Document:

EX-10.2

 Exhibit 10.2 
 SECURITY AGREEMENT 
 DATED
             2013 
 BETWEEN: 

FRASERSIDE HOLDINGS LIMITED 
 PRIVATE MEDIA GROUP INC. 
 PEACH ENTERTAINMENT DISTRIBUTION AB 

AND 
  

 

 THIS SECURITY AGREEMENT (this “Agreement”) is made the      day of
             2013 
 BETWEEN: 

 

	(1)	(a) Fraserside Holdings Limited, a company registered in Cyprus with registration number HE 109390 and with registered address at 23 Themistokli Dervis Street, STADIL
House, 5th floor, 1066 Nicosia, Cyprus; 

 (b) Private Media Group Inc. a company registered in Neveda, U.S.A,
with European headquarters at Marina 16-18, Floor 18, Suite D, 08005 Barcelona, Spain; and 
 (c) Peach Entertainment
Distribution AB, a company registered in Sweden with address at Starrsbackgatan 3, 17274 Sundbyberg, Sweden; 
 hereinafter
jointly referred to as the “Security Provider”. 
 AND 

 

	(2)	                    , a company
                         as agent and security trustee for the Lenders as defined in the Loan Agreement defined below
(hereinafter referred to as the “Security Trustee”). 

 WHEREAS the Security Provider
has entered into three Loan Agreements with the same collateral with three different parties for a total amount of €            000
(                 thousand euro) giving the same 1st in rank collateral, but this amount could be extended or increased up to a total amount of
€            000 (one million one hundred thousand euro) if the Security Provider enters into another Loan Agreement and extends one of the Loan Agreements:- 

 

	(A)	The Security Provider has agreed to enter into this Agreement upon the terms and subject to the conditions hereof. 

 

	(B)	The Security Trustee holds the benefit of this Agreement on trust for the Lenders. 

 NOW THEREFORE, in consideration of the promises and mutual covenants set forth herein and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby
agree as follows: 

  
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 1.    INTERPRETATION 

 

	1.1.	Definitions 

 In this
Agreement, unless the context requires otherwise: 
 Encumbrance means a mortgage, charge, pledge, lien or other security
interest securing any obligation of any person or any other agreement or arrangement having a similar effect. 
 Event of
Default means any Event of Default as defined in the Loan Agreement and/or any breach by the Security Provider of any one or more of the provisions of this Agreement. 
 Secured Liabilities means all present and future liabilities and obligations at any time of any member of the Obligors under the Finance Documents. 

Security Assets means all assets of the Security Provider which are the subject of any security created by this Agreement.

 Security Period means the period beginning on the date of this Agreement and ending on the day of the irrevocable and
unconditional payment, performance and discharge in full of all Secured Liabilities as determined by Security Trustee. 
  

	1.2.	Construction 

  

	 	(a)	Words and expressions defined in the Loan Agreement shall, unless the context otherwise requires or unless otherwise defined herein, have the same meaning when used in
this Agreement. 

  

	 	(b)	All references in this Agreement to Clauses and Schedules are to clauses of and schedules to this Agreement. 

 

	 	(c)	Clause headings are inserted for convenience and ease of reference only and shall not affect the interpretation hereof. 

 

	 	(d)	All words denoting the singular number only shall include the plural and vice versa. 

 

	 	(e)	Words denoting natural persons shall include corporations and vice versa. 

  

	 	(f)	In this Agreement unless the context otherwise requires the neuter gender includes the masculine and feminine and vice versa. 

 

	 	(g)	References to any law shall be deemed to include references thereto as the same may be varied or replaced from time to time or, as appropriate, as extended, re-enacted
or amended. 

  

	 	(h)	References in this Agreement to any agreement (including, without limitation to the generality of the foregoing, this Agreement, and the Loan Agreement) or other
document or instrument shall be deemed to include references thereto as the same may be varied, amended, novated or replaced from time to time (including, for the avoidance of doubt, by way of increasing the principal amount owed thereunder) and to
all agreements, documents and instruments stated to be supplemental thereto. 

  
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	 	(i)	The term the or this Security means any security created by this Agreement. 

 

	 	(j)	Any covenant of the Security Provider under this Agreement remains in force during the Security Period. 

 

	 	(k)	If the Security Trustee considers that an amount paid to it under a Finance Document is capable of being avoided or otherwise set aside on the liquidation or
administration of the payer or otherwise, then that amount will not be considered to have been irrevocably paid for the purposes of this Agreement. 

  

	 	(l)	Unless the context otherwise requires, a reference to a Security Asset includes the proceeds of sale of that Security Asset. 

2.    CREATION OF SECURITY 
  

	2.1.	Agreement to Pay 

 The
Security Provider hereby irrevocably, absolutely and unconditionally undertakes, covenants and agrees that it will upon demand pay or discharge (as applicable) the Secured Liabilities on the due date thereof in the manner provided for in the Loan
Documents or in any other relevant agreement when the same shall become due for payment or discharge, whether by acceleration or otherwise. 
  

	2.2.	Copyright and licenses 

The Security Provider hereby charges and assigns by way of first fixed charge all of its rights and beneficial interest, including any
copyright, trademark and any license and distribution rights, whether arising from any content license distribution agreement, any individual movie license agreement or otherwise, in the movies and trademarks listed in Schedule 1. 

 

	2.3.	General 

  

	 	(a)	All the security created under this Agreement: 

  

	 	(i)	is created in favour of the Security Trustee as security trustee for the Lenders; 

 

	 	(ii)	is in addition to, and not in any way prejudiced by, any other security now or subsequently held by the Security Trustee or any other Lender; 

 

	 	(iii)	is created over present and future assets of the Security Provider; and 

  

	 	(iv)	is security for the payment and performance of all the Secured Liabilities; 

  
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	 	(b)	If any discharge (whether in respect of this Security, the obligations of the Security Provider, the Borrower or any other person or any security for those obligations
or otherwise) or arrangement is made in whole or in part on the faith of any payment, security or other disposition which is avoided or must be restored on bankruptcy, insolvency, liquidation, moratorium or otherwise without limitation, the Security
created, and the obligations of the Security Provider, under this Agreement will continue as if the discharge or arrangement had not occurred. 

 3.    FURTHER ASSURANCES 

        Perfection and Further assurances 

 

	 	(a)	General Assurances  

 The
Security Provider must, at its own expense, promptly, and in any event within any applicable time limit, take whatever action the Security Trustee may require for: 
  

	 	(i)	protecting any security intended to be created by this Agreement; or 

  

	 	(ii)	facilitating the enforcement of this Security, or the exercise of any right, power or discretion exercisable, by the Security Trustee or any of its delegates or
sub-delegates in respect of any Security Assets; or 

  

	 	(iii)	facilitating the assignment or transfer of the Security Trustee’s rights and/or obligations under this Agreement. 

This includes any registration at any public registry in Cyprus which the Security Trustee may think expedient. 

 

	 	(b)	Registration of Security pursuant to the provisions of the Cyprus Companies Law 

The Security Provider shall, at its own cost and expense, within ten Business Days after the date of this Agreement: 

 

	 	(i)	provide evidence satisfactory to the Security Trustee, that this Agreement has been filed with the registrar of companies in Cyprus for registration in accordance with
the requirements of section 90 of the Companies Law, Cap.113; and 

  

	 	(ii)	enter the particulars of this Agreement and the security created under this Agreement in its register of mortgages and charges in accordance with the requirements of
section 99 of the Companies Law, Cap. 113, and deliver to the Security Trustee a certified true copy thereof. 

  
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 The Security Provider shall within thirty Business Days after the date of filing for
registration of this Agreement with the registrar of companies in Cyprus as provided in Clause 3.2(b)(i) provide the Security Trustee with an original certificate of registration of charge, as shall be issued by the registrar of companies in Cyprus.

 Notwithstanding the foregoing provisions of this Clause 3.2(b), the Security Trustee shall be entitled to perfect and/or
register the security hereby created by itself, at the cost of the Security Provider. 
 4.    PRESERVATION OF SECURITY

  

	4.1.	Waiver of defences 

Neither this Security nor the obligations of the Security Provider under this Agreement will be affected by any act, omission or thing
which, but for this provision, would reduce, release or prejudice this Security or any of its obligations under this Agreement (whether or not known to it or the Security Trustee). This includes in each case to the extent permitted under applicable
law: 
  

	 	(a)	any time or waiver granted to, or composition with, any person; 

  

	 	(b)	any release of any person under the terms of any composition or arrangement; 

 

	 	(c)	the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets
of, any person; 

  

	 	(d)	any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

  

	 	(e)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any person; 

 

	 	(f)	any amendment (however fundamental) of a Finance Document or any other document or security; or 

 

	 	(g)	any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security.

  
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	4.2.	Immediate recourse 

 The
Security Provider waives any right it may have of first requiring the Security Trustee (or any trustee or agent on its behalf) or any other person to proceed against or enforce any other right or security or claim payment from any person before
enforcing any Security created by this Agreement. 
  

	4.3.	Non-competition 

 Unless:

  

	 	(a)	the Security Period has expired; or 

  

	 	(b)	the Security Trustee otherwise directs, 

 the Security Provider will not, after any Security created by this Agreement has been enforced: 
 (i) exercise any right of subrogation, recourse, contribution or indemnity to which it may be entitled, in respect of any payment made to or moneys received by the Security Trustee or any other person as
proceeds of the enforcement of any Security created by this Agreement; or 
 (ii) receive, claim or have the benefit of any
payment, distribution or security from or on account of any other person, or exercise any right of set-off as against any other person. 
 The Security Provider must hold in a segregated account and immediately pay or transfer to the Security Trustee or in accordance with any directions given by the Security Trustee under this Clause 4.3 any
payment or distribution or benefit of security received by it contrary to this Clause 4.3. 
 5.    SECURITY
REPRESENTATIONS 
  

	5.1.	Representations 

 The
representations set out in this Clause are made by the Security Provider to the Security Trustee. 
  

	5.2.	Nature of security 

 This
Agreement creates the charge and assignment it purports to create and is not liable to be amended or otherwise set aside on the Security Provider’s liquidation, winding-up, administration, dissolution or otherwise. 

 

	5.3.	Title 

 It has full and
exclusive title to the Security Assets, free of any Encumbrance (except for those created under this Agreement) and any other right in favour of any other person. 

  
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	5.4.	Ranking 

 The security
created under this Agreement has first priority in relation to all claims of any person to a Security Asset. 
  

	5.5.	Conflict with laws 

 No
breach of any law or regulation is outstanding which affects or might affect the value of any Security Asset. 
  

	5.6.	Times for making representations 

 The representations set out in this Agreement (including in this Clause) are made on the date of this Agreement. 
 Unless a representation is expressed to be given on a specific date, each representation under this Agreement is deemed to be repeated on each day of the Security Period, by reference to the facts and
circumstances at each such time, as if made at each such time. 
 6.    RESTRICTIONS ON DEALINGS 

 

	6.1.	Restrictions on dealings 

The Security Provider may not, except as expressly permitted pursuant to the terms of the Finance Documents: 

 

	 	(a)	create or permit to subsist any Encumbrance on the Security Assets; 

  

	 	(b)	sell, transfer or otherwise dispose of the Security Assets, except in the ordinary course of business; 

 

	 	(c)	waive, amend or terminate, in whole or in part, any accessory or ancillary right or other right in respect of the Security Assets; or 

 

	 	(d)	take any action which would result in a reduction in the value, or might jeopardise the existence or enforceability, of the Security Assets or the Security.

  

	6.2.	Information 

 The Security
Provider must supply the Security Trustee promptly with any information it reasonably requests in respect of the Security Assets. 

7.    WHEN SECURITY BECOMES ENFORCEABLE 
 This Security will become immediately enforceable if an Event of Default occurs and the Security Provider hereby authorises the Security Trustee to be its attorney/representative, on its behalf and in its
name or otherwise. For the avoidance of doubt: this means that this document can be seen as an irrevocable power of attorney for the Security Trustee to execute the collateral if and when a default situation arises as described in the Loan
Agreement. 

  
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 8.    ENFORCEMENT OF SECURITY 

 

	8.1.	General 

 After this
Security has become enforceable, the Security Trustee may, in its absolute discretion, and at any time and from time to time exercise any right under: 
  

	 	(i)	applicable law; and/or 

  

	 	(ii)	this Agreement, 

 to enforce all
or any part of the Security in respect of the Security Assets as it sees fit. 
 In particular, without any further consent or
authority on the part of the Security Provider and irrespective of any direction given by it, the Security Trustee may to the extent permitted by applicable law: 
  

	 	(i)	take immediate possession of and collect the whole or any part of the Security Assets and for this purpose to take any steps in the name of the Security Provider or
otherwise as it shall consider necessary or expedient; 

  

	 	(ii)	give notice to any person in connection with enforcing this Security; 

  

	 	(iii)	seize, collect or claim all amounts payable in respect of, the Security Assets; or 

 

	 	(iv)	enforce the Security by way of proceedings or otherwise. 

  

	8.2.	Scope of Obligations 

 The
Security Trustee: 
  

	 	(a)	may not be held liable for any action taken, or not taken, in connection with collecting any receivable or enforcing any Security Assets or this Security (except in the
case of gross negligence, fraud or willful misconduct on the part of the Security Trustee); 

  

	 	(b)	may not be held liable for, and need not make, any payment under any Security Assets (except in the case of gross negligence, fraud or willful misconduct on the part of
the Security Trustee); 

  

	 	(c)	need not make any enquiries as to the nature or sufficiency of any payment received in respect of the Security Assets; 

 

	 	(d)	need not perform any obligation of the Security Provider; and 

  

	 	(e)	need not present or file any claim or take any other action to collect or enforce the payment of any amount to which it may be entitled under this Agreement.

  
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	8.3.	Receipts after an Event of Default 

 If, while an Event of Default has occurred, the Security Provider receives any proceeds relating to the Security Assets, it must immediately transfer an amount equal to those proceeds to the Security
Trustee. This is without prejudice to any right the Security Trustee may have against the person who made that payment. 
  

	8.4.	Contingencies 

 Without
prejudice to any other right the Security Trustee may have, if the proceeds of enforcement of this Security are received at a time when no amount is due under any Finance Document but at a time when amounts may or will become due, the Security
Trustee may pay the proceeds of any recoveries effected by it into a designated suspense account. 
 9.    APPLICATION OF
PROCEEDS 
 Any moneys received by the Security Trustee after this Security has become enforceable shall be applied in
discharge of the Secured Liabilities by the Security Trustee. 
 10.    EXPENSES AND INDEMNITY 

The Security Provider must: 
  

	 	(a)	immediately on demand pay all costs and expenses (including legal fees) incurred by the Security Trustee, any attorney, manager, delegate, sub-delegate, agent or other
person appointed by the Security Trustee under this Agreement in connection with: 

  

	 	(i)	this Agreement; or 

  

	 	(ii)	the enforcement or preservation of this Security; and 

  

	 	(b)	keep each of them indemnified against any failure or delay by the Security Provider in paying those costs or expenses; this includes any arising from any actual or
alleged breach by any person of any law or regulation. 

 11.    DELEGATION 

 

	11.1.	Power of attorney 

 The
Security Trustee may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by it under or in connection with this Agreement. 

  
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	11.2.	Terms 

 Any such
delegation may be made upon any terms (including power to sub-delegate) which the Security Trustee may think fit. 
  

	11.3.	Liability 

 The Security
Trustee will not be in any way liable or responsible to the Security Provider for any loss or liability arising from any act, default, omission or misconduct on the part of any delegate or sub-delegate. 

12.    EVIDENCE AND CALCULATIONS 
 In the absence of manifest error, the records of the Security Trustee are conclusive evidence of the existence and the amount of the Secured Liabilities. 

13.    CHANGES TO THE PARTIES 
  

	13.1.	Security Provider 

 The
Security Provider may not assign or transfer any of its rights or obligations under this Agreement. 
  

	13.2.	The Security Trustee 

 The
Security Trustee may sell, transfer, assign, novate or otherwise dispose of all or part of its rights or obligations under this Agreement. 

14.    MISCELLANEOUS 
  

	14.1.	Amendments 

 Unless
otherwise agreed in writing, any term of this Agreement may be amended by an agreement in writing between the Security Trustee and the Security Provider. 
  

	14.2.	Waivers and remedies cumulative 

 The rights of the Security Trustee under this Agreement: 
  

	 	(a)	may be exercised as often as necessary; 

  

	 	(b)	are cumulative and not exclusive of its rights under the general law; and 

  

	 	(c)	may be waived only in writing and specifically. 

 Delay in exercising or non-exercise of any right is not a waiver of that right. 

  
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	14.3.	Severability 

 Any
provision of this Agreement prohibited by or unlawful or unenforceable under any applicable law shall (to the extent required by such law) be ineffective without modifying the remaining provisions of this Agreement but where the provisions of any
such applicable law may be waived, they are hereby waived to the full extent permitted by such law to the end that this Agreement shall be valid, binding and enforceable in accordance with its terms. 

 

	14.4.	Counterparts 

 This
Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. 

15.    RELEASE 
 At the end of the Security Period, the Security Trustee must, at the request and cost of the Security Provider, promptly take whatever action is necessary to release the Security Assets from this
Security. 
 16.    NOTICES 
 Any notice, application or other communication to be given or made under this Agreement to the Security Trustee or to the Security Provider shall be in writing. Except as otherwise provided in this
Agreement, such notice, application or other communication shall be deemed to have been duly given or made when it is delivered by hand, airmail or facsimile transmission to the party to which it is required or permitted to be given or made at such
party’s address specified below or at such other address as such party designates by notice to the party giving or making such notice, application or other communication. 
 For the Security Provider: 
 Name: Charles Prast 

Address: C/o Milcap Media Group S.L.U. 
 Marina 16-18 
 Floor 18 

Suite D 
 08005
Barcelona 
 Spain 

  
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 With a copy to: 
  

 
  

 
  

 
 Nicosia, Cyprus 

Attention: Director 
 Fax:
+                         
 For the Security Trustee: 
 Name:
                                     

Address:
                                 

 
  

 
  
 Fax: 
 Tel: 
 17.    GOVERNING LAW 
 This Agreement is governed by
Cyprus law. 
 18.    ENFORCEMENT 
 The courts of Cyprus shall have exclusive jurisdiction to settle any dispute in connection with this Agreement. 
 This Clause is for the benefit of the Security Trustee only. To the extent allowed by law, the Security Trustee may take: 
  

	 	(i)	proceedings in any other court; and 

  

	 	(ii)	concurrent proceedings in any number of jurisdictions. 

 This Agreement has been entered into on the date stated at the beginning of this Agreement. 

IN WITNESS whereof this Agreement has been duly executed the day and year first above written. 

 

			
	 SIGNED for and on behalf of FRASERSIDE HOLDINGS LTD
by Charles
Prast
 Director
	  	 )

)            
.............................................
 )

)

  
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	 SIGNED for and on behalf of Private Media Group Inc.
by Charles
Prast
 Director
	  	 )

)            
.............................................
 )

)

  

			
	 SIGNED for and on behalf
of Peach Entertainment Distribution AB
by Eric Johnson
 Authorised Signatory
	  	 )

)            
.............................................
 )

)

  

			
	 SIGNED for and on behalf
of                                       
  
by
                                    

Authorised Signatory
	  	 )

)        ................................................

)
 )

  
  
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 13EX-10.1

 Exhibit 10.1 
 EMPLOYMENT AGREEMENT 
 THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is made effective as of June 28, 2013 (the “Effective Date”) by and between Targacept, Inc., a Delaware corporation (“Employer” or the “Company”), and David A. Hosford,
M.D., Ph.D., an individual resident of North Carolina (“Employee”). 
 RECITALS: 

WHEREAS, Employer considers the availability of Employee’s services to be important to the management and conduct of Employer’s
business and desires to secure the continued availability of Employee’s services; and 
 WHEREAS, Employee is willing to
continue to make his services available to Employer on the terms and subject to the conditions set forth herein; 
 NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 
 1.
Employment. For the Term (as defined in Section 2), Employee shall be employed as Vice President, Clinical Development and Regulatory Affairs of Employer. Employee will be located at Employer’s principal executive offices in
Winston-Salem, North Carolina or such other location as may be approved by Employer’s chief executive officer. Employee hereby accepts and agrees to such employment. Employee shall perform such duties and shall have such powers, authority and
responsibilities as are customary for one holding the position of Vice President, Clinical Development and Regulatory Affairs of a business similar to Employer and shall additionally render such other services and duties as may be reasonably
assigned to him from time to time by Employee’s assigned manager, Employer’s chief executive officer or Employer’s Board of Directors (the “Board”). 

2. Term of Employment. Employee’s employment with Employer shall continue until terminated as provided in Section 6 or
Section 7 (the period from the Effective Date to the effective date of such termination, the “Term”). Any termination of Employee’s employment with Employer or this Agreement shall not affect the parties’ continuing
obligations under Section 5, which shall survive any such termination. 
 3. Compensation. 

(a) For all services rendered by Employee to Employer under this Agreement, Employer shall pay to Employee, during the Term, an annual
base salary of not less than $283,250 ($23,604.17 per month), payable in arrears in accordance with the customary payroll practices of Employer. During the Term, Employee’s annual base salary shall be reviewed and subject to increase in
accordance with Employer’s standard policies and procedures. 
 (b) Employee shall be eligible to earn an annual bonus
during the Term of up to 30% of Employee’s annual base salary or such higher amount as may be determined by the Board (or a compensation committee thereof) from time to time (Employee’s “Target Annual Bonus”). Eligibility
for the Target Annual Bonus shall be based upon the achievement of performance objectives established by, or in a manner approved by, the Board (or a compensation committee thereof) in consultation with Employer’s chief executive officer and
shall be payable within thirty (30) days after the end of each fiscal year. 

 (c) All amounts payable hereunder shall be subject to such deductions and withholdings as
shall be required by law, if any. 
 (d) Employee shall also be entitled during the Term to holidays, sick leave and other time
off and to participate in those life, health or other insurance plans and other employee retirement and welfare benefit programs, plans, practices and benefits generally made available from time to time to similarly situated executives of Employer;
provided that nothing herein shall obligate Employer to continue any of such programs, plans, practices or benefits for Employee if discontinued for all other similarly situated executives of Employer. Without limiting the foregoing, Employee shall
be entitled to paid vacation during each fiscal year of the Term of not less than twenty (20) days. 
 4. Reimbursement
of Expenses. Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by Employee in performing the duties of his employment under this Agreement and also, to the extent consistent with Employer’s
policy, for any dues and costs of membership for appropriate professional organizations and continuing professional education, in each case subject to such reasonable documentation and substantiation as Employer shall require. 

5. Covenants of Employee. 
 (a) Covenant Not to Compete. Employee covenants that during the Noncompetition Period (as defined in Section 5(g)) and within the Noncompetition Area (as defined in Section 5(h)), he
shall not, directly or indirectly, as principal, agent, officer, director, shareholder, member, employee, consultant or trustee, or through the agency of any person, firm, corporation, partnership, limited liability company, association or other
entity (collectively, “Entity”), engage in the Business (as defined in Section 5(i)). Without limiting the generality of the foregoing, Employee agrees that during the Noncompetition Period and within the Noncompetition Area,
he shall not be (i) the owner of the outstanding capital stock or other equity interests of any Entity (other than Employer or its affiliates) that, directly or indirectly, engages in the Business; or (ii) an officer, director, partner,
manager, member, consultant or employee of any Entity that, directly or indirectly, engages in the Business; provided that this Section 5(a) shall not prevent Employee from (A) being an executive or otherwise working in the same or similar
capacity for any area or division of any Entity to the extent that such area or division does not, directly or indirectly, engage in the Business or (B) beneficially owning less than 1% of the stock of a corporation traded on a national
securities exchange (including, without limitation, the NASDAQ Stock Market). 
 (b) Nondisclosure Covenant. The parties
acknowledge that Employer and its affiliates are enterprises the success of which is attributable largely to the ownership, use and development of certain valuable confidential and proprietary information (“Proprietary Information”)
and that Employee’s employment with Employer will involve access to and work with Proprietary Information. Employee acknowledges that his relationship with Employer is a confidential relationship and agrees that he shall: (i) keep and
maintain all Proprietary Information in strictest confidence; (ii) not, either directly or indirectly, use any Proprietary Information for his own benefit; and (iii) not, either directly or indirectly, divulge, disclose or communicate any
Proprietary Information in any manner whatsoever to any person or Entity, other than to employees or agents of 

  
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Employer having a need to know such Proprietary Information to perform their responsibilities on behalf of Employer or to other persons or Entities in the normal course of Employer’s
business. This nondisclosure obligation shall apply to all Proprietary Information, whether or not Employee participated in the development thereof. Upon termination of his employment with Employer for any reason, Employee will return to Employer
all Proprietary Information in any medium and all other documents, data, materials or property of Employer (including any copies thereof) in his possession. For purposes of this Agreement, the term “Proprietary Information” shall include
any and all information related to the business of Employer, any of its affiliates or any third party whose information Employee had access to by virtue of his employment with Employer, or to any of their respective products, services, sales or
operations, that is not generally known to the public, specifically including, but without limitation: trade secrets; processes; formulae; compounds and properties thereof; data; files; research results; computer programs or related source codes or
object codes; improvements; inventions; techniques; business, operating, marketing, partnering or merger and acquisition plans; strategies; forecasts; copyrightable material; suppliers; vendors; methods and manner of operations; information relating
to the identity, needs and location of all past, present and prospective customers; and information with respect to the internal affairs of Employer and its affiliates. Such Proprietary Information may or may not contain legends or other written
notice that it is of a confidential or proprietary nature. The parties stipulate that, as between them, the above-described matters are important and confidential and gravely affect the successful conduct of the business of Employer and its
affiliates and that any breach of the terms of this Section 5(b) shall be a material breach of this Agreement. 
 (c)
Nonsolicitation Covenant. Employee covenants that during the Noncompetition Period he shall not, directly or indirectly, on behalf of himself or any Entity, solicit, induce or encourage any person to leave the employ of Employer. 

(d) Inventions. All inventions, designs, formulae, processes, discoveries, drawings, improvements and developments made by
Employee, either solely or in collaboration with others, during his employment with Employer, whether or not during working hours, and relating to any methods, apparatus, products, compounds, services or deliverables that are made, furnished, sold,
leased, used or developed by Employer or its affiliates or that pertain to the business of Employer (the “Developments”) shall become and remain the sole property of Employer. Employee shall disclose promptly in writing to Employer
all such Developments. Employee acknowledges and agrees that all Developments shall be deemed “works made for hire” within the meaning of the United States Copyright Act, as amended. If, for any reason, such Developments are not deemed
works made for hire, Employee hereby assigns to Employer all of his right, title and interest (including, but not limited to, copyright and all rights of inventorship) in and to such Developments. At the request and expense of Employer, whether
during or after employment with Employer, Employee shall make, execute and deliver all application papers, assignments or instruments, and perform or cause to be performed such other lawful acts as Employer may deem necessary or desirable in making
or prosecuting applications, domestic or foreign, for patents (including reissues, continuations and extensions thereof) and copyrights related to such Developments or in vesting in Employer full legal title to such Developments. Employee shall
assist and cooperate with Employer or its representatives in any controversy or legal proceeding relating to such Developments or any patents, copyrights or trade secrets with respect thereto. If for any reason Employee refuses or is unable to
assist Employer in obtaining or enforcing its rights with respect to such Developments, he hereby irrevocably designates and appoints Employer and its duly authorized agents as his agents and attorneys-in-fact to execute and file any documents and
to do all other lawful acts necessary to protect Employer’s rights in the Developments. Employee expressly acknowledges that the special 

  
 3 

 
foregoing power of attorney is coupled with an interest and is therefore irrevocable and shall survive (i) his death or incompetency, (ii) the termination of his employment with
Employer and (iii) the termination of this Agreement. 
 (e) Independent Covenants. Each of the covenants on the
part of Employee contained in Sections 5(a), (b), (c) and (d) shall be construed as an agreement independent of each other such covenant. The existence of any claim or cause of action of Employee against Employer, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of any such covenant. 
 (f)
Reasonableness; Injunction. Employee acknowledges that his covenants contained in this Section 5 are reasonably necessary for the protection of Employer, its affiliates and their respective businesses and that such covenants are
reasonably limited with respect to the activities prohibited, the duration thereof, the geographic area thereof, the scope thereof and the effect thereof on Employee and the general public. Employee further acknowledges that violation of the
covenants would immeasurably and irreparably damage Employer and its affiliates and, by reason thereof, Employee agrees that for violation or threatened violation of any of the provisions of this Agreement, Employer shall, in addition to any other
rights and remedies available to it at law or otherwise, be entitled to an injunction to be issued by any court of competent jurisdiction enjoining and restraining Employee from committing any violation or threatened violation of this Agreement.
Employee consents to the issuance of such injunction. Furthermore, Employer shall, in addition to any other rights or remedies available to it, at law or otherwise, be entitled to reimbursement of court costs, attorneys’ fees and other expenses
incurred as a result of a breach of this Agreement. Employee agrees to reimburse Employer for such expenses promptly following a final determination that he has breached this Agreement. 

(g) Noncompetition Period. “Noncompetition Period” shall mean the period commencing on the Effective Date and
continuing until (i) nine (9) months following termination of Employee’s employment with Employer, unless clause (ii) applies, or (ii) if applicable, the last day of the Severance Period pursuant to Section 7(d)(A).

 (h) Noncompetition Area. The “Noncompetition Area” shall consist of the entire world, North America,
the United States and Europe. 
 (i) Business. For the purposes of this Agreement, the “Business” shall
mean the business of developing, manufacturing, marketing or selling any therapeutic product: (i) that contains or is comprised of, in whole or in part, a chemical compound that modulates or otherwise affects any nicotinic acetylcholine
receptor in humans; or (ii) that is substantially similar to, or competitive with, any product candidate in development, or any product manufactured, marketed or sold, by Employer during Employee’s employment with Employer; provided,
however, that during the portion of the Noncompetition Period after termination of Employee’s employment, no product or product candidate will be considered competitive with the Company’s products or product candidates unless it is
substantially similar to, or competitive with, a product candidate in development, or a product manufactured, marketed or sold, by Employer during the five (5)-year period ending on the date of termination of Employee’s employment. 

6. Disability. Upon the “disability” of Employee, this Agreement and the employment relationship hereunder may be
terminated by action of the Board upon thirty (30) days prior written notice (the “Disability Notice”), such termination to become effective only if such disability 

  
 4 

 
continues. If, prior to the effective time of the Disability Notice, Employee shall recover from such disability and return to the full-time active discharge of his duties, then the Disability
Notice shall be of no further force and effect and Employee’s employment shall continue as if the same had been uninterrupted. If Employee shall not so recover from his disability and return to his duties, then his employment with Employer and
this Agreement shall terminate at the effective time of the Disability Notice. Such termination shall not prejudice any benefits payable to Employee that are fully vested as of the date of such termination. Prior to the effective time of the
Disability Notice, Employee shall continue to earn all compensation to which Employee would have been entitled as if he had not been disabled, such compensation to be paid at the time, in the amounts, and in the manner provided in Section 3(a).
A “disability” of Employee shall be deemed to exist at all times that Employee is considered by the insurer which has issued any policy of disability insurance owned by Employer or for which premiums are paid by Employer (the
“Employer Policy”) to be totally disabled under the terms of such policy. In the event there is no Employer Policy, “disability” shall mean the inability, by reason of physical or mental incapacity, impairment or
infirmity, of Employee to perform, upon request, his regular duties for six (6) consecutive months and the determination of the existence or nonexistence of disability shall be made by a medical doctor who is licensed to practice medicine in
the State of North Carolina mutually acceptable to the Board and to Employee (or, if Employee is incapacitated, his spouse). 

7. Termination. 
 (a) If Employee shall die during the Term, this Agreement and the employment relationship hereunder will automatically terminate on the date of death, which date shall be the last day of the Term;
provided that such termination shall not prejudice any benefits payable to Employee or Employee’s beneficiaries that are fully vested as of the date of death. 
 (b) Employer may terminate this Agreement and the employment relationship hereunder at any time, with or without Just Cause, effective at such time as may be determined by Employer’s chief executive
officer or the Board; provided that any termination with Just Cause shall require written notice to Employee. “Just Cause” shall mean: (i) Employee’s willful and material breach of this Agreement and his continued failure
to cure such breach to the reasonable satisfaction of the Board within thirty (30) days following written notice of such breach to Employee from the Board; (ii) Employee’s conviction of, or entry of a plea of guilty or nolo contendere
to a felony or a misdemeanor involving moral turpitude; (iii) Employee’s willful commission of an act of fraud, breach of trust, or dishonesty including, without limitation, embezzlement, that results in material damage or harm to the
business, financial condition or assets of Employer; (iv) Employee’s intentional damage or destruction of substantial property of Employer; (v) Employee’s violation of Employer’s policies prohibiting employment
discrimination or workplace harassment; or (vi) Employee’s commission of any act (or omission) contrary to the ethical or professional standards generally expected of Employer or Employee’s profession. Just Cause shall be determined
by the Board in its reasonable discretion and the particulars of any determination shall be provided to Employee in writing. At any time within ninety (90) days of receipt by Employee in writing of such determination, Employee may object to
such determination in writing and submit the determination to arbitration in accordance with Section 9(j). If such determination is overturned in arbitration, Employee will be treated as having been terminated without Just Cause and shall be
entitled to the benefits of Section 7(d). 
 (c) Employee may voluntarily terminate his employment with Employer on thirty
(30) days prior written notice to Employer. 
 (d) Upon any termination pursuant to this Section 7, Employee shall be
entitled to receive a lump sum equal to (i) any base salary earned and due but not yet paid through the effective date of termination plus (ii) any bonus or other compensation earned and due pursuant to the express terms of any Company
plan or program but not yet paid through the effective date of termination, such lump sum to be payable within thirty (30) days after such effective date of termination. 

  
 5 

 In addition, if this Agreement and Employee’s employment hereunder is terminated by
Employer (or its successor) other than for Just Cause (and, for clarity, other than as a result of Employee’s death), or by Employee within one (1) year following the first occurrence of Good Reason, Employee shall be entitled to the
following: 
 (A) severance, payable monthly, in an amount and for a period as follows:
(1) if such termination occurs concurrent with or within twelve (12) months following, or in connection with but prior to, a Change in Control, the sum of Employee’s then current monthly base salary plus one-twelfth (1/12th) of Employee’s Target Annual Bonus, for twelve
(12) months following such termination; or (2) if otherwise, Employee’s then current monthly base salary for nine (9) months following such termination (the time period in clause (1) or clause (2), whichever is applicable,
the “Severance Period”); provided that, in the event the aggregate amount payable in the Severance Period based on the foregoing would exceed the greater of: 

(x) two times the lesser of: 
 (aa) the sum of Employee’s annualized compensation based upon his annual base salary for his taxable year preceding his taxable year in which his employment hereunder terminates (adjusted for any
increase during that year that was expected to continue indefinitely if Employee’s employment had not terminated); or 
 (bb) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”), for the
year in which Employee’s employment hereunder is terminated; or 
 (y) the maximum amount that would be
exempt under Section 409A of the Code; 
 then, Employer (or its successor) shall pay the amount of such excess to Employee in a lump sum
on the date that is two and one-half months following the end of Employer’s (or its successor’s) taxable year during which the termination of Employee’s employment occurs. 

(B) if such termination occurs concurrent with or within twelve (12) months following, or in connection with but
prior to, a Change in Control, full acceleration of vesting for unvested options to purchase capital stock, and restricted stock or other equity-based awards (if any), of Employer (or its successor) held by Employee and outstanding as of the
effective date of termination; and otherwise six (6) months acceleration of vesting for unvested options to purchase capital stock, and restricted stock or other equity-based awards 

  
 6 

 
(if any), of Employer (or its successor) held by Employee and outstanding as of the effective date of termination. The terms of this clause (B) shall be deemed incorporated into each option
or similar agreement evidencing an award made to Employee before or after the Effective Date. 
 (C) continuation
of (1) the life insurance benefits coverage and (2) the health care (including medical and dental) benefits coverage, in each case provided to Employee (and, if applicable, his spouse and dependents) at his date of termination at the same
level and in the same manner as if his employment had not terminated (subject to the customary changes in such coverages if Employee reaches age 65 or similar events), for the Severance Period; provided that (x) Employer shall have no
obligation under the foregoing clause (2) unless Employee shall have made a timely election of continuation under the Consolidated Omnibus Budget Reconciliation Act of 1985 (commonly referred to as “COBRA”) and (y) the same
percentage of the total cost for such life insurance or health care coverage as Employee was paying at the time of termination shall continue during the Severance Period to be paid by Employee. If the terms of any of Employer’s group health,
dental or term life insurance plans referred to in this section do not permit continued participation by Employee or if permitting such continued participation would result in the imposition of an excise tax against Employer under Section 4980D
(or any successor section) of the Code, then Employer will arrange for other coverage providing substantially similar benefits at the same contribution level of Employee. 

(D) outplacement counseling services selected by Employee, up to a maximum of $10,000 and provided that (1) such
expense is incurred by Employee on or before the second anniversary of December 31 of the year during which the termination of Employee’s employment occurs and (2) such amount is paid by Employer on or before the third anniversary of
December 31 of the year during which the termination of Employee’s employment occurs. 
 (e) If Employer (or its
successor) terminates Employee’s employment for Just Cause, Employee shall forfeit any unexercised vested or unvested stock options (and other equity-based awards, to the extent unvested, if any) at the date of termination. If Employee
terminates his employment or if Employer (or its successor) terminates Employee’s employment without Just Cause, Employee shall have, with respect to each vested stock option, until the earlier of (i) three (3) months from the date of
termination or (ii) the last day of the applicable option period/term to exercise such vested stock option. 
 (f) For
purposes of this Agreement: 
 “Change in Control” shall be deemed to have occurred on the
earliest of the following dates: 
 (i) the date any entity or person shall have become the beneficial owner of,
or shall have obtained voting control over, more than fifty percent (50%) of the outstanding Common Stock of Employer; 
 (ii) the date of the consummation of: (A) a merger, consolidation, reorganization or similar business transaction of Employer with or into another corporation or other business entity (each, a
“corporation”), in which Employer is not the continuing or 

  
 7 

 
surviving entity or pursuant to which any shares of Common Stock of Employer would be converted into cash, securities or other property of another entity, other than a transaction of Employer in
which holders of Common Stock immediately prior to the transaction continue to own at least 50% of the outstanding Common Stock, or if Employer is not the surviving entity, the common stock (or other voting securities) of the surviving entity
immediately after the transaction as immediately before; or (B) the sale or other disposition of all or substantially all of the assets of Employer; or 
 (iii) the date on which the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where
the term “Continuing Director” means at any date a member of the Board (A) who was a member of the Board on the date of this Agreement, or (B) who was nominated or elected subsequent to such date by at least a majority of
the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board. 
 (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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than Employer, a subsidiary of Employer or any employee benefit plan(s) sponsored or maintained by Employer or any subsidiary
thereof, and the term “beneficial owner” shall have the meaning given the term in Rule 13d-3 under the Exchange Act.) 

The Board shall have full and final authority, in its discretion, to determine whether a Change in Control of Employer has occurred
pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto. 
 “Good Reason” shall mean the occurrence of any of the following events without Employee’s express written consent: 

(i) the material breach by Employer (or its successor) of any material provision of this Agreement; 

(ii) any purported termination of the employment of Employee by Employer (or its successor) that is not effected in
accordance with this Agreement; 
 (iii) any failure of Employer (or its successor) to pay Employee any amounts
of salary or bonus compensation that have become due and payable to Employee within thirty (30) days after Employee has given Employer (or its successor) notice of demand therefor; 

(iv) a reduction in Employee’s annual base salary unless the reduction is part of, and at the same percentage as, an
across-the-board salary reduction for all similarly-situated executives; 

  
 8 

 (v) any material diminution in Employee’s duties, responsibilities,
authority, reporting structure, status or title, unless approved in writing by Employee; or 
 (vi) being
required by Employer to relocate to a location more than fifty (50) miles from Employer’s corporate offices as of the Effective Date (Winston-Salem, North Carolina); 
 provided that Good Reason pursuant to any of clauses (i), (ii), (iii), (iv), (v) or (vi) above shall be conditional on (A) Employee having provided written notice to Employer (or its
successor) of the initial existence of any or all of the foregoing events within ninety (90) days of the initial existence of such event and (B) such event continuing to exist thirty (30) days after the date of such written notice
from Employee. 
 (g) Except as otherwise provided in this Section 7, upon termination of this
Agreement for any reason, Employee shall not be entitled to any form of severance benefits, including benefits otherwise payable under any of Employer’s regular severance plans or policies, or any other payment whatsoever. Employee agrees that
(i) the payment of any severance or other benefits pursuant to this Section 7 shall be contingent on the delivery by Employee to Employer of a release and waiver of legal claims related to the employment relationship between Employee and
Employer in a form reasonably acceptable to Employer and (ii) the payments and benefits provided hereunder, subject to the terms and conditions hereof, shall be in full satisfaction of any rights which he might otherwise have or claim by
operation of law, by implied contract or otherwise, except for rights which he may have under any employee benefit plan of Employer. Notwithstanding anything to the contrary in this Section 7, any release referenced in this Section 7(g)
must be executed and provided to Employer, and the period for revoking same must have expired, before the forty-fifth
(45th) day following the effective date of
termination of employment (or shall otherwise be structured in a manner so that all payments under this Section 7 are exempt from or made in compliance with Section 409A of the Code). Specifically but without limitation, if any payments
made under this Section 7 are not exempt from Section 409A of the Code and if the forty-five (45) day period described in the preceding sentence begins in one tax year and extends into a second tax year, such payments shall commence
during the second tax year. 
 (h) To the extent applicable, Employer and Employee intend that this Agreement comply with
Section 409A of the Code. The parties hereby agree that this Agreement shall at all times be construed in a manner to comply with Section 409A and that should any provision be found not in compliance with Section 409A, the parties are
hereby contractually obligated to execute any and all amendments to this Agreement deemed necessary and required by legal counsel to achieve compliance with Section 409A. In the event amendments are required to be made to this Agreement to
comply with Section 409A, Employer shall use its best efforts to provide Employee with substantially the same payments he would have been entitled to pursuant to this Agreement had Section 409A not applied, but in a manner that is
compliant with Section 409A. The manner in which the immediately preceding sentence shall be implemented shall be the subject of good faith negotiations of the parties. The parties also agree that in no event shall any payment required to be
made pursuant to this Agreement that is considered deferred compensation within the meaning of Section 409A be accelerated in violation of Code Section 409A. 

  
 9 

 (i) Notwithstanding anything in this Agreement to the contrary, in the event it shall be
determined that (i) any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by Employer (or its successor) or any entity which effectuates a Change in Control (or any of its affiliated
entities) to or for the benefit of Employee (whether pursuant to the terms of this Agreement or otherwise) (the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), and (ii) the reduction of the amounts payable to Employee under this Agreement to the maximum amount that could be paid to Employee without giving rise to the Excise Tax (the “Safe Harbor Cap”) would provide
Employee with a greater after-tax amount than if such amounts were not reduced, then the amounts payable to Employee under this Agreement shall be reduced (but not below zero) to the Safe Harbor Cap. Unless Employer (or its successor) and Employee
agree otherwise, the reduction of the amounts payable hereunder, if applicable, shall be made to the extent necessary in the following order: (i) first, any such Payments that became fully vested prior to the Change in Control and that pursuant
to paragraph (b) of Treas. Reg. § 1.280G-1, Q/A 24, are treated as contingent compensation payments solely by reason of the acceleration of their originally scheduled dates of payment will be reduced, by cancellation of the acceleration of
their vesting; (ii) second, any severance payments or benefits, performance-based cash or equity incentive awards, or other contingent compensation payments the full amounts of which are treated as contingent on the Change in Control where
paragraphs (b) and (c) of Treas. Reg. § 1.280G-1, Q/A 24 do not apply, will be reduced; and (iii) third, any cash or equity incentive awards, or nonqualified deferred compensation amounts, that vest solely based on
Employee’s continued service with Employer (or its successor), and that pursuant to paragraph (c) of Treas. Reg. § 1.280G-1, Q/A 24, are treated as contingent on the Change in Control because they become vested as a result of the
Change in Control, will be reduced, first by cancellation of any acceleration of their originally scheduled dates of payment (if payment with respect to such items is not treated as automatically occurring upon the vesting of such items for purposes
of Section 280G of the Code) and then, if necessary, by canceling the acceleration of their vesting. In each case, the amounts of the contingent compensation payments will be reduced in the inverse order of their originally scheduled dates of
payment or vesting, as applicable, and will be so reduced only to the extent necessary to achieve the required reduction. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments)
shall be reduced. If the reduction of the amounts payable hereunder would not result in a greater after-tax result to Employee, no amounts payable under this Agreement shall be reduced pursuant to this provision. 

(A) All determinations required to be made under this Section 7(i) shall be made by the public accounting firm that is retained by
Employer (or its successor) as of the date immediately prior to the Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to Employer (or its successor) and Employee within fifteen
(15) business days of the receipt of notice from Employer (or its successor) or Employee that there has been a Payment, or such earlier time as is requested by Employer (or its successor). Notwithstanding the foregoing, in the event
(i) the Board shall determine prior to the Change in Control that the Accounting Firm is precluded from performing such services under applicable auditor independence rules or (ii) the Audit Committee of the Board determines that it does
not want the Accounting Firm to perform such services because of auditor independence concerns or (iii) the Accounting Firm is serving as accountant or auditor for the person(s) effecting the Change in Control, the Board shall appoint another
nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees, costs and expenses (including, but not limited to, the costs of
retaining experts) of the Accounting Firm shall be borne by Employer (or its successor). If payments are reduced to the Safe 

  
 10 

 
Harbor Cap or the Accounting Firm determines that no Excise Tax is payable by Employee without a reduction in payments, the Accounting Firm shall provide a written opinion to Employee to such
effect, that Employee is not required to report any Excise Tax on Employee’s federal income tax return, and that the failure to report the Excise Tax, if any, on Employee’s applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The determination by the Accounting Firm shall be binding upon Employer (or its successor) and Employee (except as provided in Section 7(i)(B) below). 

(B) If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”)
proceeding, which has been finally and conclusively resolved, that Payments have been made to, or provided for the benefit of, Employee by Employer (or its successor), which are in excess of the limitations provided in this Section 7(i)
(referred to hereinafter as an “Excess Payment”), Employee shall repay the Excess Payment to Employer (or its successor) on demand, together with interest on the Excess Payment at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of Employee’s receipt of such Excess Payment until the date of such repayment. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the determination,
it is possible that Payments which will not have been made by Employer (or its successor) should have been made (an “Underpayment”), consistent with the calculations required to be made under this Section 7(i). In the event
that it is determined (i) by the Accounting Firm, Employer (or its successor) (which shall include the position taken by Employer (or its successor), or together with their consolidated group, on their federal income tax returns) or the IRS or
(ii) pursuant to a determination by a court, that an Underpayment has occurred, Employer (or its successor) shall pay an amount equal to such Underpayment to Employee within ten (10) days of such determination together with interest on
such amount at the applicable federal rate from the date such amount would have been paid to Employee until the date of payment. Employee shall cooperate, to the extent Employee’s expenses are reimbursed by Employer (or its successor), with any
reasonable requests by Employer (or its successor) in connection with any contests or disputes with the IRS in connection with the Excise Tax or the determination of the Excess Payment. Notwithstanding the foregoing, in the event that amounts
payable under this Agreement were reduced pursuant to Section 7(i) and the value of stock options is subsequently re-determined by the Accounting Firm within the context of Treasury Regulation §1.280G-1 Q/A 33 that reduces the value of the
Payments attributable to such options, Employer (or its successor) shall promptly pay to Employee any amounts payable under this Agreement that were not previously paid solely as a result of Section 7(i), subject to the Safe Harbor Cap.

 (j) To the extent required by law or by any policy, plan or agreement (as each may be in effect from time to time) of
Employer, Employer may require Employee to repay to Employer any bonus or other incentive-based or equity-based compensation paid to Employee and to comply with any equity retention policy, stock ownership guidelines or similar guidelines or
policies as may be established by Employer, and Employee hereby expressly agrees to comply with any such requirements. 
 8.
Best Efforts of Employee. Employee agrees that he will at all times during the Term faithfully, industriously and to the best of his ability, experience and talents perform all the duties that may be required of him pursuant to the express
and implicit terms hereof to the reasonable satisfaction of Employer, commensurate with his position. Such duties shall be rendered at such place as Employer designates and Employee acknowledges that he may be required to travel as shall reasonably
be required to promote the business of Employer. To the extent reasonably required by the duties assigned to him, Employee shall during the Term devote substantially all his professional 

  
 11 

 
time, attention, knowledge and skills to the business and interest of Employer, and Employer shall be entitled to all the benefits, profits and other issue arising from or incident to all work,
service and advice of Employee. During the Term, Employee shall not be interested, directly or indirectly, in any manner as partner, manager, officer, director, shareholder, member, adviser, consultant, employee or in any other capacity in any other
business; provided, that nothing herein contained shall be deemed to prevent or limit the right of Employee to beneficially own less than 1% of the stock of a corporation traded on a national securities exchange (including, without limitation, the
NASDAQ Stock Market) as long as such passive investment does not interfere with or conflict with the performance of services to be rendered hereunder. 
 9. Miscellaneous. 
 (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina, without regard to conflicts of law principles thereof. 
 (b) This
Agreement constitutes the entire agreement between Employee and Employer with respect to the subject matter hereof and supersedes in their entirety any and all prior oral or written agreements, understandings or arrangements between Employee and
Employer or any of its affiliates relating to the terms of Employee’s employment by Employer; provided that (i) notwithstanding the foregoing, the Proprietary Information, Inventions and Non-Competition Agreement dated October 1, 2007
between Employee and Employer (the “PIIN Agreement”), the Retention Award Agreement dated October 10, 2012 between Employee and Employer and all written agreements evidencing stock options granted prior to the Effective Date by
Employer to Employee shall continue in full force and effect in accordance with their respective terms and (ii) to the extent of any conflict between the PIIN Agreement and this Agreement, this Agreement shall control from and after the
Effective Date. Except as provided in the preceding proviso, any and all such agreements, understandings and arrangements are hereby terminated and of no force or effect and Employee hereby expressly disclaims any rights under any and all such
agreements, understandings and arrangements. This Agreement may not be amended or terminated except by an agreement in writing signed by both parties or, for clarity in the case of termination, as provided in Section 6 or Section 7.

 (c) This Agreement may be executed in two counterparts, each of which shall be deemed and original and both of which, taken
together, shall constitute one and the same instrument. 
 (d) Any notice or other communication required or permitted under
this Agreement shall be effective only if it is in writing and delivered in person or by nationally recognized overnight courier service or deposited in the mails, postage prepaid, return receipt requested, addressed as follows: 

To Employer: 

Targacept, Inc. 

100 North Main Street, Suite 1510 
 Winston-Salem, North Carolina 27101 
 Attn: Chief Executive Officer 

Attn: General Counsel 

  
 12 

 To Employee: 
 David A. Hosford 
 3412 Cottonwood Drive 

Durham, North Carolina 27707 

Notices given in person or by overnight courier service shall be deemed given when delivered in person or the day after delivery to the courier addressed
to the address required by this Section 9(d), and notices given by mail shall be deemed given three (3) days after deposit in the mails. Either party may designate by written notice to the other party in accordance herewith any other
address to which notices addressed to such designating party shall be sent. 
 (e) The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. It is understood and agreed that no failure or delay by Employer or Employee in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

 (f) This Agreement may not be assigned by Employee without the written consent of Employer. This Agreement shall be binding
on any heirs, representatives, successors or assigns of either party. 
 (g) For purposes of this Agreement, employment of
Employee by any affiliate of Employer shall be deemed to be employment by Employer hereunder, and a transfer of employment of Employee from one such affiliate to another shall not be deemed to be a termination of employment of Employee by Employer
or a cessation of the Term, it being the intention of the parties hereto that employment of Employee by any affiliate of Employer shall be treated as employment by Employer and that the provisions of this Agreement shall continue to be fully
applicable following any such transfer. 
 (h) The respective rights and obligations of the parties hereunder (including,
without limitation, under Section 7(d)) shall survive any termination of this Agreement or Employee’s employment with Employer to the extent necessary to preserve such rights and obligations for their stated durations. 

(i) In the event that it shall become necessary for either party to retain the services of an attorney to enforce any terms under this
Agreement, the prevailing party, in addition to all other rights and remedies hereunder or as provided by law, shall be entitled to reasonable attorneys’ fees and costs of suit. 

(j) Except as otherwise provided in this Section 9(j), any controversy or claim arising out of or relating to this Agreement shall
be settled by arbitration in accordance with Commercial Arbitration Rules of the American Arbitration Association then in effect, and judgment upon the award rendered by the arbitration panel, which shall consist of three members, may be entered in
any court having jurisdiction. Any arbitration shall be held in Winston-Salem, North Carolina, unless otherwise agreed in writing by the parties. One arbitrator shall be selected by Employee, one arbitrator shall be selected by Employer, and the
third arbitrator shall be selected by the two arbitrators selected by Employee and Employer. Notwithstanding the foregoing, any claim 

  
 13 

 
or dispute with respect to or arising out of any of the covenants in Section 5 or the covenant in Section 8 related to Employee’s interest in other businesses, or any statutory or
common law claim of patent infringement, misappropriation of trade secrets, unfair competition, unfair or deceptive trade practices, interference with contract, or interference with actual or prospective economic or business relations, shall be
excluded from this Section 9(j). 
 [remainder of page intentionally left blank] 

  
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 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the respective
dates set forth below, effective as of the Effective Date. 
  

									
	Targacept, Inc.	 		 		 	
				
	By:	 	 /s/ Stephen A. Hill
	 		 	 /s/ David A. Hosford

	Name:	 	 S.A. Hill
	 		 	David A. Hosford, M.D., Ph.D.
	Title:	 	 CEO
	 		 		 	
					
	Date:	 	 6/28/13
	 		 	Date:	 	 25 June 2013

  
 15

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00218-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00218-of-00352.parquet"}]]