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                                                                    EXHIBIT 10.7

                            PAIN THERAPEUTICS, INC.

             SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

        This Second Amended and Restated Investors' Rights Agreement is made as
of February 1, 2000 by and among Pain Therapeutics, Inc., a Delaware corporation
(the "Company") and the investors listed on Exhibit A hereto, each of which is
herein referred to as an "Investor."

                                    RECITALS

        WHEREAS, certain Investors are holders of shares of the Company's Series
A Preferred Stock, Series B Preferred Stock and/or shares of Common Stock issued
upon conversion thereof (the "Prior Parties") and possess registration rights,
information rights, rights of first refusal, and other rights pursuant to that
certain First Amended and Restated Investor Rights Agreement dated as of October
15, 1999 between the Company and such Prior Parties (the "Prior Agreement"); and

        WHEREAS, the undersigned Prior Parties desire to amend and restate in
its entirety the Prior Agreement and to accept the rights created pursuant
hereto in lieu of the rights granted to them under the Prior Agreement; and

        WHEREAS, certain other Investors are parties to the Series C Preferred
Stock Purchase Agreement dated as of February 1, 2000 between the Company and
such Investors (the "Purchase Agreement"), such Investors' obligations under
which are conditioned upon, among other things, the execution and delivery of
this Agreement by such Investors, holders of in excess of fifty percent (50%) of
the shares held by the Prior Parties and the Company:

        NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties to the Prior Agreement hereby agree that the Prior
Agreement shall be superseded and replaced in its entirety by this Agreement,
and the parties hereto further agree as follows:

        1. Information Rights.

                1.1 Financial Information.

                        (a) The Company shall deliver to each Investor who
continues to hold at least 100,000 shares of Series A Preferred Stock ("Series A
Preferred Stock") of the Company (or the Common Stock into which the shares of
Series A Preferred Stock have been converted) or any shares of Series B
Preferred Stock ("Series B Preferred Stock") of the Company (or the Common Stock
into which shares of Series B Preferred Stock have been converted) or any shares
of Series C Preferred Stock ("Series C Preferred Stock") of the Company (or the
Common Stock into which shares of Series C Preferred Stock have been converted)
(in each case as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), and as long as such
Investor or a principal, partner or manager of such Investor, is not employed by
or an officer or director of a competitor of the Company, and the Company
remains private, unaudited financial


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statements, prepared in accordance with generally accepted accounting
principles, of the Company within 90 days after the close of each fiscal year,
and audited financial statements, prepared in accordance with generally accepted
accounting principles, of the Company within 120 days after the close of each
fiscal year.

                        (b) The Company shall deliver to each Investor who
continues to hold at least 100,000 shares of Series B or Series C Preferred
Stock (or the Common Stock into which shares of Series B Preferred Stock have
been converted) (as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), and as long as such
Investor or a principal, partner or manager or such Investor, is not employed by
or an officer or director of a competitor of the Company; and the Company
remains private, unaudited monthly and quarterly financial statements, with
comparisons to prior year periods and budgets prepared in accordance with
generally accepted accounting principles, and progress reports on major clinical
programs within 30 days after each month or fiscal quarter, as applicable.

                1.2 Inspection Rights. Each Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 1.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed, unless Investor first
executes and delivers a confidentiality agreement with the Company in form and
substance reasonably satisfactory to the Board of Directors; provided further
that, whenever requested, the Investor shall sign an agreement satisfactory to
the Company stating that the Investor shall hold all such information in
confidence.

                1.3 Termination of Covenants. Except as required by law, the
rights set forth in Sections 1.1 and 1.2 shall terminate and be of no further
force or effect upon the closing of a public offering of the Company's
securities pursuant to an effective registration statement filed by the Company
under the Securities Act of 1933, as amended, or on the date the Company
otherwise becomes subject to the reporting requirements under Section 13 or
15(d) of the Securities Exchange Act, as amended, whichever first occurs.

        2. Registration Rights. The Company and the Investors covenant and agree
as follows:

                2.1 Definitions. For purposes of this Section 2:

                        (a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and the declaration or ordering of
effectiveness of such registration statement or document.



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                        (b) The term "Registrable Securities" means (i) the
shares of Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and (ii)
any other shares of Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares listed in (i); or (iii) other shares of Common Stock
acquired by a holder of registrable Securities; provided, however, that the
foregoing definition shall exclude in all cases any Registrable Securities sold
by a person in a transaction in which his or her rights under this Agreement are
not assigned. Notwithstanding the foregoing, Common Stock or other securities
shall only be treated as Registrable Securities if and so long as they have not
been (A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(l) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale.

                        (c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities; provided, however, that the foregoing definition shall exclude in
all cases any securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned, and any securities that have been
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, or sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.

                        (d) [Intentionally Omitted].

                        (e) The term "Series B Holder" means any person owning
or having the right to acquire (i) the shares of Common Stock issuable or issued
upon conversion of the Series B Preferred Stock and (ii) any other shares of
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares listed in (i).

                        (f) The term "Series C Holder" means any person owning
or having the right to acquire (i) the shares of Common Stock issuable or issued
upon conversion of the Series C Preferred Stock and (ii) any other shares of
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares listed in (i).

                        (g) The term "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any successor form under the
Securities Act.

                        (h) The term "SEC" means the Securities and Exchange
Commission.



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                        (i) The term "Series B Qualified IPO" means a firm
commitment underwritten public offering by the Company of shares of its Common
Stock pursuant to a registration statement on Form S-1 under the Securities Act,
in which the public offering price per share of Common Stock is at least $5.00
(as adjusted for stock splits, stock dividends, combinations, recapitalizations
and the like) and the gross proceeds to the Company are not less than
$15,000,000 (net of underwriting discounts and commissions)

                        (j) The term "Series C Qualified IPO" means a firm
commitment underwritten public offering by the Company of shares of its Common
Stock pursuant to a registration statement on Form S-1 under the Securities Act,
in which the public offering price per share of Common Stock is at least $7.00
(as adjusted for stock splits, stock dividends, combinations, recapitalizations
and the like) and the gross proceeds to the Company are not less than
$15,000,000 (net of underwriting discounts and commissions).

                2.2 Request for Registration.

                        (a) If the Company shall receive at any time at least
six (6) months after the effective date of the first registration statement for
a public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction), a written request from the holders of a majority of the
Registrable Securities held by the Series B Holders or the Series C Holders,
that the Company file a registration statement under the Securities Act covering
Registrable Securities, then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all Series B Holders or
Series C Holders (as applicable) and shall, subject to the limitations of
subsection 2.2(b), use commercially reasonable efforts to effect as soon as
practicable, and in any event within 90 days of the receipt of such request, the
registration under the Securities Act of all Registrable Securities which the
Series B Holders or Series C Holders (as applicable) request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with the terms hereof; provided, however, that the Company shall not
be obligated to effect such registration if the Series B Holders or Series C
Holders (as applicable), together with the holders of any other securities of
the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriter's discounts and commissions) of less than
$7,500,000.

                        (b) If the Series B Holders or Series C Holders
initiating the registration request hereunder ("Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 2.2 and the Company shall include such information in
the written notice referred to in subsection 2.2(a). The underwriter will be
selected by the Company subject to the prior written consent of Ohio Valley
Venture Fund LP, if participating (in the case of the Series B Holders) or
Cascade Investment L.L.C. if participating (in the case of the Series C
Holders), which consent shall not be unreasonably withheld; provided, however,
that no such



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consent shall be required if the Company selects a nationally recognized
underwriter with demonstrable, pharmaceutical and/or biotechnology
industry-specific expertise and experience. In such event, the right of any
Series B Holder or Series C Holder (as applicable) to include Registrable
Securities in such registration shall be conditioned upon such Series B Holder's
or Series C Holder's participation in such underwriting and the inclusion of
such Series B Holder's or Series C Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Series B Holder or Series C Holder (as applicable))
to the extent provided herein. All Series B Holders or Series C Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 2.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 2.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation or the exclusion of the number of shares
to be underwritten, then the Initiating Holders shall so advise all Series B
Holders or Series C Holders (as applicable) of Registrable Securities which
would otherwise be underwritten pursuant hereto, and, in the case of a
limitation, of the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Series B Holders or
Series C Holders (as applicable), including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Series B Holder or Series C Holder (as applicable);
provided, however, that the shares of Registrable Securities to be included in
such underwriting shall not be reduced in number or completely excluded unless
all other securities, are first entirely excluded from the underwriting. If the
Series B Holders or Series C Holders (as applicable) cannot sell at least 85% of
the Registrable Securities proposed to be sold, then the transaction shall be
deemed not to be a registration with respect to them for purposes of Section
2.2(d)(i) hereof.

                        (c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
2.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve-month period.

                        (d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 2.2:

                                (i) After the Company has effected two (2)
registrations pursuant to this Section 2.2 and such registrations have been
declared or ordered effective or within six (6) months of the effective date of
another registration;

                                (ii) During the period starting with the date
ninety (90) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred



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eighty (180) days after the effective date of, a registration subject to Section
2.3 hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or

                                (iii) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately registered
on Form S-3 pursuant to a request made pursuant to Section 2.4 below; provided,
however, that if the Company so refuses to effect a registration by the Series B
Holders or Series C Holders (as applicable) pursuant to this Section
2.2(d)(iii), they shall be entitled to an additional registration pursuant to
Section 2.4 for each such registration so refused until such time as they shall
have had the benefit a total of four (4) registrations pursuant to Section 2.2
and/or Section 2.4.

                2.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Series B Holders or
Series C Holders) any of its stock under the Securities Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan or a transaction covered by Rule 145 under the Securities
Act, a registration in which the only stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered, or
any registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Series B Holder and Series C Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with the
terms hereof, the Company shall, subject to the provisions of Section 2.8, cause
to be registered under the Securities Act all of the Registrable Securities that
each such holder has requested to be registered.

                2.4 Form S-3 Registration. In case the Company shall receive
from Series B Holders or Series C Holders of the Registrable Securities then
outstanding a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such holder or holders, the Company
will:

                        (a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Series B
Holders or Series C Holders; and

                        (b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Series B or Series C Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Series B or Series C (as the case may be) Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2.4: (i) if
Form S-3 is not available



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for such offering by the Series B or Series C Holders; (ii) if the Series B or
Series C Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$5,000,000; (iii) if the Company shall furnish to the Series B or Series C
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 90 days after receipt of the request of the Series B or
Series C Holder or Holders under this Section 2.4; provided, however, that the
Company shall not utilize this right more than once in any twelve month period;
(iv) if the Company has, within the six (6) month period preceding the date of
such request, already effected one registration on Form S-3 for such holders
pursuant to this Section 2.4 or within six (6) months of the effective date of
another registration; (v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance;
or (vi) during the period ending one hundred eighty (180) days after the
effective date of a registration statement subject to Section 2.3.

                        (c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Series B or Series C Holders. Registrations effected
pursuant to this Section 2.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.2 or 2.3, respectively.

                        (d) Subject to the proviso in Section 2.2(d)(iii), the
Company shall not be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 2.4 after the Company has effected two (2)
registrations initiated by the holders of a majority of the Registrable
Securities held by the Series B Holders and two (2) registrations initiated by
the holders of a majority of the Registrable Securities held by the Series C
Holders pursuant to this Section 2.4.

        If the registration is to be underwritten, the underwriter will be
selected by the Company subject to the prior written consent of Ohio Valley
Venture Fund LP, if participating (in the case of the Series B Holders) and
Cascade Investment L.L.C., if participating (in the case of the Series C
Holders), which consent shall not be unreasonably withheld; provided, however,
that no such consent shall be required if the Company selects a nationally
recognized underwriter with demonstrable, pharmaceutical and/or biotechnology
industry-specific expertise and experience. If Series B Holders or Series C
Holders (as applicable) are not able to sell at least 85% of their Registrable
Securities proposed to be sold, then the transaction shall not be deemed a
registration for purposes of Section 2.4(d) hereof.

                2.5 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:



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                        (a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days.

                        (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for up to one hundred twenty
(120) days.

                        (c) Furnish to the Series B Holders and/or Series C
Holders (as the case may be) such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.

                        (d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Series B Holders and/or Series C Holders (as the case may be), provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.

                        (e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Series
B Holder or Series C Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.

                        (f) Notify each Series B Holder or Series C Holder of
Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing. In such event, the Company shall use all reasonable
efforts to amend promptly the registration statement to conform the prospectus
to the requirement of the 1933 Act and applicable regulations.

                        (g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.

                        (h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.



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                        (i) Use its best efforts to furnish, at the request of
any Series B Holder and/or Series C Holder (as the case may be) requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Series B Holders
and/or Series C Holders (as the case may be) requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Series B Holders and/or Series C Holders (as the case may be) requesting
registration of Registrable Securities.

                2.6 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Series B Holder or
Series C Holder that such holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of such holder's Registrable Securities. The Company shall have no
obligation with respect to any registration requested pursuant to Section 2.2 or
Section 2.4 of this Agreement if, as a result of the application of the
preceding sentence, the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 2.2(a) or subsection 2.4(b)(2),
whichever is applicable.

                2.7 Expenses of Registration.

                        (a) Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with one (1)
demand registration, pursuant to Section 2.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Series B Holders or Series C
Holders (as applicable) selected by them (collectively "Registration Expenses")
shall be borne by the Company it being understood that all such expenses shall
be borne by the Company in connection with at least one (1) such registration in
which Series B Holders are able to sell Registrable Securities and at least one
(1) such registration in which Series C Holders are able to sell Registrable
Securities; provided, however, that if the Series B Holders or Series C Holders
(as applicable) bear the Registration Expenses for any registration proceeding
begun pursuant to Section 2.2 and subsequently withdrawn by them registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 2.2 hereof; in the event that such withdrawal
is based upon material adverse information



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relating to the Company that is different from the information known or
available (upon request from the Company or otherwise) to the Series B Holders
or Series C Holders requesting registration at the time of their request for
registration under Section 2.2, such registration shall not be treated as a
counted registration for purposes of Section 2.2 hereof, even though the Series
B Holders or Series C Holders (as applicable) do not bear the Registration
Expenses for such registration.

                        (b) Company Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 2.3 for each Series B or Series C Holder (which right may be assigned as
provided in Section 2.12), including (without limitation) all registration,
filing, and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Series B Holders and one counsel
for the Series C Holders selected by them shall be borne by the Company.

                        (c) Registration on Form S-3. All expenses other than
underwriting discounts and commissions incurred in connection with one (1)
registration requested pursuant to Section 2.4, including (without limitation)
all registration, filing, qualification, printers' and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Series B
Holders and of one counsel for the selling Series C Holders selected by them
shall be borne by the Company, it being understood that all such expenses shall
be borne by the Company in connection with at least one (1) such registration in
which Series B Holders are able to sell Registrable Securities and at least one
(1) such registration in which Series C Holders are able to sell Registrable
Securities.

                2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 2.3 to include any of the Series B Holders'
or Series C Holders' securities in such underwriting unless they accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), provided that such agreement does not require indemnification by
any of them except to the extent contemplated by Section 2.10 hereof; and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering. The
Company will include in such registration (i) first, the securities the Company
proposes to sell for its own account; (ii) second, to the extent that the number
of securities the Company proposes to sell is less than the number of securities
which the Company has been advised can be sold in such offering that is
compatible with the success of the offering, such number of Registrable
Securities which the Series B Holders and/or Series C Holders have requested to
be included in such registration pursuant to Section 2.3 hereof; provided,
however, in no event will



                                     - 10 -
<PAGE>   11

shares of any other selling stockholder be included in such registration which
would reduce the number of shares which have been requested to be included by
the Series B Holder and/or Series C Holders (or completely exclude the Shares)
without the written consent of a majority of the then outstanding Registrable
Securities proposed to be sold in the offering; and (iii) third, to the extent
that the number of securities which are to be included in such registration
pursuant to clauses (i) and (ii) is, in the aggregate, less than the number of
securities which the Company has been advised can be sold in such offering that
is compatible with the success of the offering, such number of other securities
requested to be included in the offering for the account of any holders not
contractually entitled to registration which, in the opinion of the
underwriters, is compatible with the success of the offering. The number of
Registrable Securities included in such registration statement shall be
allocated pro rata among the holders of Registrable Securities based on the
number of Registrable Securities held by each of them or in such other
proportions as shall mutually be agreed to by them, but in no event shall any
shares being sold by such a holder exercising a demand registration right
similar to that granted in Section 2.2 or 2.4 be excluded from such offering.
For purposes of the preceding sentence concerning apportionment, for any selling
stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder" and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.

                2.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.

                2.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 2:

                        (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Series B and Series C Holder, its legal
counsel, its accountants, any underwriter (as defined in the Securities Act) for
such holder and each person, if any, who controls such holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities



                                     - 11 -
<PAGE>   12

Act, the Exchange Act or any state securities law; and the Company will pay to
each such holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 2.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable to any holder, underwriter or controlling person for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such holder, underwriter or controlling person.

                        (b) To the extent permitted by law, each selling Series
B and Series C Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, its legal counsel, its accountants, any underwriter, any other holder
selling securities in such registration statement and any controlling person of
any such underwriter or other holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such holder expressly
for use in connection with such registration; and each such holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 2.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
2.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the holder, which consent shall not be unreasonably withheld; provided, that
in no event shall any indemnity under this subsection 2.10(b) exceed the net
proceeds from the offering received by such holder, except in the case of
willful fraud by such holder.

                        (c) Promptly after receipt by an indemnified party under
this Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such



                                     - 12 -
<PAGE>   13
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 2.10, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.10.

                        (d) If the indemnification provided for in this Section
2.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a holder
under this Subsection 2.10(d) exceed the net proceeds from the offering received
by such holder, except in the case of willful fraud by such holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

                        (e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

                        (f) The obligations of the Company and Series B and
Series C Holders under this Section 2.10 shall survive the completion of any
offering of Registrable Securities in a registration statement under this
Section 2, and otherwise.

                2.11 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Series B and Series C Holders the benefits of Rule
144 promulgated under the Securities Act and any other rule or regulation of the
SEC that may at any time permit a holder to sell securities of the Company to
the public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

                        (a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remain subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;



                                     - 13 -
<PAGE>   14

                        (b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
necessary to enable the Series B and Series C Holders to utilize Form S-3 for
the sale of their Registrable Securities;

                        (c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and

                        (d) furnish to any Series B or Series C Holder, so long
as the holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Series B
or Series C Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

                2.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2.12 may be
assigned (but only with all related obligations) by a Series B or Series C
Holder to (i) a transferee or assignee of at least 100,000 shares of such
securities, (ii) a transferee or assignee of all of such Registrable Securities
held by such transferring holder, if less than 100,000 shares, or (iii) a
general partner, limited partner, retired partner, member or retired member,
affiliate, parent or majority-owned subsidiary of the transferee, provided the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act. For the purposes of determining
the number of shares of Registrable Securities held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under Section 2.

                2.13 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the holders of a majority of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Section 2.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such



                                     - 14 -
<PAGE>   15

registration only to the extent that the inclusion of his securities will not
reduce the amount of the Registrable Securities of the Series B or Series C
Holders which is included.

                2.14 "Market Stand-Off" Agreement. Each holder of Registrable
Securities hereby agrees that, during the period of duration (up to, but not
exceeding, 180 days) specified by the Company and an underwriter of Common Stock
or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Securities Act, it shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except Common Stock included
in such registration; provided, however, that:

                        (a) such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and

                        (b) all officers, directors, and key employees of the
Company, all five-percent security holders, and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.

        In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each holder agrees
that, if so requested, such holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 2.14.

        Notwithstanding the foregoing, the obligations described in this Section
2.14 shall not apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms which may be promulgated in the future.

                2.15 Termination of Registration Rights. No holder of
registrable securities shall be entitled to exercise any right provided for in
this Section 2 after five (5) years following the consummation of a Qualified
IPO.

        3. Right of First Offer.

                3.1 General. Except for (i) conversion rights applicable to the
Company's Preferred Stock, (ii) securities issued pursuant to an underwritten
public offering pursuant to an effective registration statement under the
Securities Act, (iii) securities issued pursuant to the Company's acquisition of
another corporation by merger, purchase of substantially all the assets or other
corporate reorganization, (iv) securities issued in connection with any stock
split or stock dividend



                                     - 15 -
<PAGE>   16

of the Company, (v) securities issued after the date hereof to employees,
officers, directors or consultants of the Company pursuant to stock purchase or
stock option plans, stock bonuses or awards, contracts or other arrangements
that are approved by the Company's board of directors, (vi) warrants or other
securities issued to financial institutions or commercial lenders in connection
with equipment financing transactions approved by the Company's board of
directors or to Williams Trading, L.L.C. in connection with the Company's Series
C Preferred Stock Financing and (vii) securities issued in connection with
strategic corporate partner agreements approved by the Company's board of
directors, the Company will not, nor will it permit any subsidiary to, authorize
or issue any shares of stock of the Company of any class and will not authorize,
issue or grant any options, warrants, conversion rights or other rights to
purchase or acquire any shares of stock of the Company of any class without
offering the Investors the right of first refusal described below. In the event
the Company grants subsequent purchasers any rights of first refusal or
registration rights which are, in the good faith judgment of the Board of
Directors, superior to those granted to the Series B Holders or Series C Holders
pursuant to this Agreement, then the Series B Holders and Series C Holders,
respectively, shall receive such rights.

                3.2 Right of First Offer.

                        (a) Each holder of Series B and/or Series C Preferred
Stock shall have a right of first refusal to purchase an amount of equity
securities of the Company of any class or kind which the Company proposes to
sell (other than the issuance of shares contemplated by Section 3.1 above)
sufficient to maintain such holder's proportionate beneficial ownership interest
in the Company. If the Company wishes to make any such sale of its securities,
it shall give the holders of Series B and Series C Preferred Stock written
notice of the proposed sale. The notice shall set forth (i) the Company's bona
fide intention to offer such shares and (ii) the material terms and conditions
of the proposed sale (including the number of shares to be offered and the
price, if any, for which the Company proposes to offer such shares), and shall
constitute an offer to sell such securities to the holders of Series B and
Series C Preferred Stock on such terms and conditions. Any holder of Series B or
Series C Preferred Stock may accept such offer by delivering a written notice of
acceptance to the Company within ten (10) days after receipt of the Company's
notice of the proposed sale. Any holder of Series B or Series C Preferred Stock
exercising its right of first refusal shall be entitled to participate in the
purchase of such securities on a pro rata basis to the extent necessary to
maintain such holder's proportionate beneficial ownership interest in the
Company (for purposes of determining the pro rata interest of the holder, any
holder shall be treated as owning that number of shares of Common Stock into
which any outstanding convertible securities may be converted and for which any
outstanding options or warrants may be exercised). The Company shall promptly,
in writing, inform each holder which elects to purchase its pro rata portion of
such shares of any other holder's failure to do so, in which case the holders
electing to purchase such shares shall have the right to purchase all or a
portion of such shares on a pro rata basis, on terms no less favorable to the
holder, for a period of ten (10) days. Such holder shall be entitled to
apportion the right of first refusal hereby granted among itself and its
partners, affiliates and related parties in such proportions it deems
appropriate. If the Investor does not accept such offer within ten (10) days,
then that



                                     - 16 -
<PAGE>   17

portion of the shares which is not purchased may be offered to other parties on
terms no less favorable to the Company for a period of ten (10) days.

                        (b) In lieu of delivering Notice to the holders of
Series B and/or Series C Preferred Stock prior to the sale of Company offered
securities to third parties, as provided in Section 3, above, the Company may
elect first to sell Company offered securities to third parties and then, within
thirty (30) days thereafter, offer such holders the opportunity to purchase
their pro rata portions of the Company offered securities. Such offer shall
remain in effect for twenty (20) days after notice to the Investors and, if
accepted, the closing of the sale of Company offered securities shall occur
within thirty (30) days after the date of the acceptance notice.

                3.3 Expiration of Right of First Refusal. The right of first
refusal granted under this Agreement shall expire when a sale of securities
pursuant to a registration statement filed by the Company under the Securities
Act in connection with a firm commitment underwritten offering of its securities
to the general public is consummated.

                3.4 Assignment. The right of first refusal granted under this
Section 3 may be assigned (i) to a transferee or assignee in connection with any
transfer or assignment of Registrable Securities by a holder of not less than
100,000 shares of Registrable Securities, or such lesser number if such shares
constitute all of the registrable securities then held by such holder, or (ii)
to any transferee or assignee who is a constituent, member or partner or retired
partner of a holder of the estate of such partner, or to any transferee or
assignee who is a family member of the holder or a trust for the benefit of the
holder or any family member of the holder or any parent corporation or
subsidiary corporation of the holder, provided that, with respect to each such
transfer or assignment, the Company be given prior written notice of the
transfer, the transferee or assignee agree writing to all provisions contained
in this Section 3 and that such transfer otherwise be effected in accordance
with applicable laws.

        4. Miscellaneous.

                4.1 Waivers and Amendments. With the written consent of the
Company and the holders of more than 50% of the Registrable Securities,
including at least 50% of the Series B Holders and 50% of the Series C Holders,
the obligations of the Company and the rights of the holders of registrable
securities under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely), and with the same consent, the
Company, when authorized by resolution of its Board of Directors, may amend this
Agreement or enter into a supplementary agreement for the purpose of adding any
provisions of this Agreement; provided however that no consent or amendment
shall be necessary to add Investors to this Agreement in connection with their
purchase of Series B Preferred Stock from the Company. Neither this Agreement
nor any provisions hereof may be changed, waived, discharged or terminated
orally, but only by a signed statement in writing. Any amendment, waiver or
supplementary agreement effected in accordance with this paragraph shall be
binding upon each holder or any Registrable Securities then outstanding, each
future holder of all such Registrable Securities and the Company.



                                     - 17 -

<PAGE>   18

                4.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by nationally
recognized courier or upon deposit with the United States Post Office, (by first
class mail, postage prepaid) addressed: (a) if to the Company, at 250 East Grand
Avenue, Suite 70, South San Francisco, California 94080 (or at such other
address as the Company shall have furnished to the holders of Registrable
Securities in writing) attention of the Chief Executive Officer and (b) if to a
holder of Registrable Securities, at the latest address of such person shown on
the Company's records.

                4.3 Descriptive Headings. The descriptive headings herein have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.

                4.4 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.

                4.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.

                4.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

                4.7 Successors and Assigns. Except as otherwise expressly
provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.

                4.8 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter of this Agreement.

                4.9 Separability; Severability. Unless expressly provided in
this Agreement, the rights of each Investor under this Agreement are several
rights, not rights jointly held with any other Investors. Any invalidity,
illegality or limitation on the enforceability of this Agreement with respect to
any Investor shall not affect the validity, legality or enforceability of this
Agreement with respect to the other Investors. If any provision of this
Agreement is judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired.

                4.10 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.



                                     - 18 -
<PAGE>   19

        IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investors' Rights Agreement on the day and year first set forth above.

                                       PAIN THERAPEUTICS, INC.

                                       By:
                                          ---------------------------------

                                       Title:
                                             ------------------------------



                                     - 19 -
<PAGE>   20

                                       INVESTORS:

                                       ------------------------------------
                                       [Print Name]

                                       ------------------------------------
                                       [Signature]

                                       ------------------------------------
                                       [Title, if applicable]


   [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]


                                     - 20 -