the business day immediately preceding the date of the Corporation’s annual meeting of stockholders that occurs in
the third calendar year following the calendar year in which the date of grant occurs, provided that the Nonemployee Director remains in service as a Director during such periods. 
 (B) Annual Options. An Annual Option granted shall vest and become exercisable on the earlier of (i) the first anniversary of
the date of grant or (ii) the business day immediately preceding the date of the Corporation’s annual meeting of stockholders that occurs in the calendar year immediately following the calendar year in which the date of grant occurs,
provided that the Nonemployee Director remains in service as a Director on such earlier date. 
 (ii) Unless the Administrator
determines otherwise (taking into account any Code Section 409A considerations), a Director Option granted to a Nonemployee Director at the time of grant may be exercised only to the extent vested and exercisable on the Nonemployee
Director’s Termination Date (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 six months next succeeding the Termination
Date (or such other period stated in the Award Agreement); or (Y) the close of the Option Period. If the services of a Nonemployee Director are terminated for Cause, his Director Option shall lapse and no longer be exercisable as of his
Termination Date, as determined by the Administrator. 
  

 15 

 (iii) A Director Option shall be exercised by giving written notice to the Administrator
or its designee at such time and place as the Administrator shall direct. Such notice shall specify the number of shares to be purchased pursuant to the Director Option and the aggregate purchase price to be paid therefor, and shall be accompanied
by the payment of such purchase price. Payment shall be made in accordance with Section 7(d)(ii). 
 (g)
Nontransferability: A Director Option 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 a
manner consistent with the registration provisions of the Securities Act. Except as may be permitted by the preceding sentence, a Director Option shall be exercisable during the Nonemployee Director’s lifetime only by him or by his guardian or
legal representative. The designation of a beneficiary in accordance with Section 19(g) does not constitute a transfer. 
  

	9.	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 the holder of an Option (a “Related Option”) with respect to all or a portion of the shares of Common Stock subject to the Related Option (a “Related SAR”) or may be granted separately to an
eligible individual (a “Freestanding SAR”). The base price per share of an SAR shall be no less than 100% of the Fair Market Value per share of the Common Stock on the date the SAR is granted. Notwithstanding the foregoing, the
Administrator may in its discretion authorize the grant of substitute or assumed SARs of an acquired entity with a base price per share not equal to at least 100% of the Fair Market Value of the stock on the date of grant, if the terms of such
substitution or assumption otherwise comply, to the extent deemed applicable, with Code Section 409A and Code Section 424(a). 
 (b) Related SARs: A Related 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; provided, however, that Related SARs must be granted in accordance with Code Section 409A. The base price of a Related SAR shall be equal to the Option Price of the Related Option. Related 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. Notwithstanding the foregoing, a Related SAR that is related to an Incentive Option may be exercised only to the extent that the Related Option is exercisable and only when the Fair Market
Value exceeds the Option Price of the Related Option. Upon the exercise of a Related SAR granted in connection with a Related Option, the Option shall be canceled to the extent of the number of shares as to which the SAR is exercised, and upon the
exercise of a Related Option, the Related SAR shall be canceled to the extent of the number of shares as to which the Related Option is exercised or surrendered. 
 (c) Freestanding SARs: An SAR may be granted without relationship to an Option (as defined above, a “Freestanding SAR”) and, in such case, will be exercisable upon such terms and subject to such
conditions as may be determined by the Administrator, subject to the terms of the Plan. 
  

 16 

 (d) Exercise of SARs: 
 (i) Subject to the terms of the Plan, SARs shall be vested and exercisable in whole or in part upon such terms and conditions as may be
established by the Administrator and stated in the applicable Award Agreement. The period during which an SAR may be exercisable shall not exceed 10 years from the date of grant or, in the case of Related SARs, such shorter Option Period as may
apply to the Related Option. Any SAR or portion thereof not exercised before expiration of the period established by the Administrator shall terminate. 
 (ii) SARs may be exercised by giving written notice to the Corporation in form acceptable to the Administrator at such place and subject to such terms and conditions as may be established by the Administrator or its
designee. Unless the Administrator determines otherwise, the date of exercise of an SAR shall mean the date on which the Corporation shall have received proper notice from the Participant of the exercise of such SAR. 
 (iii) Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise an SAR
following termination of the Participant’s employment or service with the Corporation. Such provisions shall be determined in the sole discretion of the Administrator, need not be uniform among all SARs issued pursuant to this Section 9,
and may reflect distinctions based on the reasons for termination of employment. Notwithstanding the foregoing, unless the Administrator determines otherwise, no SAR may be exercised unless the Participant is, at the time of exercise, an eligible
Participant, as described in Section 6, and has been a Participant continuously since the date the SAR was granted, subject to the provisions of Sections 7(d)(iii), (iv) and (v). 
 (e) Payment Upon Exercise: Subject to the limitations of the Plan, upon the exercise of an SAR, a Participant shall be entitled to receive payment
from the Corporation in an amount determined by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise of the SAR over the base price of the SAR by (ii) the number of shares of
Common Stock with respect to which the SAR is being exercised. Notwithstanding the foregoing, the Administrator in its discretion may limit in any manner the amount payable with respect to an SAR. The consideration payable upon exercise of an SAR
shall be paid in cash, shares of Common Stock (valued at Fair Market Value on the date of exercise of the SAR) or a combination of cash and shares of Common Stock, as determined by the Administrator. 
 (f) Nontransferability: Unless the Administrator determines otherwise, (i) SARs shall not be transferable (including by sale, assignment,
pledge or hypothecation) other than by will or the laws of intestate succession, and (ii) SARs may be exercised during the Participant’s lifetime only by him or by his guardian or legal representative. The designation of a beneficiary in
accordance with Section 19(g) does not constitute a transfer. 
  

	10.	Restricted Awards 

 (a) Grant of
Restricted Awards: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant Restricted Awards to such individuals for such numbers of shares of Common Stock, upon such terms and at such times as the
Administrator shall determine. Such Restricted Awards may be in the form of Restricted Stock Awards and/or Restricted Stock Units that are subject to certain conditions, which conditions must be met in order for the Restricted Award to vest and be
earned (in whole or in part) and no longer subject to forfeiture. Restricted Stock Awards shall be payable in shares of Common Stock. Restricted Stock Units shall be payable in cash or shares of 

  

 17 

 
Common Stock, or partly in cash and partly in shares of Common Stock, in accordance with the terms of the Plan and the discretion of the Administrator. The
Administrator shall determine the nature, length and starting date of the period, if any, during which a Restricted Award may be earned (the “Restriction Period”), and shall determine the conditions which must be met in order for a
Restricted Award to be granted or to vest or be earned (in whole or in part), which conditions may include, but are not limited to, payment of a stipulated purchase price, attainment of performance objectives, continued service or employment for a
certain period of time (or a combination of attainment of performance objectives and continued service), Retirement, Displacement, Disability, death, or any combination of such conditions. Notwithstanding the foregoing, Restricted Awards that vest
based solely on continued service or the passage of time shall be subject to a minimum Restriction Period of one year (except in the case of (i) Restricted Awards assumed or substituted in connection with mergers, acquisitions or other business
transactions, (ii) Restricted Awards granted in connection with the recruitment or hiring of a Participant, and/or (iii) Restricted Awards granted pursuant to any incentive compensation or bonus program established by the Corporation).
In the case of Restricted Awards based upon performance criteria, or a combination of performance criteria and continued service, the Administrator shall determine the Performance Measures applicable to such Restricted Awards (subject to
Section 1(ii)). 
 (b) Vesting of Restricted Awards: Subject to the terms of the Plan (and taking into account any Code
Section 409A considerations), the Administrator shall have sole authority to determine whether and to what degree Restricted Awards have vested and been earned and are payable and to establish and interpret the terms and conditions of
Restricted Awards. The Administrator may (taking into account any Code Section 409A considerations) accelerate the date that any Restricted Award granted to a Participant shall be deemed to be vested or earned in whole or in part, without any
obligation to accelerate such date with respect to other Restricted Awards granted to any Participant. 
 (c) Forfeiture of Restricted
Awards: Unless the Administrator determines otherwise (taking into account any Code Section 409A considerations), if the employment or service of a Participant shall be terminated for any reason and all or any part of a Restricted Award has
not vested or been earned pursuant to the terms of the Plan and the individual Award, such Award, to the extent not then vested or 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: The Administrator shall have sole discretion to determine
whether a Participant shall have dividend rights, voting rights or other rights as a stockholder with respect to shares subject to a Restricted Award which has not yet vested or been earned. If the Administrator so determines, a certificate or
certificates for shares of Common Stock subject to a Restricted Award may be issued in the name of the Participant as soon as practicable after the Award has been granted; provided, however, that, notwithstanding the foregoing, the Administrator
shall have the right to retain custody of certificates evidencing the shares subject to a Restricted Award and to require the Participant to deliver to the Corporation a stock power, endorsed in blank, with respect to such Award, until such time as
the Restricted Award vests (or is forfeited) and is no longer subject to a substantial risk of forfeiture. 
 (e) Nontransferability:
Unless the Administrator determines otherwise, Restricted Awards that have not vested shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession, and the recipient of a
Restricted 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 designation of a beneficiary in accordance
with Section 19(g) does not constitute a transfer. 
  

 18 

	11.	Performance Awards 

 (a) Grant of
Performance Awards: Subject to the terms of the Plan, the Administrator may in its discretion grant Performance Awards to such eligible individuals upon such terms and conditions and at such times as the Administrator shall determine.
Performance Awards may be in the form of Performance Shares and/or Performance Units. An Award of a Performance Share is a grant of a right to receive shares of Common Stock, the cash value thereof, or a combination thereof (as determined in the
Administrator’s discretion), which is contingent upon the achievement of performance or other objectives during a specified period and which has a value on the date of grant equal to the Fair Market Value of a share of Common Stock. An Award of
a Performance Unit is a grant of a right to receive shares of Common Stock, a designated dollar value amount of Common Stock or a combination thereof (as determined in the Administrator’s discretion) which is contingent upon the achievement of
performance or other objectives during a specified period, and which has an initial value determined in a dollar amount established by the Administrator at the time of grant. Subject to Section 5(b), the Administrator shall have complete
discretion in determining the number of Performance Units and/or Performance Shares granted to any 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, continued service or employment for a certain period of time, or a combination of such conditions. Subject to Section 1(ii), the Administrator shall determine the Performance Measures to be used in valuing Performance
Awards. 
 (b) Earning of Performance Awards: Subject to the terms of the Plan (and taking into account any Code Section 409A
considerations), 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 of
Section 11. The Administrator, in its sole and absolute discretion, may (taking into account any Code Section 409A considerations) 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 granted to any Participant. 
 (c) 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 in installments upon such terms as may be established by the Administrator. 
 (d)
Forfeiture of Performance Awards: Unless the Administrator determines otherwise (taking into account any Code Section 409A considerations), 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 individual Award, 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. 
 (e) Nontransferability: Unless the Administrator determines otherwise, Performance Awards that 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, and 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 designation of a beneficiary in accordance with Section 19(g) does not constitute a transfer.

  

 19 

	12.	Phantom Stock Awards 

 (a) Grant of
Phantom Stock Awards: Subject to the terms of the Plan, the Administrator may in its discretion grant Phantom Stock Awards to such eligible individuals, in such numbers, upon such terms and at such times as the Administrator shall determine. A
Phantom Stock Award is an Award to a Participant of a number of hypothetical share units with respect to shares of Common Stock, with a value per unit based on the Fair Market Value of a share of Common Stock. 
 (b) Vesting of Phantom Stock Awards: Subject to the terms of the Plan (and taking into account any Code Section 409A considerations), the
Administrator shall have sole authority to determine whether and to what degree Phantom Stock Awards have vested and are payable and to interpret the terms and conditions of Phantom Stock Awards. 
 (c) Forfeiture of Phantom Stock Awards: Unless the Administrator determines otherwise (taking into account any under Code Section 409A
considerations), if the employment or service of a Participant shall be terminated for any reason and all or any part of a Phantom Stock Award has not vested and become payable pursuant to the terms of the Plan and the individual Award, such Award,
to the extent not then vested or earned, shall be forfeited immediately upon such termination and the Participant shall have no further rights with respect thereto. 
 (d) Payment of Phantom Stock Awards: Upon vesting of all or a part of a Phantom Stock Award and satisfaction of such other terms and conditions as may be established by the Administrator, the Participant shall
be entitled to a payment of an amount equal to the Fair Market Value of one share of Common Stock with respect to each such Phantom Stock unit which has vested and is payable. Payment may be made, in the discretion of the Administrator, in cash or
in shares of Common Stock valued at their Fair Market Value on the applicable vesting date or dates (or other date or dates determined by the Administrator), or in a combination thereof. The Administrator may, however, establish a limitation on the
amount payable in respect of each share of Phantom Stock. Payment may be made in a lump sum or upon such terms as may be established by the Administrator. 
 (e) Nontransferability: Unless the Administrator determines otherwise, (i) Phantom Stock Awards that have not vested shall not be transferable (including by sale, assignment, pledge or hypothecation) other
than by will or the laws of intestate succession, (ii) Phantom Stock Awards may be exercised during the Participant’s lifetime only by him or by his guardian or legal representative, and (iii) shares of Common Stock (if any) subject
to a Phantom Stock Award may not be sold, transferred, assigned, pledged or otherwise encumbered until the Phantom Stock Award has vested and all other conditions established by the Administrator have been met. The designation of a beneficiary in
accordance with Section 19(g) does not constitute a transfer. 
  

	13.	Dividends and Dividend Equivalents 

 The
Administrator may, in its sole discretion, provide that Awards granted under the Plan earn dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to a Participant’s account. Any
crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Administrator may establish, including reinvestment in additional shares of Common Stock or share equivalents. Notwithstanding the other
provisions herein, any dividends or dividend equivalent rights related to an Award shall be structured in a manner so as to avoid causing the Award and related dividends or dividend equivalent rights to be subject to Code Section 409A or shall
otherwise be structured so that the Award and dividends or dividend equivalents are in compliance with Code Section 409A. 
  

 20 

	14.	No Right or Obligation of Continued Employment or Service 

 Neither the Plan, the grant of an Award nor any other action related to the Plan shall confer upon the Participant any right to continue in the employment or service of the Corporation or an Affiliate as an Employee,
Director or Independent Contractor or to interfere in any way with the right of the Corporation or an Affiliate to terminate the Participant’s employment or service at any time. 
  

	15.	Amendment and Termination of the Plan 

 (a)
Amendment and Termination of Plan: The Plan may be amended, altered and/or terminated at any time by the Board; provided, that (i) approval of an amendment to the Plan by the stockholders of the Corporation shall be required to the
extent, if any, that stockholder approval of such amendment is required by applicable law, rule or regulation; and (ii) except for adjustments made pursuant to Section 5(d), the Option Price for any outstanding Option or base price of any
outstanding SAR may not be decreased after the date of grant, nor may any outstanding Option or SAR be surrendered to the Corporation as consideration for the grant of a new Option or SAR with a lower Option Price or base price than the original
Option or SAR, as the case may be, without stockholder approval of any such action. 
 (b) Amendment and Termination of Awards: The
Administrator may amend, alter or terminate any Award granted under the Plan, prospectively or retroactively, but such amendment, alteration or termination of an Award shall not, without the consent of the recipient of an outstanding Award,
materially adversely affect the rights of the recipient with respect to the Award. 
 (c) Unilateral Authority of Administrator to Modify
Plan and Awards: Notwithstanding Section 15(a) and Section 15(b) herein, the following provisions shall apply: 
 (i) The Administrator shall have unilateral authority to amend the Plan and any Award (without Participant consent and without stockholder approval, unless such stockholder approval is required by applicable laws, rules or regulations) to
the extent necessary to comply with applicable laws, rules or regulations or changes to applicable laws, rules or regulations (including but not limited to Code Section 409A, Code Section 422 and federal securities laws). 
 (ii) The Administrator shall have unilateral authority to make adjustments to the terms and conditions of Awards in recognition of unusual
or nonrecurring events affecting the Corporation or any Affiliate, or the financial statements of the Corporation or any Affiliate, or of changes in accounting principles, if the Administrator determines that such adjustments are appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles. 
 (d) Cash Settlement: Notwithstanding any provision of the Plan, an Award or an Award Agreement to the contrary, the Administrator may cause any
Award (or portion thereof) granted under the Plan to be canceled in consideration of an alternative award or cash payment of an equivalent cash value, as determined by the Administrator in its sole discretion, made to the holder of such canceled
Award. 
  

 21 

	16.	Restrictions on Awards and Shares 

 The
Corporation may impose such restrictions on Awards, shares and any other benefits underlying Awards hereunder as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock
exchange or similar organization and any blue sky, state or foreign securities laws applicable to such securities. Notwithstanding any other Plan provision to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares
of Common Stock under the Plan, 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 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. 
  

	17.	Change in Control 

 The Administrator shall
(taking into account any Code Section 409A considerations) have sole discretion to determine the effect, if any, on an Award, including but not limited to the vesting, earning and/or exercisability of an Award, in the event of a Change in
Control. Without limiting the effect of the foregoing, in the event of a Change in Control, the Administrator’s discretion shall include, but shall not be limited to, the discretion to determine that an Award shall vest, be earned or become
exercisable in whole or in part, shall be assumed or substituted for another award, shall be cancelled without the payment of consideration, shall be cancelled in exchange for a cash payment or other consideration, and/or that other actions (or no
action) shall be taken with respect to the Award. The Administrator also has discretion to determine that acceleration or any other effect of a Change in Control on an Award shall be subject to both the occurrence of a Change in Control event and
termination of employment or service of the Participant. Any such determination of the Administrator may be, but shall not be required to be, stated in an individual Award Agreement. 
  

	18.	Compliance with Code Section 409A 

 (a)
General: Notwithstanding any other provision in the Plan or an Award to the contrary, if and to the extent that Code Section 409A is deemed to apply to the Plan or any Award granted under the Plan, it is the general intention of the
Corporation that the Plan and all such Awards shall, to the extent practicable, comply with Code Section 409A, and the Plan and any such Award shall, to the extent practicable, be construed in accordance therewith. Deferrals of shares or any
other benefits distributable pursuant to an Award otherwise exempt from Code Section 409A in a manner that would cause Code Section 409A to apply shall not be permitted unless such deferrals are in compliance with Code Section 409A.
Without in any way limiting the effect of the foregoing, (i) in the event that exemption from or compliance with Code Section 409A requires that any special terms, provisions or conditions be included in the Plan or any Award, then such
terms, provisions and conditions shall, to the extent practicable, be deemed to be made a part of the Plan or Award, as applicable; and (ii) terms used in the Plan or an Award Agreement shall be construed in accordance with Code
Section 409A if and to the extent required. Further, in the event that the Plan or any Award shall be deemed not to comply with Code Section 409A, then neither the Corporation, the Administrator nor its or their designees or agents shall
be liable to any Participant or other person for actions, decisions or determinations made in good faith. 
 (b) Specific Terms Applicable
to Awards Subject to Code Section 409A: Without limiting the effect of Section 18(a), above, and notwithstanding any other provision in the Plan to the contrary, the following provisions shall, to the extent required under Code
Section 409A, apply with respect to Awards deemed to involve the deferral of compensation under Code Section 409A: 
  

 22 

 (i) Distributions: Distributions may be made with respect to Awards subject to
Code Section 409A not earlier than upon the occurrence of one or more of the following events: (A) separation from service; (B) disability; (C) death; (D) a specified time or pursuant to a fixed schedule; (E) a change
in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation; or (F) the occurrence of an unforeseeable emergency. Each of the preceding distribution events shall be
defined and interpreted in accordance with Code Section 409A. 
 (ii) Specified Employees: With respect to
Participants who are “specified employees” (as defined in Code Section 409A), a distribution due to separation from service may not be made before the date that is six months after the date of separation from service (or, if earlier,
the date of death of the Participant), except as may be otherwise permitted pursuant to Code Section 409A. The aggregate amount of payments the Participant would have received but for the application of this section shall be paid during the
seventh month following separation from service; all remaining payments shall be made in their ordinary course or as may be otherwise permitted under Code Section 409A. 
 (iii) No Acceleration: Acceleration of the time or schedule of any payment under the Plan that is subject to Code Section 409A
(or that would become subject to Code Section 409A as a result of such acceleration) is prohibited, except that, to the extent permitted by the Administrator, acceleration of the time and/or form of a payment, where such accelerations do not
violate Code Section 409A, may be allowed. 
 (iv) Short-Term
Deferrals: If and to the extent deemed necessary to comply with short-term deferral exemption under Code Section 409A, shares of Common Stock, cash payments or other benefits subject to an Award shall, upon vesting and/or earning of the
Award, be issued and distributed to the Participant (or his beneficiary) no later than the later of (a) the 15th day of the third month
following the end of the Participant’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (b) the 15th day of the third month following the end of the Company’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or shall otherwise be made in accordance with Code
Section 409A. 
 (v) Deferral Elections: 
 (A) In the sole discretion of the Administrator, a Participant may be permitted to make an election as to the time or form of any
distribution from an Award, provided that, except as specified in (B), (C) and (D) below, such election is made and becomes irrevocable not later than the close of the taxable year preceding the taxable year in which the services for which
the Award is granted are to be performed, or at such other time or times as may be permitted under Code Section 409A. Notwithstanding the foregoing, a Participant may cancel a deferral election upon (X) a hardship distribution pursuant to
Code Section 401(k), or (Y) upon application for a distribution under section 18(b)(i)(F) (unforeseeable emergency). 
 (B) In the case of the first year in which the Participant becomes eligible to participate in the Plan, the election described in (A) may be made with respect to services to be performed after the election within 30 days after the date
the Participant becomes eligible to participate in the Plan. 
  

 23 

 (C) In the case of any performance-based compensation (as that term is defined in Code
Section 409A), where such compensation is based on services performed over a period of at least 12 months, the election described in (A) may be made no later than six months before the end of the period. 
 (D) In the case of any Award subject to a substantial risk of forfeiture (as defined in Code Section 409A), the election described in
(A) may be made within 30 days of the date the Participant first obtains a legally binding right to the Award, provided that the Award requires the Participant to perform at least 12 months of service after such election is made. 
 (vi) Changes to Elections: To the extent that the Administrator, in its sole discretion, permits a subsequent election to delay a
payment or change the form of payment that has been specified under (A), (B), (C) or (D) above, the following provisions shall apply: 
 (A) Such election may not take effect until 12 months after the date on which the election is made; 
 (B) Where the payment is to be made for reasons other than death, disability or unforeseeable emergency, as those terms are defined in Section 18(b)(i), above, the first payment with respect to which such election is made must be
deferred for a period of not less than five years from the date such payment would otherwise have been made; and 
 (C) Any
election related to a payment based upon a specified term or pursuant to a fixed schedule, as such terms are defined in Section 18(b)(i), above, may not be made less than 12 months prior to the date of the first scheduled payment hereunder.

 Notwithstanding anything else in this Section 18(b)(vi) to the contrary and consistent with Code Section 409A, (i) the
Administrator may elect, or may allow the Participant to elect, on or before December 31, 2007, the time or form of payment of amounts subject to Code Section 409A, provided that any such election occurring in 2007 shall apply only to
amounts that are not otherwise payable in 2007 and does not cause an amount to be paid in 2007 that would not otherwise be payable in that year; and (ii) the Administrator may elect, or may allow the Participant to elect, on or before
December 31, 2008, the time or form of payment of amounts subject to Code Section 409A, provided that any such election occurring in 2008 shall apply only to amounts that are not otherwise payable in 2008 and does not cause an amount to be
paid in 2008 that would not otherwise be payable in that year. 
 (vii) Termination of Awards Subject to Code
Section 409A. As permitted by the Administrator in its sole discretion, and in accordance with Code Section 409A, the Corporation may terminate an Award that is subject to Code Section 409A and distribute benefits to Participants.

  

 24 

	19.	General Provisions 

 (a) Stockholder
Rights: Except as otherwise determined by the Administrator (and subject to the provisions of Section 10(d) regarding Restricted Awards), a Participant and his legal representative, legatees or distributees shall not be deemed to be the
holder of any shares subject to an Award and shall not have any rights of a stockholder unless and until certificates for such shares have been issued and delivered to him or them under the Plan. A certificate or certificates for shares of Common
Stock acquired upon exercise of an Option or SAR shall be promptly 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,
with respect to Options, payment of the Option Price (except as may otherwise be determined by the Corporation in the event of payment of the Option Price pursuant to Section 7(d)(ii)(C)). Except as otherwise provided in Section 10(d)
regarding Restricted Awards, a certificate for any shares of Common Stock issuable pursuant to a Restricted Award, Performance Award or Phantom Stock Award shall be promptly issued in the name of the Participant (or his beneficiary) and distributed
to the Participant (or his beneficiary) after the Award (or portion thereof) has vested or been earned. 
 (b)
Withholding: The Corporation shall withhold all required local, state, federal, foreign and other taxes and any other amount required to be withheld by any governmental authority or law from any amount payable in cash with respect
to an Award. Prior to the delivery or transfer 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 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 establish procedures to permit a recipient to
satisfy such obligation in whole or in part, and any local, state, federal, foreign or other 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. 
 (c) 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 that the Plan shall be construed in favor of such Plan transactions meeting the requirements of Rule 16b-3 or any successor rules thereto. 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. 
 (d) Code Section 162(m)
Performance-Based Compensation. To the extent to which Section 162(m) of the Code is applicable, the Corporation intends that compensation paid under the Plan to Covered Employees will, to the extent practicable, constitute “qualified
performance-based compensation” within the meaning of Section 162(m), unless otherwise determined by the Administrator. Accordingly, Awards granted to Covered Employees which are intended to qualify for the performance-based exception
under Code Section 162(m) shall be deemed to include any such additional terms, conditions, limitations and provisions as are necessary to comply with the performance-based compensation exemption of Section 162(m), unless the
Administrator, in its discretion, determines otherwise. 
  

 25 

 (e) Unfunded Plan; No Effect on Other Plans: 
 (i) The Plan shall be unfunded, and the Corporation shall not be required to create a trust or segregate any assets that may at any time
be represented by Awards under the Plan. The Plan shall not establish any fiduciary relationship between the Corporation and any Participant or other person. 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 Affiliate, including, without limitation, any specific funds, assets or other property which the Corporation or any Affiliate, 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 other amounts, if any, payable under the Plan, unsecured by any assets of the Corporation or any Affiliate. Nothing contained in the Plan shall
constitute a guarantee that the assets of such entities shall be sufficient to pay any benefits to any person. 
 (ii) The
amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute compensation with respect to which any other employee benefits of such Participant are determined, including, without limitation, benefits
under any bonus, pension, profit sharing, life insurance or salary continuation plan, except as otherwise specifically provided by the terms of such plan or as may be determined by the Administrator. 
 (iii) The adoption of the Plan shall not affect any other stock incentive or other compensation plans in effect for the Corporation or any
Affiliate, nor shall the Plan preclude the Corporation from establishing any other forms of stock incentive or other compensation for employees or service providers of the Corporation or any Affiliate. 
 (f) 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, and in accordance with applicable federal laws of the United States. 
 (g) Beneficiary
Designation: The Administrator may permit a Participant to designate in writing a person or persons as beneficiary, which beneficiary shall be entitled to receive settlement of Awards (if any) to which the Participant is otherwise entitled in
the event of death. In the absence of such designation by a Participant, and in the event of the Participant’s death, the estate of the Participant shall be treated as beneficiary for purposes of the Plan, unless the Administrator determines
otherwise. The Administrator shall have sole discretion to approve and interpret the form or forms of such beneficiary designation. A beneficiary, legal guardian, legal representative or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent that the Plan and/or Award Agreement provide otherwise, and to any additional restrictions deemed necessary or appropriate by
the Administrator. 
 (h) Gender and Number: Except where otherwise indicated by the context, words in any gender shall include any
other gender, words in the singular shall include the plural and words in the plural shall include the singular. 
 (i) Severability:
If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included. 
  

 26 

 (j) Rules of Construction: Headings are given to the sections of this Plan solely as a convenience
to facilitate reference. The reference to any statute, regulation or other provision of law shall be construed to refer to any amendment to or successor of such provision of law. 
 (k) Successors and Assigns: The Plan shall be binding upon the Corporation, its successors and assigns, and Participants, their executors,
administrators and permitted transferees and beneficiaries. 
 (l) Right of Offset: Notwithstanding any other provision of the Plan or
an Award Agreement, the Corporation may reduce the amount of any payment or benefit otherwise payable to or on behalf of a Participant by the amount of any obligation of the Participant to the Corporation that is or becomes due and payable.

 (m) Effect of Changes in Status: Unless otherwise provided in an Award Agreement or determined by the Administrator, an Award shall
not be affected by any change in the terms, conditions or status of the Participant’s employment or service, provided that the Participant continues to be in the employ of, or in service to, the Corporation or an Affiliate. Without limiting the
foregoing, the Administrator has sole discretion to determine (taking into account any Code Section 409A considerations), at the time of grant of an Award or at any time thereafter, the effect, if any, on Awards granted to a Participant if the
Participant’s status as an Employee, Director or Independent Contractor changes, including but not limited to a change from full-time to part-time, or vice versa, or if other similar changes in the nature or scope of the Participant’s
employment or service occur. 
 (n) Fractional Shares: Except as otherwise provided by the Plan or the Administrator, (i) the
total number of shares issuable pursuant to the exercise, vesting or earning of an Award shall be rounded under general rounding principles to the nearest whole share (except where rounding down is required in order to preserve intended tax
treatment or otherwise required by applicable law, rule or regulation), (ii) no fractional shares shall be issued, and (iii) no consideration shall be paid for any such fractional shares. 
 [Signature page to follow] 
  

 27 

 IN WITNESS WHEREOF, this Targacept, Inc. 2006
Stock Incentive Plan, as amended and restated through November 28, 2007, is, by the authority of the Board of Directors of the Corporation, executed in behalf of the Corporation, effective as of the 28th day of November, 2007. 
  

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

	Name:	 	J. Donald deBethizy
	Title:	 	President & CEO

  

	
	ATTEST:
	
	 /s/ Peter A. Zorn

	Secretary
	
	[Corporate Seal]

  

 28

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}]]