Document:

Purchase Agreement

 Exhibit 10.1. 

EXECUTION VERSION 

PURCHASE AGREEMENT AND AMENDMENT TO LETTER AGREEMENT 

This PURCHASE AGREEMENT AND AMENDMENT TO LETTER AGREEMENT (this “Agreement”) is made and entered into as of
August 5, 2010 by and among AEP Industries Inc., a Delaware corporation (the “Company”), KSA Capital Management, LLC, a Delaware limited liability company acting as investment manager or adviser to Sellers (as defined below)
(“KSA Capital”), Daniel D. Khoshaba, managing member of KSA Capital (“Mr. Khoshaba”), KSA Capital, LLC, a Delaware limited liability company (“KSA Capital, LLC”), and KSA Capital Partners, LP, a Delaware
limited partnership, and KSA Capital Fund, Ltd. an exempted company incorporated and existing under the laws of the Cayman Islands (together, “Sellers”). 

WHEREAS, Sellers directly own shares of the issued and outstanding common stock, par value $0.01 per share, of the Company
(“Company Shares”); and 
 WHEREAS, Sellers desire to sell, and the Company desires to purchase, free and clear
of any and all Liens (as defined herein) an aggregate of 400,476 Company Shares with an aggregate purchase price as set forth herein; and 

WHEREAS, the Company, Mr. Khoshaba, KSA Capital, KSA Capital, LLC and the Sellers have previously entered into that certain Letter
Agreement, dated February 12, 2010 (the “Letter Agreement”), pursuant to which, among other things, the Company agreed to appoint Mr. Khoshaba as a director of the Company; and 

WHEREAS, the Company, Mr. Khoshaba, KSA Capital, KSA Capital, LLC and the Sellers wish to amend the Letter Agreement in certain
respects as set forth herein. 
 NOW, THEREFORE, in consideration of the foregoing premises and the covenants, agreements and
representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

 ARTICLE I 

PURCHASE AND SALE; CLOSING 

Section 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, Sellers agree to sell, convey,
assign, transfer and deliver to the Company, and the Company agrees to purchase from Sellers, 400,476 Company Shares (the “Purchased Shares”), free and clear of any and all mortgages, pledges, encumbrances, liens, security
interests, options, charges, claims, deeds of trust, deeds to secure debt, title retention agreements, rights of first refusal or offer, limitations on voting rights, proxies, voting agreements, limitations on transfer or other agreements or claims
of any kind or nature whatsoever (collectively, “Liens”). 
 Section 1.2 Purchase Price. Upon the terms
and subject to the conditions of this Agreement, in consideration of the aforesaid sale, conveyance, assignment, transfer and delivery to the Company of the Purchased Shares, the Company shall pay to Sellers (i) an aggregate of $10,916,625.25,
representing the number of Company Shares at prices per share set forth on Schedule A hereto, and (ii) $8,009.52, which represents the Sellers’ aggregate brokerage commission costs associated with purchasing such shares (the
“Costs”). 
 Section 1.3 Expenses. Except as expressly set forth in this Agreement, all fees and
expenses incurred by a party hereto in connection with the matters contemplated by this Agreement shall be borne by the party incurring such fee or expense, including without limitation the fees and expenses of any investment banks, attorneys,
accountants or other experts or advisors retained by such party. 
 Section 1.4 Closing. The consummation of the
transactions contemplated by this Agreement (the “Closing”) shall take place at 10:00 a.m., local time, on August 9, 2010 at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New
York, 10036, or at such other place, date or time as the parties may agree in writing (the “Closing Date”); provided that the Company’s obligations to consummate the transactions contemplated by this Agreement shall be
conditioned on (a) no condition existing on the Closing Date which would prevent the Company from drawing funds under the Amended and Restated Loan and Security Agreement with Wells Fargo Bank N.A., successor to Wachovia Bank N.A, as a lender
thereunder and as agent for the lenders thereunder, which was last amended and restated on October 30, 2008, as amended or otherwise modified through the date hereof, and (b) no injunction or other order, judgment, law, regulation, decree
or ruling or other legal restraint or prohibition having been issued, enacted or promulgated by a court or other governmental authority of competent jurisdiction that would have the effect of prohibiting or preventing the consummation of the
transactions contemplated hereunder. 
  

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 Section 1.5 Closing Deliveries. 

(a) At the Closing, in accordance with Section 1.2, the Company shall deliver or cause to be delivered to Sellers the following:

 (i) on the Closing Date, a cash amount equal to the sum of $10,916,625 and $8,009.52, by wire transfer of
immediately available funds to such account(s) as KSA Capital, on behalf of Sellers, has specified in writing prior to the Closing Date; and 

(b) At the Closing, Sellers shall deliver or cause to be delivered to the Company the following: 

(i) certificates representing the Purchased Shares, duly and validly endorsed or accompanied by stock powers duly and
validly executed in blank or appropriate evidence that the Purchased Shares have been transferred to an account of the Company and in each case sufficient to convey to the Company good, valid and marketable title in and to such Purchased Shares,
free and clear of any and all Liens; and 
 (ii) a letter, signed by Mr. Khoshaba, stating that he is
resigning from the Board of Directors of the Company (the “Board”) effective as of the Closing Date. 
 ARTICLE
II 
 COVENANTS 

Section 2.1 Standstill; Continuation of Letter Agreement Provisions. 

(a) During the period beginning on the date hereof and ending on the date of the Company’s 2011 Annual Meeting of Stockholders, or
any adjournment or postponement thereof (the “2011 Annual Meeting”), none of Sellers, KSA Capital, Mr. Khoshaba or any of their Affiliates shall acquire, offer or propose to acquire, or agree to acquire, directly or indirectly,
by purchase or otherwise, (i) additional Voting Securities (as defined in Section 5.3 of this Agreement), or (ii) direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) additional Voting
Securities. 
 (b) Notwithstanding Mr. Khoshaba’s resignation from the Board, the provisions of Paragraphs 4, 5 and 9
of the Letter Agreement related to KSA Capital, Mr. Khoshaba, KSA Capital, LLC, the Sellers and their Affiliates shall continue to apply to KSA Capital, Mr. Khoshaba, the Sellers, KSA Capital, LLC, and their Affiliates and to be in full
force and effect through the date of the 2011 Annual Meeting, as if Mr. Khoshaba were one of the Company’s nominees for director at the 2011 Annual Meeting and continued to serve on the Board through the date that is one day after the date
of the 2011 Annual Meeting. 
  

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 Section 2.2 Public Announcement; Public Filings. 

(a) Upon execution of this Agreement, the Company shall issue a press release (in substantially the form attached hereto as Exhibit
A). No party hereto nor any of its respective Affiliates shall issue any press release or make any public statement relating to the transactions contemplated hereby that is inconsistent with, or are otherwise contrary to, the statements in the
press release. 
 (b) Promptly following the date hereof, KSA Capital will cause to be filed with the Securities and Exchange
Commission an amendment to its Schedule 13D relating to the Company, as amended through July 28, 2010, disclosing entry into this Agreement. Prior to filing of the amendment, KSA Capital will provide the Company and its counsel a reasonable
opportunity to review and comment upon such amendment. Promptly after the date of this Agreement, Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba will file any reports required to be filed, which have not previously been filed, under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations thereunder. 

Section 2.3 Confidentiality. Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba shall not disclose and shall maintain
the confidentiality of (and shall cause their respective Affiliates, directors, officers and employees to not disclose and to maintain the confidentiality of) any non-public information which relates to the business, legal or financial affairs of
the Company (the “Confidential Information”). Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba shall use at least the same degree of care to safeguard and to prevent the disclosure, publication or dissemination of the
Confidential Information as they respectively employ to avoid unauthorized disclosure, publication or dissemination of their own information of a similar nature, but in no case less than reasonable care. Promptly after the date of this Agreement,
Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba will promptly return to the Company, or destroy, all hard copies of the Confidential Information and permanently erase or delete all electronic copies of the Confidential Information in
their or any of their Affiliate’s possession or control (and, upon the request of the Company, shall certify to the Company that such Confidential Information has either been returned or destroyed, erased or deleted, as the case may be). In the
event that a Seller, KSA Capital, KSA Capital, LLC or Mr. Khoshaba (or any Affiliate, director, officer or employee) is requested or required (by oral question, interrogatory, request for information or documents, subpoena, civil investigative
demand or similar process) to disclose any Confidential Information, Sellers, KSA Capital, KSA Capital, LLC or Mr. Khoshaba shall (a) notify the Company promptly so that the Company may seek a protective order or other appropriate remedy
and (b) cooperate with the Company in any effort the Company undertakes to obtain a protective order or other remedy. In the event that no 

 

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such protective order or other remedy is obtained, the applicable party shall disclose to the Person compelling disclosure only that portion of the Confidential Information which such party is
advised by counsel is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment is accorded the Confidential Information so disclosed. 

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF 

SELLERS, KSA CAPITAL, KSA CAPITAL, LLC AND MR. KHOSHABA 

Each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba hereby makes, jointly and severally with respect to each other such
party, the following representations and warranties to the Company: 
 Section 3.1 Existence; Authority. Each of Sellers,
KSA Capital, LLC and KSA Capital is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba has all requisite competence,
power and authority to execute and deliver this Agreement, to perform its or his obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated hereby. 
 Section 3.2 Enforceability. This
Agreement has been duly and validly executed and delivered by each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba and, assuming due and valid authorization, execution and delivery by the Company, this Agreement constitutes, a legal,
valid and binding obligation of each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba, as applicable, enforceable against each such Person in accordance with its terms, except as such enforceability may be affected by bankruptcy,
insolvency, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles. 

Section 3.3 Ownership. Each Seller is the sole record and beneficial owner of the Purchased Shares set forth opposite its name on
Schedule B hereto, free and clear of any and all Liens. Each Seller has full power and authority to transfer full legal ownership of its respective Purchased Shares to the Company, and no Seller is required to obtain the approval of any
Person or governmental agency or organization to effect the sale of the Purchased Shares. The entire direct or indirect beneficial ownership of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba or any of their respective Affiliates in the
Company is 1,355,743 Company Shares, prior to giving effect to the sale of the Purchased Shares. 
 Section 3.4 Purchased
Shares. The number of Shares and prices per Shares set forth on Schedule A hereto accurately reflect the number of Shares and 

 

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purchase price per Share that the Sellers paid for the Purchased Shares. The Costs represent brokerage commissions paid by the Seller in connection with purchasing the Purchased Shares.

 Section 3.5 Good Title Conveyed. The stock certificates and stock powers executed and delivered by Sellers at the
Closing or book entry transfer instructions given by Sellers will be valid and binding obligations of Sellers, enforceable in accordance with their respective terms, and effectively vest in the Company good, valid and marketable title to all
Purchased Shares, free and clear of any and all Liens. 
 Section 3.6 Absence of Litigation. There is no suit, action,
investigation or proceeding pending or, to the knowledge of any Seller, KSA Capital, KSA Capital, LLC or Mr. Khoshaba, threatened against such party that could impair the ability of any of Sellers, KSA Capital, KSA Capital, LLC or
Mr. Khoshaba to perform its obligations hereunder or to consummate the transactions contemplated hereby. 
 Section 3.7
Other Acknowledgments. 
 (a) Each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba hereby represents and
acknowledges that it or he is a sophisticated investor and that it or he knows that the Company may have provided such Person with material Confidential Information, or refrained from providing such Person with material Confidential Information,
concerning the Company and its condition (financial and otherwise), results of operations, businesses, properties, plans and prospects and that such information could be material to Sellers’ decision to sell the Purchased Shares or otherwise
materially adverse to Sellers’ interests. Each of Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba acknowledges and agrees that the Company shall have no obligation to disclose to it or him any such information and hereby waives and
releases, to the fullest extent permitted by law, any and all claims and causes of action it has or may have against the Company and its Affiliates, officers, directors, employees, agents and representatives based upon, relating to or arising out of
the disclosure or nondisclosure of such information or the sale of the Purchased Shares hereunder. 
 (b) Each of Sellers, KSA
Capital, KSA Capital, LLC and Mr. Khoshaba further represents that it or he has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the sale of the Purchased Shares and has,
independently and without reliance upon the Company, made its or his own analysis and decision to sell the Purchased Shares. With respect to legal, tax, accounting, financial and other considerations involved in the transactions contemplated by this
Agreement, including the sale of the Purchased Shares, none of Sellers, KSA Capital, KSA Capital, LLC or Mr. Khoshaba is relying on the Company (or any agent or representative thereof). Each of Sellers, KSA Capital, KSA Capital, LLC and
Mr. Khoshaba has carefully considered and, to the extent it or he believes such discussion necessary, discussed with professional legal, tax, accounting, financial and other advisors the suitability of the transactions contemplated by this
Agreement, including the sale of the Purchased Shares. Each of Sellers, KSA Capital, KSA Capital, 
  

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LLC and Mr. Khoshaba acknowledges that neither the Company nor any of its directors, officers, subsidiaries or Affiliates has made or makes any representations or warranties, whether express
or implied, of any kind except as expressly set forth in this Agreement. 
 (c) Sellers, KSA Capital, KSA Capital, LLC and
Mr. Khoshaba are “accredited investors” as defined in Rule 501 promulgated under the Securities Act. The sale of the Purchased Shares by Sellers (i) was privately negotiated in an independent transaction and (ii) does not
violate any rules or regulations applicable to Sellers. 
 ARTICLE IV 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

The Company makes the following representations and warranties Sellers: 

Section 4.1 Existence; Authority. The Company is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby and has taken all necessary
corporate action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. 

Section 4.2 Enforceability. This Agreement has been duly and validly executed and delivered by the Company and, assuming due and
valid authorization, execution and delivery by Sellers, KSA Capital, KSA Capital, LLC and Mr. Khoshaba, as applicable, this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with
its terms, except as such enforceability may be affected by bankruptcy, insolvency, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles. 

Section 4.3 Absence of Litigation. There is no suit, action, investigation or proceeding pending or, to the knowledge of the
Company, threatened against such party that could impair the ability of the Company to perform its obligations hereunder or to consummate the transactions contemplated hereby. 

Section 4.4 Section 16 Matters. The Board has adopted a resolution to exempt the purchase and sale of the Purchased Shares,
as contemplated hereby, from Section 16(b) of the Exchange Act by virtue of Rule 16b-3(e) thereunder. 
  

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 ARTICLE V 

MISCELLANEOUS 

Section 5.1 Survival. Each of the representations, warranties, covenants, and agreements in this Agreement or pursuant hereto
shall survive the Closing. Notwithstanding any knowledge of facts determined or determinable by any party by investigation, each party shall have the right to fully rely on the representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or papers delivered in connection herewith. Each representation, warranty, covenant and agreement of the parties contained in this Agreement is independent of each other representation,
warranty, covenant and agreement. Except as expressly set forth in this Agreement, no party has made any representation warranty, covenant or agreement. 

Section 5.2 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly given if so given) by hand delivery, cable, telecopy or mail (registered or certified, postage prepaid, return receipt requested) to the respective parties hereto addressed as follows: 

If to the Company: 

AEP Industries Inc. 

125 Phillips Avenue 

South Hackensack, New Jersey 07606 

Attn: Paul Feeney 

Fax: (201) 807-6801 

With a copy (which shall not constitute notice) to: 

Skadden, Arps, Slate, Meagher & Flom LLP 

Four Times Square 

New York, New York 10036 

Attn: Richard J. Grossman 

         Sal Guerrera 

Fax: (212) 735-2000 

If to any Seller, KSA Capital, KSA Capital, LLC or Mr. Khoshaba: 

KSA Capital Management, LLC 

4 Essex Avenue, 4th Floor 

Bernardsville, NJ 07924 

Attn: Daniel D. Khoshaba 

Phone: (908) 766-3331 

Fax: (908) 766-4738 
  

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 With a copy (which shall not constitute notice) to: 

Seward & Kissel LLP 

One Battery Park Plaza 

New York, NY 10004 

Attn: David R. Mullé, Esq. 

Phone: (212) 574-1200 

Fax: (212) 480-8421 

Section 5.3 Certain Definitions. As used in this Agreement, (a) the term “Affiliate” shall have the meaning
set forth in Rule 12b-2 under the Exchange Act and shall include Persons who become Affiliates of any Person subsequent to the date hereof; (b) the term “Voting Securities” shall mean the Company Shares and any other securities
of the Company entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for, securities of the Company entitled to vote in the election of directors, whether or not subject to the passage of time
or other contingencies; (c) the Company, KSA Capital, KSA Capital, LLC, Mr. Khoshaba and each Seller will be referred to herein individually as a “party” and collectively as “parties;” and (d) the
term “Person” shall be interpreted broadly to include, among others, any individual, general or limited partnership, corporation, limited liability or unlimited liability company, joint venture, estate, trust, group, association or
other entity of any kind or structure 
 Section 5.4 Specific Performance. The Company, on the one hand, and Sellers, KSA
Capital, KSA Capital, LLC and Mr. Khoshaba, on the other hand, acknowledge and agree that the other would be irreparably injured by a breach of this Agreement and that money damages are an inadequate remedy for an actual or threatened breach of
this Agreement. Accordingly, the parties agree to the granting of specific performance of this Agreement and injunctive or other equitable relief as a remedy for any such breach or threatened breach, without proof of actual damages, and further
agree to waive any requirement for the securing or posting of any bond in connection with any such remedy. Such remedy shall not be deemed to be the exclusive remedy for a breach of this Agreement, but shall be in addition to all other remedies
available at law or equity. 
 Section 5.5 Third Parties. This Agreement is solely for the benefit of the parties hereto
and is not enforceable by any other Person. 
 Section 5.6 No Waiver. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party hereto to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 

 

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 Section 5.7 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable. The parties hereto further agree to replace such invalid or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the
purposes of such invalid or unenforceable provision. 
 Section 5.8 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, that, this Agreement (and any of the rights, interests or obligations of any party hereunder) may not be assigned by any party
without the prior written consent of the other parties hereto, such consent not to be unreasonably withheld. Any purported assignment of a party’s rights under this Agreement in violation of the preceding sentence shall be null and void.

 Section 5.9 Entire Agreement; Amendments. This Agreement (including any Schedules and Exhibits hereto) and the Letter
Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and, this Agreement and the Letter Agreement, as amended by this Agreement, supersede all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter hereof and, except as expressly set forth herein, is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. This Agreement
may be amended only by a written instrument duly executed by the parties hereto or their respective permitted successors or assigns. 

Section 5.10 Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. 
 Section 5.11 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to choice of law principles thereof that would cause the application of the laws of any other jurisdiction. 

Section 5.12 Submission to Jurisdiction. Each of the parties irrevocably submits to the exclusive jurisdiction and service and
venue in any federal or state court sitting in the State of Delaware for the purposes of any action, suit or proceeding arising out of or with respect to this Agreement. Each of the parties irrevocably and unconditionally waives any objections to
the laying of venue of any action, suit or proceeding relating to this Agreement in any federal or state court sitting in the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY. 

 

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 Section 5.13 Counterparts; Facsimile. This Agreement may be executed by the parties
hereto in separate counterparts (including by fax, .jpeg, .tiff and .pdf), each of which when so executed shall be an original, but all such counterparts shall together constitute one and the same instrument. 

Section 5.14 Further Assurances. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto agrees
to execute such additional documents, to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate or make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 

Section 5.15 Interpretation. Each of the parties hereto acknowledges that it has been represented by counsel of its choice
throughout all negotiations that have preceded the execution of this Agreement, and that it has executed this Agreement with the advice of such counsel. Each party hereto and its counsel cooperated and participated in the drafting and preparation of
this Agreement, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of
law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party hereto that drafted or prepared it is of no application and is hereby expressly waived by each of the parties, and any controversy
over interpretations of this Agreement shall be decided without regard to events of drafting or preparation. 
 [SIGNATURE PAGES
FOLLOW] 
  

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 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the day and year first written above. 
  

					
	AEP INDUSTRIES INC.
		
	By:	 	 /s/ Paul M. Feeney

		 	Name:	 	Paul M. Feeney
		 	Title:	 	Chief Financial Officer
	
	KSA CAPITAL MANAGEMENT, LLC
		
	By:	 	 /s/ Daniel D. Khoshaba

		 	Name:	 	Daniel D. Khoshaba
		 	Title:	 	Managing Member
	
	 /s/ Daniel D. Khoshaba

	Daniel D. Khoshaba

[Purchase Agreement] 

					
	KSA CAPITAL PARTNERS, LP
	By:	 	KSA Capital LLC, its General Partner
		
	By:	 	 /s/ Daniel D. Khoshaba

		 	Name:	 	Daniel D. Khoshaba
		 	Title:	 	Managing Member
	
	KSA CAPITAL FUND, LTD.
		
	By:	 	 /s/ Daniel D. Khoshaba

		 	Name:	 	Daniel D. Khoshaba
		 	Title:	 	Director
	
	KSA CAPITAL, LLC
		
	By:	 	 /s/ Daniel D. Khoshaba

		 	Name:	 	Daniel D. Khoshaba
		 	Title:	 	Managing Member

 [Purchase Agreement]

 SCHEDULE A 

Purchased Shares 
  

			
	 Number of Shares
	  	 Price per Share

	1,200	  	31.72
	1,800	  	31.46
	200	  	31.72
	300	  	35.10
	900	  	35.00
	300	  	34.90
	6,210	  	34.68
	300	  	34.95
	2,000	  	34.90
	1,800	  	34.98
	31,735	  	38.45
	2,900	  	34.05
	15,843	  	32.69
	3,400	  	32.99
	200	  	33.15
	1,200	  	30.62
	1,300	  	27.88
	100	  	28.05
	600	  	28.02
	300	  	26.36
	700	  	26.63
	500	  	26.82
	700	  	26.81
	14,068	  	27.00
	800	  	27.54
	15,569	  	27.96
	8,725	  	27.38
	16,168	  	27.06
	1,700	  	27.28
	15,568	  	27.34
	1,300	  	27.50
	1,400	  	27.54
	200	  	27.51
	900	  	29.10
	500	  	28.78
	100	  	28.85
	1,000	  	28.05

  

 A-1 

			
	 Number of Shares
	  	 Price per Share

	4,000	  	27.45
	500	  	27.07
	4,800	  	26.52
	22,068	  	25.11
	14,468	  	25.91
	14,968	  	26.94
	1,500	  	27.12
	1,300	  	26.99
	1,400	  	25.92
	400	  	26.28
	300	  	25.96
	16,100	  	24.39
	26,400	  	23.60
	3,300	  	24.10
	18,768	  	23.35
	3,500	  	23.42
	9,800	  	23.77
	22,600	  	25.08
	900	  	24.91
	1,900	  	26.11
	3,900	  	26.36
	200	  	25.63
	1,500	  	25.80
	2,200	  	25.31
	600	  	25.36
	9,600	  	24.07
	900	  	23.12
	9,400	  	23.93
	9,200	  	23.91
	800	  	24.79
	10,391	  	24.84
	19,927	  	24.91
	6,200	  	25.07
	900	  	25.95
	600	  	27.28
	2,700	  	28.27

  

 A-2 

 SCHEDULE B 

 

			
	 Name of Seller
	  	 Number of Purchased Shares

Beneficially Owned by Seller

	 KSA CAPITAL PARTNERS, LP
	  	166,374
	 KSA CAPITAL FUND, LTD.
	  	234,102

  

 866568-New York Server 4A - MSW 

B-1 

 EXHIBIT A 

AEP Industries Inc. Agrees to Repurchase Shares from KSA Capital Management, LLC 

Daniel Khoshaba Steps Down from the Board of Directors 

SOUTH HACKENSACK, N.J. and NEW YORK, N.Y., August 5, 2010. AEP Industries Inc. (Nasdaq: AEPI, the “Company”) and KSA Capital Management,
LLC (“KSA Capital”) today announced they have entered into an agreement whereby the Company will repurchase 400,476 shares of its common stock (or approximately 6.0% of the outstanding) from investment funds affiliated with KSA Capital in
a privately negotiated transaction at an aggregate purchase price of $10.92 million, or approximately $27.26 per share, plus brokerage commissions. The purchase price per share represents a discount of 4.8% to yesterday’s closing price of the
Company’s common stock. 
 The repurchase, which is expected to close in the next several days, will reduce KSA Capital’s beneficial
ownership of the Company’s common stock from approximately 20.3% to approximately 15.2% (after giving effect to the share repurchase). KSA Capital and its affiliates have agreed to continue their existing standstill restrictions, and to not
purchase additional shares of the Company, through the Company’s 2011 Annual Meeting of Stockholders. 
 The Company also announced that,
effective upon the purchase of KSA Capital’s shares, Mr. Daniel Khoshaba, the managing member of KSA Capital, will resign from the Board of Directors of the Company because he determined that his responsibilities to the investors in KSA
Capital may create a potential conflict with his responsibilities as a director of the Company. 
 Brendan Barba, Chairman and Chief Executive
Officer of the Company, commented, “Over the last several months, Mr. Khoshaba has been a valuable member of AEP Industries’ Board of Directors and we appreciate his contribution to the Company.” 

Daniel Khoshaba, the managing member of KSA Capital, commented, “KSA Capital believes in the long term value of AEP Industries and we are excited
about its future prospects.” 
 The Company’s Board of Directors authorized a $6.5 million increase to its previously-announced $10
million stock repurchase program to allow for the repurchase of shares from KSA Capital. After giving effect to the repurchase of KSA Capital’s shares and previous repurchases made under the stock repurchase program, the Company will have
repurchased approximately $15.7 million under the program. 
  

 866568-New York Server 4A - MSW 

EX A-1 

 AEP Industries Inc. manufactures, markets, and distributes an extensive range of plastic packaging products
for the consumer, industrial and agricultural markets. The Company has operations in the United States and Canada. 
 Except for historical
information contained herein, statements in this release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company’s actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume, resin availability,
new operating system, cash flow guidance and market conditions, including the continuing impacts of the U.S. recession and the global credit and financial crisis. Those and other risks are described in the Company’s annual report on Form 10-K
for the year ended October 31, 2009 and subsequent reports filed with or furnished to the Securities and Exchange Commission (SEC), copies of which are available from the SEC or may be obtained from the Company. Except as required by law, the
Company assumes no obligation to update the forward-looking statements, which are made as of the date hereof, even if new information becomes available in the future. 
  

 EX A-2Collaborative Research and License Agreement

 Exhibit 10.1 

[********] Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended. 
 AMENDMENT NO.
3 TO 
 COLLABORATIVE RESEARCH AND LICENSE AGREEMENT 

This Amendment No. 3 to Collaborative Research and License Agreement (this “Amendment”), effective as of the date
of signature of the last Party to sign below, amends the Collaborative Research and License Agreement entered into as of December 27, 2005 by and between AstraZeneca AB, a company limited by shares organized and existing under the laws of
Sweden (“AstraZeneca”), and Targacept, Inc., a Delaware (USA) corporation (“Targacept”), as amended by Amendment No. 1 dated November 10, 2006 and Amendment No. 2 effective July 8, 2009 (the
“Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Agreement. 

WHEREAS Targacept’s product candidate that it refers to as TC-5619 has previously become an Option Compound (i) for which the
Option Indication is CDS, (ii) for which AstraZeneca and Targacept agreed to an Option Compound Development Plan dated on or about November 5, 2007 (the “Original 5619 OCDP”) that provided for, among other things,
Targacept to conduct a Phase 2 clinical proof of concept study of TC-5619 in CDS and (iii) that has not yet been determined to be an Option Compound Candidate Drug, a Terminated Compound or an Unexercised Option Compound; 

WHEREAS AstraZeneca and Targacept intend to amend and restate the Original 5619 OCDP effective on or about the date of this Amendment to,
among other things: (i) modify various aspects of the Original 5619 OCDP as applied to CDS; (ii) provide for Targacept also to conduct and fund (A) a Phase 2 clinical proof of concept study of TC-5619 in ADHD (in adults) and
(B) various activities in preparation of a potential Phase 2 clinical proof of concept study of TC-5619 in AD; (iii) provide for AstraZeneca to conduct and fund various other activities in preparation of a potential Phase 2 clinical proof
of concept study of TC-5619 in AD; and (iv) provide for a potential Phase 2 clinical proof of concept study of TC-5619 in AD; and 

WHEREAS AstraZeneca and Targacept desire to amend, in accordance with Section 17.6 of the Agreement, various aspects of the
Agreement as applied to TC-5619. 
 NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good
and valuable consideration, AstraZeneca and Targacept, intending to be legally bound, hereby agree as follows: 
 1. The Agreement is hereby
amended by adding the following new Section 5.10.2(h). 
 “(h) Special TC-5619 Provisions. The following provisions shall apply
solely to TC-5619. Except as otherwise expressly provided in this Section 5.10.2(h), the terms and conditions of the Agreement as applied to TC-5619 and any TC-5619 Product shall remain in full force and effect; provided that, for clarity, in
the event of any conflict between this Section 5.10.2(h) and any other provision of this Agreement as applied to TC-5619 or any TC-5619 Product, this Section 5.10.2(h) shall control. 

 (i) Limited License Grant. Subject to the other terms of this Agreement, Targacept
shall, and hereby does, grant to AstraZeneca, conditional on and effective as of effectiveness of the amendment and restatement of the original Option Compound Development Plan for TC-5619 (as so amended and restated and as may be further amended
from time to time by written agreement of the Parties, the “Amended 5619 OCDP” and, the effective date of such amendment and restatement, the “Amended 5619 OCDP Date”), a co-exclusive (with Targacept and its
Affiliates), royalty-free, worldwide license, without the right to grant sublicenses, under Targacept Technology and Targacept Patent Rights, and Targacept’s interest in Joint Technology and Joint Patent Rights, in each case that would be
infringed by the conduct by AstraZeneca of (A) those activities identified in the Amended 5619 OCDP as enabling activities supporting development in AD (collectively, the “AD Enabling Activities”) to be conducted by or on
behalf of AstraZeneca (collectively, the “AZ AD Enabling Activities”) or (B) the potential Phase 2 clinical proof of concept study of TC-5619 in AD contemplated by the Amended 5619 OCDP (the “5619 AD POC
Study”) in the absence of a license, such license to: 
 (1) be solely to conduct, or have conducted, the AZ AD
Enabling Activities and the 5619 AD POC Study; and 
 (2) expire and be of no further force or effect upon the first to occur
of: 
 (x) the exercise by AstraZeneca of the POC Option for TC-5619 as permitted by this Section 5.10.2(h); 

(y) an agreement by the Parties that Targacept shall conduct the 5619 AD POC Study; 

(z) such time as a POC Option Period expires with the POC Option unexercised; provided that this clause (z) shall not apply in the
case of a Decision Trigger Notice provided under clause (z) of Section 5.10.2(h)(iii)(B)(1) if AstraZeneca provides a certification under Section 5.10.2(h)(iv)(A); or 

(aa) such time as AstraZeneca gives (or is deemed to have given) a certification to Targacept pursuant to Section 5.10.2(h)(iv)(C).

 For clarity: (I) the co-exclusivity granted by Targacept under this Section 5.10.2(h)(i) is limited to the sole purpose referenced
in clause (1) above and shall have no effect on Targacept’s ability to Exploit Targacept Technology, Targacept Patent Rights and Targacept’s interest in Joint Technology and Joint Patent Rights for any other purpose, to the extent
permitted by Section 8.6 and consistent with the exclusive and co-exclusive grants set forth in this Agreement; (II) this Section 5.10.2(h)(i) shall not affect the applicability of Section 8.1.2(b) in the event that AstraZeneca
elects to complete the Amended 5619 OCDP pursuant to, and to the extent permitted by, Section 5.10.2(b)(5); and (III) the [********] for, and the [********] with respect to, the 5619 AD POC Study are to be agreed upon by the
Parties as provided in Section 5.10.2(h)(v)(B). 
 (ii) Interplay with Section 5.10.2(c). It is acknowledged
and agreed that, solely for purposes of: 
 (A) clause (i) of Section 5.10.2(c)(1), the IND-Ready Notice for TC-5619
shall be deemed to have specified each of CDS and ADHD; and 
  

 2 

 (B) clause (i) of each of Section 5.10.2(c)(2) through Section 5.10.2(c)(5),
CDS shall be considered the Principal Indication for TC-5619; and 
 (C) clause (ii) of each of Section 5.10.2(c)(1)
through Section 5.10.2(c)(5), if and to the extent any such clause becomes applicable, the Principal Indication for TC-5619 and any TC-5619 Product shall be whichever one of CDS, ADHD or AD for which TC-5619 achieves Option Compound Proof of
Concept; provided that, if TC-5619 achieves Option Compound Proof of Concept for more than one of CDS, ADHD and AD, the Principal Indication shall be the Initial Principal Indication determined pursuant to clause (1) of
Section 5.10.2(h)(vii) (and such Principal Indication shall not change as a result of the application of any of clauses (2), (3) or (4) of Section 5.10.2(h)(vii)). 

(iii) Progress of Amended 5619 OCDP; POC Option. 

(A) For so long as either Party (the “Performing Party”) is performing activities under the Amended 5619 OCDP, the
Performing Party shall, subject to Section 5.10.2(h)(iii)(F): 
 (1) provide to the other Party on at least [********]
a written report that summarizes the status of all activities conducted by the Performing Party under the Amended 5619 OCDP, to the extent not summarized in a previous report, and the results achieved; 

(2) make available such additional information in its possession or control with respect to the activities that it conducts under the
Amended 5619 OCDP as may be reasonably requested by the other Party from time to time; and 
 (3) with respect to each of the
activities conducted by the Performing Party under the Amended 5619 OCDP, (x) within a reasonable time after completion of such activity, prepare or have prepared a final written report of the results of such activity and, within a reasonable
time after such report is prepared by or provided to the Performing Party, provide such report to the other Party and (y) make available to the other Party upon request the data generated in such activity at U.S. offices of Performing Party or
one of its Affiliates, the site of any Third Party contracted to perform such activity or another mutually acceptable location within a reasonable time after such data is finalized by or provided to the Performing Party. Notwithstanding the
reference to “final written report” in clause (x) of this Section 5.10.2(h)(iii)(A)(3), Targacept shall, after completion of each of the [********] included in the AD Enabling Activities (together, the “Enabling
Toxicology Studies”), provide AstraZeneca, within a reasonable time after Targacept’s receipt thereof, with (aa) an audited draft report (which audit has been performed by quality assurance personnel of Targacept or the contract
research organization(s) contracted by Targacept to conduct such Enabling Toxicology Study) of the outcome of such Enabling Toxicology Study (for each such Enabling Toxicology Study, the “Audited Enabling Toxicology Report”) and
(bb) a final written report of the outcome of such Enabling Toxicology Study (for each such Enabling Toxicology Study, the “Final Enabling Toxicology Report”). 

As of the Amended 5619 OCDP Date, clause (4) of Section 5.10.2(b)(3) shall cease to apply to TC-5619 and Section 5.10.2(h)(iii)(A) shall
apply to TC-5619 in its place; provided that, for clarity, it is the intent of Targacept and AstraZeneca that each provision of the Agreement that references clause (4) of Section 5.10.2(b)(3) (or Section 5.10.2(b)(3) and thereby
includes said clause (4)) shall be deemed also to reference Section 5.10.2(h)(iii)(A) as such provision applies to TC-5619, mutatis mutandis. 
  

 3 

 (B) Without limitation of Section 5.10.2(h)(iii)(A), Targacept shall provide
AstraZeneca with written notice (each, a “Decision Trigger Notice”) within a reasonable time following each of: 

(1) the first of (x) Targacept’s completion of the Phase 2 clinical proof of concept study of TC-5619 in CDS contemplated by
the Amended 5619 OCDP (the “5619 CDS POC Study”) if TC-5619 achieves Option Compound Proof of Concept for CDS, (y) Targacept’s completion of the Phase 2 clinical proof of concept study of TC-5619 in ADHD contemplated by
the Amended 5619 OCDP (the “5619 ADHD POC Study”) if TC-5619 achieves Option Compound Proof of Concept for ADHD, and (z) the latest of (I) Targacept’s completion of the 5619 CDS POC Study if TC-5619 does not achieve
Option Compound Proof of Concept for CDS, (II) Targacept’s completion of the 5619 ADHD POC Study if TC-5619 does not achieve Option Compound Proof of Concept for ADHD and (III) the earlier of (aa) the Parties’ completion of all of the AD
Enabling Activities (including the Enabling Toxicology Studies) and (bb) if at [********] the only AD Enabling Activities that have not yet been completed are one or more of the AZ AD Enabling Activities, [********] or [********]
thereafter on which the only AD Enabling Activities that have not yet been completed are one or more of the AZ AD Enabling Activities; and 

(2) if AstraZeneca provides a certification pursuant to Section 5.10.2(h)(iv)(A) and thereafter conducts and satisfies its
resulting obligation with respect to the 5619 AD POC Study (for clarity, under the circumstances described in Section 5.10.2(h)(iv) and not following the exercise by AstraZeneca of the POC Option for TC-5619), the completion of the 5619 AD POC
Study. 
 Each Decision Trigger Notice shall: (x) include a summary of the results of activities completed under the Amended 5619 OCDP as
of the date of such Decision Trigger Notice; (y) include a summary of the status of existing Patent Rights with respect to TC-5619, whether Controlled by Targacept or controlled by a Third Party, Known to Targacept; (z) include a
description of all license agreements regarding, and all other agreements relating to Targacept’s Control of (including any financial or other obligations with respect thereto), TC-5619; (aa) specify, with respect to a Decision Trigger Notice
in respect of the 5619 CDS POC Study, the 5619 ADHD POC Study or the 5619 AD POC Study, whether TC-5619 has achieved Option Compound Proof of Concept for CDS, ADHD or AD, as applicable; and (bb) with respect to a Decision Trigger Notice provided
under clause (z) of Section 5.10.2(h)(iii)(B)(1), if not already provided, include or be accompanied by, for each Enabling Toxicology Study, the Final Enabling Toxicology Report or, if not yet available, the Audited Enabling Toxicology
Report for each Enabling Toxicology Study. For clarity, each Decision Trigger Notice shall also constitute a POC Notice, except that a Decision Trigger Notice provided under clause (z) of Section 5.10.2(h)(iii)(B)(1): (I) shall not
constitute a POC Notice unless and until AstraZeneca provides a certification under Section 5.10.2(h)(iv)(B); and (II) shall when provided be treated as a POC Notice solely for purposes of Section 12.3, notwithstanding the foregoing clause
(I) and without regard to whether AstraZeneca subsequently provides a certification under Section 5.10.2(h)(iv)(B). 

(C) At such time as Targacept has given (1) the Decision Trigger Notice under Section 5.10.2(h)(iii)(B)(1) or (2) the
Decision Trigger Notice under Section 5.10.2(h)(iii)(B)(2), if 
  

 4 

 
any and if such Decision Trigger Notice specifies that TC-5619 has achieved Option Compound Proof of Concept for AD, AstraZeneca shall thereupon have the POC Option for TC-5619. It is understood
and agreed that (x) notwithstanding Section 5.10.2(d), the POC Option for TC-5619 shall arise solely under this Section 5.10.2(h)(iii) and, in the case of a Decision Trigger Notice provided under clause (z) of
Section 5.10.2(h)(iii)(B)(1), would arise without Option Compound Proof of Concept having been achieved and (y) in the case of a Decision Trigger Notice provided under Section 5.10.2(h)(iii)(B)(2), would arise for the second time.

 (D) The first and, unless Targacept provides a Decision Trigger Notice under Section 5.10.2(h)(iii)(B)(2) and such
Decision Trigger Notice specifies that TC-5619 has achieved Option Compound Proof of Concept for AD, only POC Option Period for TC-5619 shall expire, subject to the last paragraph of this clause (D), on: 

(1) the latest of: 

(x) [********] following the date on which the Decision Trigger Notice is delivered to AstraZeneca; 

(y) [********] following the date on which AstraZeneca has been provided for each of the Enabling Toxicology Studies with the
Audited Enabling Toxicology Report; and 
 (z) [********] following the date on which AstraZeneca has been provided for
each of the Enabling Toxicology Studies with the Final Enabling Toxicology Report; or 
 (2) such other date, if any, as the
Parties may agree in writing 
 (such expiration date, the “5619 Option Primary Expiration Date”). 

If Targacept provides a Decision Trigger Notice under Section 5.10.2(h)(iii)(B)(2) and such Decision Trigger Notice specifies that TC-5619 has
achieved Option Compound Proof of Concept for AD, there shall be a second POC Option Period for TC-5619, which shall expire on the later of [********] following the date on which such Decision Trigger Notice is delivered to AstraZeneca,
subject to the last paragraph of this clause (D), or such other date, if any, as the Parties may agree in writing. 
 Notwithstanding the
foregoing, if AstraZeneca requests further information relating to TC-5619 as permitted by Section 5.10.2(h)(iii)(E) and all such information is not provided within [********] of such request, then the then-operative POC Option Period
for TC-5619 shall be extended for any such delay in responding to such request (for example, if AstraZeneca requests certain information and that information is not completely provided until [********] after the request, then the
then-operative POC Option Period would be extended by [********]). 
 (E) Following receipt of each Decision Trigger
Notice (a maximum of two), AstraZeneca shall notify Targacept if it desires to conduct due diligence at Targacept’s offices with respect to TC-5619 and, if so, the Business Day(s) on which it will do so during normal business hours; provided
that such date(s) shall be at least [********] following the date of Targacept’s 
  

 5 

 
receipt of such notice from AstraZeneca. Without limiting the foregoing but subject to Section 5.10.2(h)(iii)(F), Targacept shall: (A) provide to AstraZeneca for review at
Targacept’s offices during normal business hours in a reasonable and prompt manner such data, documentation and other information in Targacept’s possession or control regarding TC-5619, including the activities conducted pursuant to the
Amended 5619 OCDP and the results achieved, as AstraZeneca reasonably requests (provided such request is made at least [********] before the expiration of the then-operative POC Option Period) for purposes of evaluating the POC Option for
TC-5619 (including true, complete and correct copies of all license agreements (with financial terms redacted to the extent AstraZeneca has no responsibility therefor) regarding, and other agreements relating to Targacept’s Control of
(including any financial or other obligations with respect thereto), TC-5619 and applications for Patent Rights, results of freedom to operate analyses and other information with respect to the intellectual property status of TC-5619; provided that
Targacept shall not be required to provide privileged information with respect to such intellectual property status unless and until procedures reasonably acceptable to Targacept are in place to protect such privilege); and (B) respond in a
prompt and reasonable manner to all reasonable queries raised by AstraZeneca in connection with its evaluation of such POC Option. 

(F) For clarity, in no event will either Performing Party be required by any provision of this Section 5.10.2(h)(iii) to amend or
modify, suspend or terminate prior to the planned conclusion of, unblind, obtain or produce interim results from, or prepare or have prepared any written report regarding interim results of any study or activity; provided, however, that nothing in
this Section 5.10.2(h)(iii)(F) is intended to limit or restrict: (1) a Party’s right to request of a Performing Party or such Performing Party’s obligation to provide or make available, as the context requires under this
Section 5.10.2(h)(iii), to the other Party interim results from any study or activity or written reports with respect thereto that the Performing Party has in its possession and control, if any; or (2) AstraZeneca’s right to request
or Targacept’s obligation to provide, written reports filed by Targacept with the applicable Regulatory Authority(ies) for any study or activity for which Targacept is the Performing Party, even if such study or activity is incomplete.

 (G) If AstraZeneca does not agree with Targacept’s determination, as specified in the POC Notice, as to whether
(1) TC-5619 has or has not achieved Option Compound Proof of Concept for CDS, ADHD or AD, as applicable, or (2) the Enabling Toxicology Studies have actually been completed or the content of the Final Enabling Toxicology Reports is
adequate, AstraZeneca shall, prior to the end of the POC Option Period for TC-5619, refer such matter (clause (1) or clause (2)) in writing to the ESC for resolution pursuant to Section 2.1.5 (and, if necessary, Section 14.3
(accelerated arbitration)) and, in such event, all relevant time periods pursuant to this Section 5.10.2(h)(iii) shall be tolled pending such resolution and the Decision Trigger Notice shall be deemed to be amended to reflect such resolution.

 (H) Without limitation of Section 5.10.2(h)(vi)(E), to the extent applicable, the failure of TC-5619 to achieve Option
Compound Proof of Concept for either or both of CDS and ADHD shall not give rise to the application of Section 5.10.2(e). 

(I) If AstraZeneca exercises the POC Option for TC-5619 as permitted by this Section 5.10.2(h)(iii), then Targacept and AstraZeneca
shall continue to use Commercially Reasonable Efforts to execute their respective remaining obligations under the Amended 5619 OCDP, if any, to completion (except that, without limitation of any other provision hereof, AstraZeneca shall not be
required by this Section 5.10.2(h)(iii)(I) to use Commercially Reasonable 
  

 6 

 
Efforts to execute the 5619 AD POC Study to completion) and, as between Targacept and AstraZeneca, Targacept shall have and retain all rights and licenses necessary to satisfy its remaining
obligations under the Amended 5619 OCDP. 
 For clarity, it is the intent of Targacept and AstraZeneca that compliance by a Party with this
Section 5.10.2(h)(iii) shall constitute compliance by such Party with Section 5.10.2(d) (but not, for clarity, Section 5.10.2(d)(1) or Section 5.10.2(d)(2)) as such Section 5.10.2(d) applies to TC-5619 or any TC-5619 Product
(including as to the content of the POC Notice) and that each provision of the Agreement that references Section 5.10.2(d) (or Section 5.10.2 and thereby includes Section 5.10.2(d)) shall be deemed also to reference this
Section 5.10.2(h)(iii) as such provision applies to TC-5619 or a TC-5619 Product, mutatis mutandis. 
 (iv) No
Option Compound Proof of Concept for CDS and no Option Compound Proof of Concept for ADHD. In the case of a Decision Trigger Notice provided under clause (z) of Section 5.10.2(h)(iii)(B)(1), AstraZeneca shall provide Targacept with
written certification, prior to the 5619 Option Primary Expiration Date, that, intending to be legally bound and having received good and valuable consideration, AstraZeneca: 

(A) commits to conducting the 5619 AD POC Study, in which case Section 5.10.2(h)(vi) shall apply; 

(B) commits to conducting a human clinical trial of TC-5619 (1) in furtherance of its development for AD [********] a
[********] of [********] the [********] or (2) in [********], in either case (clause (1) or (2)): 

(x) the Decision Trigger Notice provided under clause (z) of Section 5.10.2(h)(iii)(B)(1) shall thereafter also constitute a
POC Notice; 
 (y) such certification shall be deemed a notice of exercise of the POC Option, shall specify the [********]
for which AstraZeneca commits to conducting a human clinical trial of TC-5619 and shall be accompanied by payment by AstraZeneca of the Option Exercise Fee required by Section 5.10.2(h)(ix)(A); and 

(z) for clarity, TC-5619 shall be a POC Option Candidate Drug and subject to AstraZeneca’s obligations pursuant to
Section 5.10.2(h)(vii) and AstraZeneca shall use Commercially Reasonable Efforts to initiate such human clinical trial as soon as reasonably practicable; or 

(C) disclaims any interest in a potential license to further Exploit TC-5619, in which case Section 5.10.2(h)(xii) shall apply;

 provided that, if AstraZeneca does not give such written certification to Targacept on or before the 5619 Option Primary Expiration Date,
AstraZeneca shall thereupon be deemed to have given a certification to Targacept pursuant to clause (C) above. 
 (v) AZ
AD Enabling Activities and 5619 AD POC Study [********]. 
  

 7 

 (A) AstraZeneca shall fund the AZ AD Enabling Activities and shall conduct the AZ AD
Enabling Activities either itself or with or through such subcontractors as it may elect to engage; provided that, for clarity, AstraZeneca shall have no obligation to fund or conduct any other AD Enabling Activities. Subject to clauses (1) and
(4) of this Section 5.10.2(h)(v)(A), Targacept shall own all right, title and interest in and to all data and other work product and all intellectual property, made, conceived, developed, generated or reduced to practice in the conduct of
the AD Enabling Activities (including the AZ AD Enabling Activities) and AstraZeneca shall have no rights to any such data and other work product or intellectual property unless and until TC-5619 becomes an Option Compound Candidate Drug pursuant to
the terms of this Agreement (in which case and at which time AstraZeneca would have such rights to such data and other work product and intellectual property as are provided in the Agreement). Accordingly, if and to the extent AstraZeneca contracts
with any Third Party to conduct any AZ AD Enabling Activity, AstraZeneca shall ensure that ownership of all data and other work product and all intellectual property, made, conceived, developed, generated or reduced to practice in, or arising from,
the conduct of each such AZ AD Enabling Activity (“AZ AD Enabling Activity Work Product” and “AZ AD Enabling Activity Intellectual Property,” respectively) is assigned solely to Targacept, subject to the following
provisions of this Section 5.10.2(h)(v)(A). 
 (1) Notwithstanding the foregoing clause (A), if and to the extent
AstraZeneca wishes to contract with any Third Party that is an academic or non-profit institution to conduct any AZ AD Enabling Activity and AstraZeneca is unable to secure from such Third Party for Targacept ownership of all AZ AD Enabling Activity
Work Product or AZ AD Enabling Activity Intellectual Property, AstraZeneca shall: 
 (x) consult with Targacept with respect to
the terms and conditions of any such agreement with such Third Party; 
 (y) consider and address in good faith any comments
provided by Targacept and, in any event, provide Targacept with a copy of any agreement AstraZeneca proposes to enter into with such Third Party for Targacept’s review, it being understood that the Parties shall use good faith efforts to secure
from such Third Party (I) for Targacept and its licensees and sublicensees (through multiple tiers) to [********] to [********] AZ AD Enabling Activity Work Product and (II) for Targacept to [********] and
[********], and a [********] a and [********], in and to AZ AD Enabling Activity Intellectual Property (a “Third Party IP [********]”), subject in each case (clauses (I) and (II)) to any rights reserved by
the U.S. federal government and, to the extent customary, such Third Party and any obligations imposed under Applicable Law; and 

(z) not enter into any such agreement unless Targacept shall have approved the form and content thereof in writing (such approval not to
be withheld unless the intellectual property, [********] or [********] rights or work product provisions thereof are not satisfactory to Targacept, acting in good faith), it being understood that, notwithstanding any other provision of
this Agreement or the Amended 5619 OCDP, if Targacept shall not have provided such approval, AstraZeneca shall not have the right to proceed with such AZ AD Enabling Activity and such AZ AD Enabling Activity shall be deemed stricken from the Amended
5619 OCDP. 
 (2) Targacept shall consult with AstraZeneca with respect to the terms and conditions of any [********] of
a Third Party IP [********] and consider and address in good faith any comments provided by AstraZeneca and, in any event, provide AstraZeneca with a copy of any agreement Targacept proposes to enter into with such Third Party with respect to
such AZ AD Enabling Intellectual Property (a “Third Party License Agreement”) for AstraZeneca’s review. If, 

 

 8 

 
after good faith discussions, Targacept and AstraZeneca are not able to agree that such [********] is necessary or reasonably useful to Develop TC-5619 in the Field or Commercialize any
TC-5619 Product in the Field or that the terms and conditions of such Third Party License Agreement are commercially reasonable, then AstraZeneca shall have the right, exercisable within [********] after delivery of such Third Party License
Agreement, to deliver written notice of objection to Targacept and to refer such matter to the ESC for resolution pursuant to Section 2.1.5 (and, if necessary, arbitration in accordance with terms and conditions of Section 14.2 (full
arbitration)); provided that, for clarity, Targacept shall nevertheless have the right to enter into such Third Party License Agreement, subject to clause (3) below. 

(3) If Targacept enters into a Third Party License Agreement and AstraZeneca exercises the POC Option for TC-5619, AstraZeneca shall be
responsible for all financial and non-financial obligations to such Third Party in connection with such Third Party License Agreement unless and until TC-5619 becomes a Terminated Compound; provided that, if AstraZeneca timely provided a notice of
objection and initiated arbitration as provided in clause (2) above and in such arbitration proceeding such [********] is found not to be necessary or reasonably useful to Develop TC-5619 in the Field or Commercialize any TC-5619 Product
in the Field or the terms of such Third Party License Agreement are found not to be commercially reasonable, then (x) Targacept shall be responsible for all financial and non-financial obligations to such Third Party in connection with such
Third Party License Agreement and (y) notwithstanding anything in this Agreement to the contrary, Targacept shall have the right in its sole discretion to terminate such Third Party License Agreement. For clarity, Targacept shall be responsible
for all financial and non-financial obligations to such Third Party in connection with such Third Party License Agreement if AstraZeneca does not exercise the POC Option for TC-5619 and when and if TC-5619 becomes a Terminated Compound. 

(4) With respect to any AZ AD Enabling Activity Intellectual Property that both (x) does not apply solely to TC-5619 or
[********] and (y) Targacept acquires ownership of or obtains a license to pursuant to this Section 5.10.2(h)(v), Targacept shall, and hereby does, grant to AstraZeneca a perpetual, irrevocable, fully paid-up, royalty-free,
worldwide, non-exclusive right and license, with right to grant sublicenses, in each case to the extent Targacept has such right and license, to use and practice such AZ AD Enabling Activity Intellectual Property for all purposes other than the
Exploitation in any respect of TC-5619, any salt form, polymorph, crystalline form, prodrug, Major Metabolite, hydrate, solvate or formulation of TC-5619 or any Product that consists of or contains any of the foregoing (each, a “TC-5619
Product”). The term “[********]” as used in this clause (4) shall mean the [********] as described in [********] of [********]. 

(5) Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be
done such acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary for, or as the other Party may reasonably request, to carry out more effectively the purpose of this
Section 5.10.2(h)(v)(A). 
 (B) AstraZeneca and Targacept shall collaborate in good faith and work diligently to devise and
agree in writing upon (1) [********] for the 5619 AD POC Study and (2) the [********] for TC-5619 for AD not later than [********], such [********] and [********] to be upon such agreement deemed
incorporated in, and part of, the Amended 5619 OCDP and subject to modification from time to time thereafter only by mutual written agreement of the Parties. AstraZeneca shall ensure that the [********] for the 5619 AD POC Study is true to
and accurately 
  

 9 

 
reflects the agreed upon [********]. Targacept shall have the same rights and AstraZeneca shall have the same obligations with respect to any written embodiment of the agreed upon
[********] and with respect to such [********] as Targacept and AstraZeneca have with respect to AZ AD Enabling Activity Work Product pursuant to Section 5.10.2(h)(v)(A). 

(vi) 5619 AD POC Study. Solely to the extent AstraZeneca makes a certification under Section 5.10.2(h)(iv)(A) (it being
understood that, in all other circumstances, this Section 5.10.2(h)(vi) shall not be operative): 
 (A) unless the Parties
shall agree in a signed written document for Targacept to conduct the 5619 AD POC Study, AstraZeneca shall initiate the 5619 AD POC Study as soon as reasonably practicable after the later of (1) the date on which it has provided its
certification pursuant to Section 5.10.2(h)(iv)(A) and (2) without limitation of Section 5.10.2(h)(v)(B), agreement by the Parties as to [********] and [********] for the 5619 AD POC Study pursuant to
Section 5.10.2(h)(v)(B), and in any case prior to conducting any other Development activities for TC-5619 (other than the production of clinical trial material, necessary regulatory matters and other matters related directly to the 5619 AD POC
Study) and shall conduct the 5619 AD POC Study; 
 (B) Each Party shall have the same rights and obligations with respect to the
5619 AD POC Study as such Party has with respect to AZ AD Enabling Activities pursuant to Section 5.10.2(h)(v)(A); 
 (C)
all costs incurred in connection with the conduct of the 5619 AD POC Study (whether conducted by AstraZeneca or Targacept) shall be borne by AstraZeneca and shall be non-refundable and non-creditable; provided that, if Targacept conducts all or any
portion of the 5619 AD POC Study, the Parties shall mutually agree on a budget for the 5619 AD POC Study and as to their respective responsibilities, if any, for any costs incurred in connection with the conduct of the 5619 AD POC Study in excess of
such budget; 
 (D) for clarity, the 5619 AD POC Study shall be conducted under the Amended 5619 OCDP and therefore subject,
without limitation, to Section 5.10.2(h)(iii)(A); and 
 (E) following completion of the 5619 AD POC Study (whether
conducted by AstraZeneca or Targacept), if the Decision Trigger Notice provided under Section 5.10.2(h)(iii)(B)(2) specifies that TC-5619 has not achieved Option Compound Proof of Concept for AD, Section 5.10.2(e) shall thereupon apply;
provided that, in such circumstance, the [********] terms on which AstraZeneca could designate TC-5619 as an Option Compound Candidate Drug, as contemplated by Section 5.10.2(e), shall be [********] from the [********]
terms that would have been applicable had Option Compound Proof of Concept been achieved for each of CDS, ADHD and AD. 
 (vii)
AstraZeneca’s Diligence Obligation for TC-5619. If AstraZeneca exercises the POC Option for TC-5619 as permitted by this Section 5.10.2(h) (including pursuant to Section 5.10.2(h)(iv)(B)), AstraZeneca shall use Commercially
Reasonable Efforts to Develop TC-5619 and Commercialize one TC-5619 Product in [********] for the 5619 Principal Indication (defined and determined as provided below); provided that, notwithstanding anything in this Agreement to the contrary,
AstraZeneca shall have no obligation to Develop TC-5619 or to Commercialize any TC-5619 Product until the results of each of the 5619 CDS POC Study and the 5619 ADHD POC Study 

 

 10 

 
and the Final Enabling Toxicology Report for each of the Enabling Toxicology Studies have been made available to AstraZeneca. Notwithstanding anything in this Agreement to the contrary, if Option
Compound Proof of Concept is achieved [********], AstraZeneca shall [********] have a diligence obligation with respect to the 5619 Principal Indication. If Regulatory Approval is obtained for a TC-5619 Product for the 5619 Principal
Indication in [********], AstraZeneca shall use Commercially Reasonable Efforts to (A) Commercialize such TC-5619 Product for the 5619 Principal Indication in [********] and (B) obtain Regulatory Approval for such TC-5619
Product for the 5619 Principal Indication in [********]. If such Regulatory Approval is obtained in any [********], AstraZeneca shall use Commercially Reasonable Efforts to Commercialize such TC-5619 Product for the 5619 Principal
Indication in [********]. Subject to the determination from time to time of the 5619 Principal Indication as described below, if, notwithstanding exercise by AstraZeneca of Commercially Reasonable Efforts following the designation of TC-5619
as a POC Option Candidate Drug, the exercise of Commercially Reasonable Efforts would not require AstraZeneca to continue to Develop TC-5619 for the 5619 Principal Indication, AstraZeneca shall have no further obligations pursuant to this
Section 5.10.2(h)(vii) (or, for clarity, Section 5.5.1(c)) with respect to TC-5619 or any TC-5619 Product; provided that, if AstraZeneca, in its sole discretion, elects to do so, the exercise by AstraZeneca of Commercially Reasonable
Efforts to Develop TC-5619 or Commercialize a TC-5619 Product for [********] (other than the 5619 Principal Indication) shall, after such failure, be sufficient to satisfy AstraZeneca’s diligence obligation set forth in
Section 5.5.1(b). Notwithstanding anything in this Agreement to the contrary, (x) AstraZeneca shall have no obligation to Develop TC-5619 or Commercialize any TC-5619 Product [********] and (y) if TC-5619 is Developed or a
TC-5619 Product is Commercialized [********] in at least [********], but AstraZeneca’s not Developing TC-5619 and not Commercializing a TC-5619 Product in [********] would not breach its obligations to use Commercially
Reasonable Efforts as provided above, AstraZeneca shall have no obligation to Develop TC-5619 or Commercialize any such TC-5619 Product in such [********]. For purposes of clarity, the diligence obligations in this paragraph shall not apply
to, and shall not be satisfied by, any Other Licensed Compound or Other Licensed Product. 
 The “5619 Principal
Indication” from time to time shall be determined as provided below. 
 (1) The initial 5619 Principal Indication (the
“Initial Principal Indication”) shall be [********], except that: 
 (x) if TC-5619 achieves Option
Compound Proof of Concept in both CDS and ADHD, AstraZeneca shall have the right by written notice to Targacept, given at any time prior to Initiation by AstraZeneca of the first human clinical trial of TC-5619 following the later of
(A) AstraZeneca’s exercise of the POC Option and (B) the date that TC-5619 achieves Option Compound Proof of Concept for the later of CDS and ADHD, to [********] to [********]; 

(y) notwithstanding clause (x), if TC-5619 achieves Option Compound Proof of Concept in one or both of CDS and ADHD, and TC-5619
subsequently Achieves Proof of Concept for AD in the 5619 AD POC Study, then AstraZeneca shall have the right by written notice to Targacept, given at any time prior to Initiation by AstraZeneca of the first human clinical trial of TC-5619 for AD
following the date that TC-5619 Achieves Proof of Concept for AD, to [********]; and 
  

 11 

 (z) if AstraZeneca gives a certification to Targacept pursuant to
Section 5.10.2(h)(iv)(B), the Initial Principal Indication shall be [********] specified in such certification; 

(2) AstraZeneca shall have the right, upon written notice to Targacept, to [********] (as determined pursuant to clause
(1) above) to [********], in its sole discretion, following the completion of any Phase II Clinical Trial, but before the Initiation of the first Phase III Clinical Trial, of TC-5619. 

(3) The Initial Principal Indication (as determined pursuant to clause (1) or clause (2) above, as applicable) shall remain
the 5619 Principal Indication thereafter unless (x) TC-5619 Achieves Proof of Concept (in the 5619 AD POC Study in the case of AD) or achieves Option Compound Proof of Concept, collectively, in two or more of CDS, ADHD and AD (each such
indication, a “POC Indication”), and (y) both (A) the failure by AstraZeneca to diligently progress the Development of TC-5619 to obtain Regulatory Approval for [********] in [********] would nevertheless
constitute the use of Commercially Reasonable Efforts and (B) the failure by AstraZeneca to diligently progress the Development of TC-5619 to obtain Regulatory Approval for [********] (the “Replacement Principal
Indication”) in [********] would not constitute the use of Commercially Reasonable Efforts, in which case such Replacement Principal Indication shall thereupon become the 5619 Principal Indication; provided that (i) in no event
shall there be [********] and (ii) if there are [********], then the [********] for which AstraZeneca uses Commercially Reasonable Efforts to Develop TC-5619 to obtain Regulatory Approval shall be the 5619 Principal
Indication and if AstraZeneca uses Commercially Reasonable Efforts to Develop TC-5619 to obtain Regulatory Approval for [********], AstraZeneca shall have the right, on written notice to Targacept given promptly following request therefor, to
designate [********] Replacement Principal Indication shall become the 5619 Principal Indication; and 
 (4) Except
where [********] is the 5619 Principal Indication and except for so long as Development or Commercialization of TC-5619 or a TC-5619 Product for [********] continues, the [********] for which TC-5619 obtains Product Regulatory
Approval (and, in the case of [********] approval) in [********] shall become (if not already) the 5619 Principal Indication. 

For clarity, it is the intent of Targacept and AstraZeneca that compliance by AstraZeneca with this Section 5.10.2(h)(vii) shall constitute
compliance by AstraZeneca with Section 5.5.1(c) as such Section 5.5.1(c) applies to TC-5619 or any TC-5619 Product and that each provision of the Agreement that references Section 5.5.1(c) (or Section 5.5.1 and thereby includes
Section 5.5.1(c)) shall be deemed also to reference this Section 5.10.2(h)(vii) as such provision applies to TC-5619 or a TC-5619 Product, mutatis mutandis. 

(viii) Option Expansion Fee for TC-5619. AstraZeneca shall pay to Targacept the sum of Eleven Million Dollars (US $11,000,000)
(the “5619 Option Expansion Fee”) in immediately available funds at a time to be agreed upon by the Parties. The 5619 Option Expansion Fee shall be non-refundable and non-creditable. 

 

 12 

 (ix) Option Exercise Fee for TC-5619. Subject, for clarity, to Section 6.3, if
AstraZeneca exercises the Option for TC-5619 (other than if AstraZeneca had assumed from Targacept and completed the Amended 5619 OCDP pursuant to Section 5.10.2(b)(5), in which case clause (a)(ii) of Section 6.2 and
Section 5.10.2(b)(5) shall be operative), the Option Exercise Fee that AstraZeneca shall pay Targacept shall be: 
 (A) in
the amount of Thirty-Two Million Dollars (US $32,000,000), if AstraZeneca exercises the POC Option for TC-5619 upon achievement of Option Compound Proof of Concept in any one of CDS, ADHD or AD or pursuant to Section 5.10.2(h)(iv)(B); or

 (B) in an amount to be negotiated by the Parties pursuant to Section 5.10.2(e) if AstraZeneca desires to designate
TC-5619 as an Option Compound Candidate Drug under the circumstances set forth in, and subject to, Section 5.10.2(h)(vi)(E). 
 For
clarity, it is the intent of Targacept and AstraZeneca that compliance by AstraZeneca with this Section 5.10.2(h)(ix) shall constitute compliance by AstraZeneca with clauses (b) and (c) of Section 6.2 as such clauses apply to
TC-5619 or any TC-5619 Product and that each provision of the Agreement that references clause (b) or clause (c) of Section 6.2 (or Section 6.2 and thereby includes said clauses (b) and (c)) shall be deemed also to reference
this Section 5.10.2(h)(ix) as such provision applies to TC-5619 or a TC-5619 Product, mutatis mutandis. 
 (x)
Milestone Payments for TC-5619. 
 (A) Subject to Section 5.10.2(b)(5), if TC-5619 becomes a POC Option Candidate
Drug, then, with respect to each of milestone event 5 through milestone event 9 (five milestone events) under the heading “Milestone Event” in Section 6.5.1(a) for POC Option Candidate Drugs/POC Option Products (column C) (reproduced
under the heading “Milestone Event” below), the amount payable to Targacept by AstraZeneca with respect to such milestone event shall instead be the amount shown below corresponding to such milestone event (and, for clarity, not the amount
shown in the table in Section 6.5.1(a), column C, corresponding to such milestone event). 
  

			
	 Milestone Event
	  	 TC-5619/TC-5619

Products

		
	5. Initiation of [********]	  	[********]
		
	6. [********] of [********]	  	[********]
		
	7. First Commercial Sale [********]	  	[********]
		
	8. First Commercial Sale [********]	  	[********]
		
	9. First Commercial Sale [********]	  	[********]

 (B) For clarity:
(1) Section 5.10.2(h)(x)(A) shall apply solely to the application of Section 6.5.1(a) to TC-5619 and TC-5619 Products and for no other purpose (for further clarity, Sections 6.5.1(b) and 6.5.1(c) and the amounts payable to Targacept
by AstraZeneca thereunder, if 
  

 13 

 
any, are not intended to be affected by this Section 5.10.2(h)(x)); (2) any payment obligation of AstraZeneca that arises under Section 5.10.2(h)(x)(A) shall be deemed to
arise under Section 6.5.1(a) and therefore subject to, without limitation, Sections 6.5.1(a) (excluding the dollar amounts shown in the table therein), 6.5.2, 6.6.1(d)(2), 10.2.4 and 10.2.6 (in each case if and to the extent
applicable); and (3) amounts paid to Targacept by AstraZeneca under Section 5.10.2(h)(x)(A) shall be deemed paid under Section 6.5.1(a). 

(xi) Payment of Royalties by AstraZeneca for TC-5619. 

(A) Subject to Section 5.10.2(b)(5), if TC-5619 becomes a POC Option Candidate Drug, then, with respect to the royalty tiers under
the heading “AZ Net Sales of Such Product in the Territory” in Section 6.6.1(a)(1) for POC Option Products (column C) (reproduced under the heading “AZ Net Sales of Such Product in the Territory” below), the amount payable
to Targacept by AstraZeneca with respect to AZ Net Sales of TC-5619 Products shall instead be the amount shown below corresponding to such tier (and, for clarity, not the amount shown in the table in Section 6.6.1(a)(1), column C, corresponding
to such tier). 
  

			
	 AZ Net Sales of such Product in the Territory
	  	 TC-5619/TC-5619

Products

		
	For that portion of AZ Net Sales of such Product that are less than or equal to [********]	  	[********]
		
	For that portion of AZ Net Sales of such Product that exceed [********] [********] and are less than or equal to [********]	  	[********]
		
	For that portion of AZ Net Sales of such Product that exceed [********] and are less than or equal to [********] 	  	[********]
		
	For that portion of AZ Net Sales of such Product that exceed [********] and are less than or equal to [********] 	  	[********]
		
	For that portion of AZ Net Sales of such Product that exceed [********]	  	[********]

 (B) For clarity, any
royalty obligation of AstraZeneca that arises under Section 5.10.2(h)(xi)(A) shall be deemed to arise under Section 6.6.1(a) and amounts paid to Targacept by AstraZeneca under Section 5.10.2(h)(xi)(A) shall be deemed paid
under Section 6.6.1(a). 
 (xii) Failure to Exercise POC Option; Disclaimed Interest. If AstraZeneca
(x) has the POC Option for TC-5619 pursuant to Section 5.10.2(h)(iii)(C) (other than in the case of a Decision Trigger Notice provided under clause (z) of Section 5.10.2(h)(iii)(B)(1)) and does not exercise such POC Option within
the POC Option Period, or (y) gives (or is deemed to have given) a certification to Targacept pursuant to Section 5.10.2(h)(iv)(C): 

(A) Section 5.10.2(d)(2) shall apply; 
  

 14 

 (B) Targacept shall have the right to continue to conduct, but shall have no further
obligation to continue to conduct, all or any portion of the activities remaining under the Amended 5619 OCDP; 
 (C)
AstraZeneca shall have no further right (except to the extent Targacept shall otherwise agree in writing) or obligation to continue to conduct all or any portion of the activities remaining under the Amended 5619 OCDP; 

(D) TC-5619 shall be, for clarity, an Unexercised Option Compound and shall not be a Terminated Compound or, notwithstanding anything in
the Agreement to the contrary, an Additional Compound or Excluded Zone Compound, it being the intent of Targacept and AstraZeneca that, in the circumstances described in this Section 5.10.2(h)(xii) and notwithstanding anything in the Agreement
to the contrary, Targacept and its Affiliates and licensees (and sublicensees, through multiple tiers) shall have (1) the exclusive and unrestricted worldwide right to Exploit TC-5619, including any salt form, polymorph, crystalline form,
prodrug, Major Metabolite, hydrate, solvate or formulation thereof, in all respects and (2) the non-exclusive and unrestricted worldwide right to Exploit [********] TC-5619 in all respects; and 

(E) if and to the extent requested in writing by Targacept, AstraZeneca shall promptly: (1) where permitted by law, transfer to
Targacept all of its right, title and interest in all Regulatory Filings then in its name applicable to TC-5619 in the Territory, if any, and all material aspects of Confidential Information in its possession (or that can be obtained without undue
effort or expense) and Control as of the date of termination solely to the extent relating to such Regulatory Filings; (2) notify the applicable Regulatory Authorities and take any other action reasonably necessary to effect such transfer;
(3) provide Targacept with copies of all correspondence between AstraZeneca and such Regulatory Authorities relating to such Regulatory Filings; (3) provide Targacept with all supplies of TC-5619 in the possession (or that can be obtained
without undue effort or expense) and Control of AstraZeneca or any Affiliate or contractor of AstraZeneca; and (4) provide Targacept with copies of all reports and data generated or Controlled by, and in the possession of, AstraZeneca or its
Affiliates pursuant to this Agreement that relate to TC-5619. For purposes of clarity, nothing in this Section 5.10.2(h)(xii)(E) shall require AstraZeneca to make any payments or provide any other consideration to any Third Party.”

 2. The Agreement is hereby amended by deleting the text of Section 11.2.5(a)(3) in its entirety and replacing it with the following.

 “Develop a particular Option Compound Candidate Drug for a Principal Indication in [********] as provided in
Section 5.5.1(c) (or TC-5619 for the 5619 Principal Indication in [********] as provided in Section 5.10.2(h)(vii)), to terminate in the Territory such Option Compound Candidate Drug (including TC-5619, if applicable) and all Option
Compound Products that contain such Option Compound Candidate Drug (including TC-5619 Products, if applicable), and all Licensed Derivatives (other than Working Licensed Derivatives and products containing Working Licensed Derivatives) with respect
to any of the foregoing, in each case as of the effective date of such termination; provided, however, that this Section 11.2.5(a)(3) shall not apply if AstraZeneca (whether itself or with or through one or more of its Affiliates, Sublicensees
or Distributors) is using Commercially Reasonable Efforts to Commercialize a Product that contains such Option Compound Candidate Drug or any Licensed Derivative with respect thereto.” 

 

 15 

 3. Except as expressly amended by this Amendment, all of the terms and conditions of the Agreement shall
remain in full force and effect. 
 4. AstraZeneca shall pay to Targacept the 5619 Option Expansion Fee on or before the fifth
(5th) Business Day after the effective date of this Amendment. 
 [remainder of page intentionally left blank]

  

 16 

 IN WITNESS WHEREOF AstraZeneca and Targacept have executed this Amendment as of the respective dates set
forth below. 
  

									
	TARGACEPT, INC.	 		 	ASTRAZENECA AB (publ.)
					
	By:	 	 /s/ J. Donald deBethizy
	 		 	By:	 	 /s/ Anders Burén

					
	Name:	 	 J. Donald deBethizy
	 		 	Name:	 	 Anders Burén

					
	Title:	 	 President & CEO
	 		 	Title:	 	 Authorised Signatory

					
	Date:	 	 April 30, 2010
	 		 	Date:	 	 April 30, 2010

[Signature Page to Amendment No. 3]

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