AMENDED AND RESTATED LICENSE AGREEMENT

1.1

“Annual License Fee” shall mean [********] , and “Annual Rights Fee” means [********] .

1.2

“Competition” shall, with respect to any Licensed Product, be deemed to exist in a particular country for and after the first calendar quarter in which [********] .

1.3

“Competitive Product” shall mean, with respect to any Licensed Product, any pharmaceutical product containing an active ingredient that is the same compound as a Named Compound contained in or comprising such Licensed Product, or any analog, salt, solvate, prodrug form, inclusion complex or metabolite thereof, that [********] .

1.4

“Confidential Information” shall mean, subject to Paragraph 15.3, information that is confidential, proprietary or otherwise not generally available to the public.

1.5

“Effective Date” shall mean the date so identified above in the preamble to this Agreement.

1.6

“Improvement” shall mean, with respect to any Licensed Product, technology that [********] .

1.7

“Licensed Process” shall mean any process that relates to a Named Compound and infringes or would infringe, in whole or in part, a Valid Claim contained in the Patent Rights.

1.8

“Licensed Product” shall mean any product or part thereof containing or comprising a Named Compound that:

(a)

infringes or would infringe, in whole or in part, a Valid Claim contained in the Patent Rights in the country in which such product or part thereof is made, used, leased or sold; or

(b)

is made by a process that is a Licensed Process in the country in which such product is made, used or sold.

1.9

“LICENSEE” shall include, in addition to Targacept, Inc.: a related company of Targacept, Inc., the voting stock of which is, directly or indirectly, at least fifty percent (50%) owned or controlled by Targacept, Inc.; an organization which directly or indirectly controls more than fifty percent (50%) of the voting stock of Targacept, Inc.; and an organization, the majority ownership of which is, directly or indirectly, common to the ownership of Targacept, Inc.. References in this Paragraph 1.9 to “voting stock” shall mean capital stock entitled to vote in the election of the board of directors or the analogous body of a noncorporate entity.

1.10

“Losses” shall mean all claims and expenses, including reasonable attorneys’ fees, actually incurred.

1.11

“Milestones” shall mean events defined in Appendix B .

1.12

“Named Compounds” shall mean [********] .

1.13

“NDA Filing Date” shall mean the date on which LICENSEE (or its sublicensee or collaborative partner) files its first New Drug Application (or its equivalent) with the United States Food and Drug Administration or any comparable foreign regulatory authority for the use of a Licensed Product to treat attention deficit hyperactivity disorder and/or any other neuropsychiatric disease or disorder in any country.

1.14

“Net Sales” shall mean [********] .

1.15

“Option Invention” shall mean any discovery, compound, improvement, invention, idea, process or technique, whether or not patentable, that (i) is made, conceived or first reduced to practice by RESEARCH FOUNDATION and (ii) without regard to any rights reserved under Paragraph 2.2, cannot reasonably be practiced without infringing the Patent Rights licensed to LICENSEE hereunder.

1.16

“Patent Rights” shall mean, collectively, (i) the patents and patent applications listed on Appendix A , (ii) all patents that issue from patent applications listed on Appendix A and all reexaminations, reissues, revisions, substitutes, renewals or extensions thereof, and (iii) all other United States and foreign patents that issue from applications that claim priority to patents and patent applications listed on Appendix A , including, without limitation, continuation applications, continuation-in-part applications, divisional applications, substitute applications, reissue applications or requests for examination and foreign applications of any of the foregoing.

1.17

“Special Issue Dispute” shall mean a dispute between the parties as to whether (i) LICENSEE is meeting its diligence obligation hereunder or (ii) a condition that would give rise to a royalty reduction under Paragraph 4.1(b)(i) or 4.1(c) has occurred or been met.

1.18

“Sublicense Fees” shall mean any fees (including the fair market value of any consideration paid other than in cash) received by LICENSEE for a sublicense of Patent Rights, excluding (i) running royalties on the sale or lease of Licensed Products, (ii) payments specifically allocated to research and development for, or to the manufacture or supply of, a Licensed Product or Licensed Process, (iii) amounts received by LICENSEE that it is required to repay (e.g., a loan) and (iv) payments received in exchange for securities of LICENSEE.

1.19

“Substantial LICENSEE IP Rights” shall mean any issued patent or pending patent application owned or licensed by LICENSEE that claims an Improvement, but excluding Improvements for which both LICENSEE and RESEARCH FOUNDATION provided independent inventive contribution.

1.20

“Territory” shall mean the world.

1.21

“Valid Claim” shall mean: (i) any claim of an issued patent that has not expired and that has not been held invalid or unenforceable by decision of a court or other governmental agency of competent jurisdiction or been admitted to be invalid through reissue, disclaimer or otherwise; or (ii) any claim of a pending patent application that has not expired or become canceled, abandoned or otherwise disallowed.

2.1

(a) RESEARCH FOUNDATION hereby grants to LICENSEE the perpetual, exclusive right and license under the Patent Rights to research, develop, make, have made, use, market, distribute, lease, sell, import and export Licensed Products and Licensed Processes for any and all indications in the Territory, with the right to practice all or any portion of the foregoing right and license through subcontractors which, unless specifically sublicensed hereunder, shall not be considered sublicensees hereunder.

2.2

RESEARCH FOUNDATION reserves to the University the right to practice under the Patent Rights solely for the University’s internal research and education purposes; provided that the foregoing rights shall be expressly subject to RESEARCH FOUNDATION’s obligations pursuant to Paragraph 15.

2.3

Notwithstanding anything herein to the contrary, in no event shall either RESEARCH FOUNDATION or University perform research sponsored by, or for the benefit of, a third party for-profit entity where such research, if performed by such third party for-profit entity, would infringe or would be reasonably likely to infringe the Patent Rights licensed to LICENSEE hereunder.

2.4

The license granted hereunder shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology except as specifically set forth herein.

2.5

LICENSEE may grant exclusive or nonexclusive sublicenses to third-party sublicensees with respect to all or any portion of the license granted to LICENSEE hereunder only with the approval of RESEARCH FOUNDATION, which shall: (i) be given unless RESEARCH FOUNDATION reasonably believes in good faith that the proposed sublicense will result in LICENSEE’s inability to fulfill its obligations hereunder; (ii) otherwise not be unreasonably withheld or delayed; and (iii) be deemed given unless written notice to the contrary is received by LICENSEE within thirty (30) days after written notice requesting approval is received by RESEARCH FOUNDATION. RESEARCH FOUNDATION shall, notwithstanding the period provided in this Paragraph 2.4, use good faith efforts to respond to LICENSEE’S written notice as promptly as reasonably practicable within such period.

2.6

LICENSEE agrees to forward to RESEARCH FOUNDATION a copy of any and all fully executed sublicense agreements contemplated by Paragraph 2.4. At the request of RESEARCH FOUNDATION, LICENSEE shall also provide copies of all distribution agreements and other such agreements relative to the Licensed Products or involving rights granted to LICENSEE under the agreement.

2.7

Termination of the license granted to LICENSEE in this Agreement shall terminate all sublicenses which may have been granted by LICENSEE; provided that any sublicensee may elect to continue its sublicense by advising RESEARCH

FOUNDATION in writing, within (60) sixty days of the sublicensee’s receipt of written notice of such termination from RESEARCH FOUNDATION, of its election and its agreement to assume all of the obligations to RESEARCH FOUNDATION (including obligations for payment) contained in this Agreement. Any sublicense granted by LICENSEE shall contain provisions corresponding to those of this paragraph respecting termination and the conditions of continuance of sublicenses.

2.8

Except as otherwise provided in a research or other written agreement between the parties, each invention, discovery, proprietary development, data and information, in any medium or manifestation, including any method, process, composition of matter, apparatus, device, system, product, article of manufacture or appliance made or developed after the Effective Date, and all intellectual property rights relating thereto, shall be owned exclusively by the party making or developing it, without any accounting, compensation or other obligation hereunder to the other party.

3.1

LICENSEE shall use commercially reasonable efforts (either alone or through research collaborations or alliances with research organizations, pharmaceutical companies or other third parties) to market and sell, or to develop, one or more Licensed Products or Licensed Processes through a diligent program for exploitation of the Patent Rights, and LICENSEE’s failure to use such efforts shall be grounds for RESEARCH FOUNDATION to terminate this Agreement pursuant to Paragraph 13.3. Without limiting the generality of the foregoing, until the NDA Filing Date, LICENSEE shall: (i) spend a minimum of [********] to conduct research and development of one or more Licensed Products; provided that, for the avoidance of doubt, any or all of such amount may [********] ; and (ii) deliver to RESEARCH FOUNDATION, at least annually, a brief report summarizing its research and development activities completed since the last report, research and development activities currently in process, planned future research and development activities and research and development work being performed by third parties. If RESEARCH FOUNDATION believes LICENSEE is failing to comply with its obligations under this Paragraph 3.1, RESEARCH FOUNDATION may send notice to the LICENSEE asserting such belief and the basis therefor. LICENSEE shall have sixty (60) days from its receipt of such notice either to (i) commence compliance with its obligations under this Paragraph 3.1 to RESEARCH FOUNDATION’s reasonable satisfaction or (ii) send notice to RESEARCH FOUNDATION requesting that such issue be resolved in accordance with Article XII, in which case the procedures set forth in Article XII shall be followed.

3.2

LICENSEE will use commercially reasonable efforts to effect the NDA Filing Date on or before December 31, 2012; provided that the parties acknowledge that (i) the foregoing target is expressly subject to significant scientific, clinical and

regulatory uncertainties and (ii) failure to meet such target shall not constitute a breach of this Agreement or entitle RESEARCH FOUNDATION to terminate this Agreement if SPONSOR is in compliance with Paragraph 3.1, but shall entitle RESEARCH FOUNDATION, upon sixty (60) days written notice to LICENSEE, to make the license granted in Paragraph 2.1(a) nonexclusive.

3.3

LICENSEE may, but expressly without creating any binding obligation, (i) consider University to conduct or, if applicable, to coordinate particular pre-clinical or early-stage clinical research in furtherance of LICENSEE’s diligence obligations hereunder and (ii) communicate with University researchers from time to time regarding the research and development of one or more Licensed Products hereunder.

4.1

For the rights, privileges and license granted hereunder, LICENSEE shall pay to RESEARCH FOUNDATION:

(a)

Milestone payments payable, if at all, at the times and upon achievement of the Milestones set forth on Appendix B .

(b)

Running royalties equal to the Applicable Royalty Amount. The “Applicable Royalty Amount” shall be [********] of Net Sales of Licensed Products in any country; provided that, with respect to a particular Licensed Product in a particular country: