Exhibit 4.2(b)
Amendment No. 1 to
Third Amended and Restated
Investor Rights Agreement
THIS AMENDMENT NO. 1 to the Third
Amended and Restated Investor Rights Agreement dated December 6,
2004 (this “ Amendment ”) amends the Third
Amended and Restated Investor Rights Agreement dated May 12, 2004
(the “ Future IRA ”) by and among Targacept,
Inc. (the “ Company ”) and the holders of shares
of the Company’s Series C Convertible Preferred Stock, $0.001
par value per share (“ Series C Stock ”), Series
B Convertible Preferred Stock, $0.001 par value per share (“
Series B Stock ”), or Series A Convertible Preferred
Stock, $0.001 par value per share (“ Series A Stock
” and, together with the Series C Stock and Series B Stock,
“ Preferred Stock ”) party thereto. Capitalized
terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Future IRA.
R E C I T A L S:
WHEREAS, the Future IRA was entered
into in contemplation of an initial public offering of the
Company’s common stock in order to amend, effective as of the
closing of such initial public offering, the Company’s Second
Amended and Restated Investor Rights Agreement dated November 26,
2002, as amended (the “ Current IRA ”), which is
currently in effect; and
WHEREAS, by its terms, the Future
IRA will not become effective or affect the Current IRA unless and
until the prospective initial public offering is completed and will
not become effective at all if such initial public offering is not
completed on or before December 31, 2004 (the “ Trigger
Date ”); and
WHEREAS, Section 3 of the Future IRA
provides that the Future IRA may be amended only with the prior
written consent of the Company and the holders of a majority of the
outstanding Series A Registrable Securities and Series B
Registrable Securities and at least 65% of the outstanding Series C
Registrable Securities (collectively, the “ Required
Investors ”); and
WHEREAS, the prospective initial
public offering may not be completed on or before the Trigger Date,
and the Company and the undersigned holders of Preferred Stock,
constituting the Required Investors, desire to amend the Future IRA
as provided herein to extend the Trigger Date;
NOW, THEREFORE, the undersigned
parties agree as follows:
1. Section 2.1(a) of the Future IRA
is hereby amended by deleting the first sentence in its entirety
and replacing it with the following:
“Subject to the other
provisions of this Section 2.1, Section 2.8 and Section 2.9, if, at
any time or from time to time following the Eligibility Date (but
in no event prior to (x) six months after the effective date of the
first registration of the Company’s securities on Form S-1 or
(y) three months after the effective date of any other registration
of the Company’s securities, other than registrations on Form
S-4, Form S-8 or comparable or successor forms and other than
registrations for the account of selling stockholders on Form S-3
or a comparable or successor form), the Company shall receive a
written
