Document:

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                                                                    EXHIBIT 10.5

                      [PAIN THERAPEUTICS, INC. LETTERHEAD]

                                                                October 23, 2001

Nadav Friedmann, MD, PhD.
91 Beacon Court
Lafayette, CA 94549

Dear Nadav,

On behalf of the Board of Directors, I am delighted to offer you the position of
Chief Operating Officer at Pain Therapeutics, Inc. The terms of your employment,
outlined below, reflect our previous discussions:

1.      As Chief Operating Officer and an Executive Officer of the Company, you
        will report to the President & CEO.

2.      You agree to serve your term as a member of PTI's Board of Directors and
        Scientific Advisory Board, but you may need to resign from Board
        Committees that require outside Board members.

3.      Your primary responsibilities will be to advise the Company on its
        clinical and regulatory strategies, and to execute such strategies,
        consistent with company-wide objectives and policies. Other
        responsibilities will include:

        -       assessing outside products, projects and late-stage technology
                opportunities;

        -       contributing to the preparation and implementation of budgets;

        -       establishing and maintaining professional relationships with
                leaders in the field of pain management;

        -       assisting in the Company's public relations and investor
                relations;

        -       assuming other responsibilities as these may arise from
                time-to-time at the request of the President & CEO.

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4.      Your cash compensation will be $300,000 per year and will be reviewed
        annually at such time as PTI generally conducts annual reviews for
        officers. You will be eligible to receive a discretionary year-end cash
        and/or equity bonus.

5.      You will receive an option to buy 550,000 shares of PTI common stock,
        subject to approval by PTI's Board of Directors. Your option will vest
        monthly and equally over 48 months. Your option will begin vesting on
        the first day of your full-time employment at PTI. Your option will be
        priced at the closing price of PTI's stock, as reported by NASDAQ, on
        the last market-trading day prior to the date of the grant.

6.      PTI will reimburse you for all reasonable business and travel expenses
        actually incurred on behalf of PTI, consistent with the Company's
        Finance and or Travel policies.

7.      PTI will reimburse you for reasonable relocation expenses and living
        expenses actually incurred on behalf of PTI while you live away from
        your normal residence for a period thru May 23, 2002. Such expenses must
        be documented, are subject to approval by the President & CEO, and in no
        event shall this amount exceed $30,000.

8.      We agree that your full-time start date will be October 23, 2001.

9.      You will be eligible to receive medical, life insurance, disability or
        other health, insurance or other benefits provided to regular full-time
        PTI employees.

10.     You will be entitled to accrue three (3) weeks paid vacation per year.
        Vacation time is accrued at a rate of 1.25 days per month of full-time
        employment. Accrued but unused vacation days beyond 15 days may not be
        reimbursed or carried forward from calendar year to year.

11.     You acknowledge and agree that in accordance with California law, your
        employment at PTI is "at will". You understand that PTI or you may
        terminate your employment at any time, for any reason or no reason, with
        or without cause and with and without notice.

12.     PTI also reserves the right to make personnel decisions regarding your .
        employment, including but not limited to, promotions, salary adjustment,
        scope of responsibilities, transfer and termination consistent with
        PTI's needs.

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13.     You and PTI further agree that all disputes, claims or causes of action
        arising out of your employment or its termination shall be submitted to
        binding arbitration before a neutral arbitrator, except where the law
        specifically forbids the use of arbitration as a final and binding
        remedy.

14.     You warrant and represent that you have no commitments or obligations
        inconsistent with PTI's offer of employment as of the date of your
        full-time employment with PTI. You further understand that this is a
        full-time and exclusive position in the services of PTI.

15.     You agree to sign a "CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT
        AGREEMENT" (attached).

Nadav, I believe these terms reflect our discussions. If acceptable to you,
please sign, date and return one original copy. We look forward to working with
you!

/s/ REMI BARBIER
--------------------------------

Remi Barbier
Chairman of the Board
President & CEO

  I agree to all the terms and condition of employment set forth in this letter.

                         /s/ NADAV FRIEDMANN           10/24/01
                         --------------------------    ---------
                         Nadav Friedmann, MD, PhD.     Date

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                                                                    EXHIBIT 10.6

                      [PAIN THERAPEUTICS, INC. LETTERHEAD]

         CONSULTING AGREEMENT, SETTLEMENT AGREEMENT AND MUTUAL RELEASE

        This Consulting Settlement Agreement and Mutual Release ("Agreement") is
made by and between Pain Therapeutics, Inc. (the "Company") and Barry Sherman,
MD ("Employee").

        WHEREAS, Employee was employed by the Company; and

        WHEREAS, the Company and Employee have mutually agreed to terminate the
employment relationship, release each other from any claims arising from or
related to the employment relationship, and enter into a consulting relationship
for a six month transition period;

        NOW THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as "the Parties") hereby agree as
follows:

        1. Resignation. Employee has resigned from his position as the Company's
Executive Vice President, Chief Medical Officer and member of the Scientific
Advisory Board, effective October 19, 2001.

        2. Consideration.

               (a) Upon execution of this Agreement, the Company agrees to pay
Employee $32,251.67, less applicable taxes, in respect of his unpaid salary and
accrued and unused paid time off earned through October 19, 2001 plus an advance
payment of the fee for the first month of his consultancy described herein. In
addition, the Company agrees to pay Employee at the rate of $21,666.67 per
month, less applicable withholding, for the period commencing on October 19,
2001 and ending on April 19, 2002, unless earlier terminated as provided in
clause (b) below (the "Payment Period"), in each case in accordance with the
Company's payroll practices; provided, however, that the parties acknowledge and
agree that the first monthly payment has been delivered to Employee as an
advance upon signing this Agreement. During the Payment Period, options to
purchase Company common stock held by Employee will no longer continue to vest
in accordance with applicable option agreements and Company option plans.

               (b) During the Payment Period, Employee shall, upon request by
the Company's President & Chief Executive Officer, provide consulting services
to the Company regarding preclinical, scientific, patent, technology, clinical
development projects and business development issues or other Company issues as
may arise from time to time. Such consulting services shall be rendered at
mutually agreeable times during normal business hours on days when the Company
is open for business. Such consulting services may be rendered by telephone,
electronically or in person at the

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Company's headquarters' or at such other locations as may be mutually agreed by
the parties. Employee acknowledges that attending meetings, developing written
plans and reports and participating in joint discussions with third parties are
included in the services provided by employee in his continuing role as a
consultant to the Company and both parties acknowledge that Employee is not
obligated to provide more than 20 hours of such services to the Company on a
weekly basis. The Company will reimburse Employee for his reasonable expenses
incurred in connection with providing consulting services hereunder, in
accordance with the Company's expense reimbursement policies. This consulting
relationship will terminate on the earliest to occur of (i) the date on which
Employee provides written notice of termination to the Company's President &
Chief Executive Officer, or (ii) April 19, 2002.

               (c) The exercise of any vested stock options held by Employee
shall continue to be subject to the terms and conditions of the Company's
applicable Stock Plans and the applicable Stock Option Agreement between
Employee and the Company. Employee shall continue to be a service provider to
the Company for purposes of the Company's applicable Stock Plans until April 19,
2002, and options under such plans held by Employee shall be exercisable until
May 19, 2002.

               (d) During the Payment Period, the Company will reimburse COBRA
expenses for Employee and his spouse at cost. Employee will not be entitled to
accrual of any other employee benefits, including, but not limited to, vacation
benefits or bonuses. Subsequent to the Payment Period, the Company will not
contest unemployment benefits.

        3. Confidential Information. Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
in the manner provided in, and shall continue to comply with mutually signed
NON-DISCLOSURE AGREEMENT dated March 29, 1999, by and between the Company and
Employee. Employee shall return all the Company property and confidential and
proprietary information in his possession to the Company on or before the
Effective Date of this Agreement.

        4. Payment of Salary. Employee acknowledges and represents that the
Company has paid all salary, wages, bonuses, accrued vacation and any and all
other benefits due to Employee accrued on or prior to October 19, 2001.

        5. Release of Claims. Employee agrees that the consideration set forth
in Section 2 above represents settlement in full of all outstanding obligations
owed to Employee by the Company. Employee and the Company, on behalf of
themselves, and their respective heirs, family members, executors, officers,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns,
hereby fully and forever release each other and their respective heirs, family
members, executors, officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns, from, and agree not to sue concerning, any claim,
duty, obligation or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that any of them may
possess arising from any omissions, acts or facts that have occurred up until
and including the date of this Agreement including, without limitation:

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                (i)     any and all claims relating to or arising from
                        Employee's employment relationship with the Company and
                        the termination of that relationship;

                (ii)    any and all claims relating to, or arising from,
                        Employee's right to purchase, or actual purchase of
                        shares of stock of the Company, including, without
                        limitation, any claims for fraud, misrepresentation,
                        breach of fiduciary duty, breach of duty under
                        applicable state corporate law, and securities fraud
                        under any state or federal law;

                (iii)   any and all claims for wrongful discharge of employment;
                        termination in violation of public policy;
                        discrimination; breach of contract, both express and
                        implied; breach of a covenant of good faith and fair
                        dealing, both express and implied; promissory estoppel;
                        negligent or intentional infliction of emotional
                        distress; negligent or intentional misrepresentation;
                        negligent or intentional interference with contract or
                        prospective economic advantage; unfair business
                        practices; defamation; libel; slander; negligence;
                        personal injury; assault; battery; invasion of privacy;
                        false imprisonment; and conversion;

                (iv)    any and all claims for violation of any federal, state
                        or municipal statute, including, but not limited to,
                        Title VII of the Civil Rights Act of 1964, the Civil
                        Rights Act of 1991, the Age Discrimination in Employment
                        Act of 1967, the Americans with Disabilities Act of
                        1990, the Fair Labor Standards Act, the Employee
                        Retirement Income Security Act of 1974, The Worker
                        Adjustment and Retraining Notification Act, Older
                        Workers Benefit Protection Act; the California Fair
                        Employment and Housing Act, and Labor Code section 201,
                        et seq. and section 970, et seq.;

                (v)     any and all claims for violation of the federal, or any
                        state, constitution;

                (vi)    any and all claims arising out of any other laws and
                        regulations relating to employment or employment
                        discrimination; and

                (vii)   any and all claims for attorneys' fees and costs.

        The Company and Employee agree that the release set forth in this
section shall be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to Employee's
(i) rights to indemnification and exculpation under the Company's Certificate of
Incorporation and Bylaws and pursuant to California or Delaware law; and (ii)
rights under any applicable director and officer liability insurance policy of
the Company.

        6. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Employee and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Agreement. Employee acknowledges that the
consideration given for this waiver and release Agreement is in addition to
anything of value to which

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Employee was already entitled. Employee further acknowledges that he has been
advised by this writing that (a) he should consult with an attorney prior to
executing this Agreement; (b) he has at least twenty-one (21) days within which
to consider this Agreement; (c) he has at least seven (7) days following the
execution of this Agreement by the parties to revoke the Agreement; and (d) this
Agreement shall not be effective until the revocation period has expired.

        7. No Pending or Future Lawsuits. Employee represents that he has no
lawsuits, claims, or actions pending in his name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. Employee also represents that he does not intend to bring any claims on
his own behalf or on behalf of any other person or entity against the Company or
any other person or entity referred to herein relating to the Employee's
employment relationship with the Company and the termination of that
relationship.

        8. Application for Employment. Employee understands and agrees that, as
a condition of this Agreement, he shall not be entitled to any employment with
the Company, its subsidiaries, or any successor, and he hereby waives any right,
or alleged right, of employment or re-employment with the Company. Employee
further agrees that he will not apply for employment with the Company, its
subsidiaries or related companies, or any successor.

        9. Confidentiality. The Parties hereto each agree to use their
reasonable best efforts to maintain in confidence the existence of this
Agreement, the contents and terms of this Agreement, and the consideration for
this Agreement (hereinafter collectively referred to as "Settlement
Information"). Each Party hereto agrees to take commercially reasonable
precautions to prevent disclosure of any Settlement Information to third
parties. The Parties hereto agree to take commercially reasonable precautions to
disclose Settlement Information only to those employees, officers, directors,
attorneys, accountants, governmental entities, and family members who have a
reasonable need to know of such Settlement Information. Notwithstanding the
foregoing, the Company shall be permitted to disclose Settlement Information
publicly if, and to the extent, in the reasonable opinion of counsel to the
Company, such disclosure is required in accordance with applicable state or
federal securities laws, including, without limitation, Regulation FD
promulgated by the Securities Exchange Commission.

        10. Non-Disparagement. Each party agrees to refrain from any defamation,
libel or slander of the other, or tortious interference with the contracts and
relationships of the other. All inquiries by potential future employers of
Employee will be directed solely to the President & Chief Executive Officer.
Upon inquiry, the Company shall only state the following: Employee's last
position and dates of employment.

        11. No Admission of Liability, The Parties understand and acknowledge
that this Agreement constitutes a compromise and settlement of disputed claims.
No action taken by the Parties hereto, or either of them, either previously or
in connection with this Agreement shall be deemed or construed to be (a) an
admission of the truth or falsity of any claims heretofore made or (b) an
acknowledgment or admission by either party of any fault or liability whatsoever
to the other party or to any third party.

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        12. Costs. The Parties shall each bear their own costs, expert fees,
attorneys' fees and other fees incurred in connection with this Agreement.

        13. Arbitration. The Parties agree that any and all disputes arising out
of the terms of this Agreement, their interpretation, and any of the matters
herein released, shall be subject to binding arbitration in Santa Clara County,
California before the American Arbitration Association under its California
Employment Dispute Resolution Rules, or by a judge to be mutually agreed upon.
The Parties agree that the prevailing party in any arbitration shall be entitled
to injunctive relief in any court of competent jurisdiction to enforce the
arbitration award. The Parties agree that the prevailing party in any
arbitration shall be awarded its reasonable attorney's fees and costs.

        14. Civil Code Section 1542. The Parties represent that they are not
aware of any claim by either of them other than the claims that are released by
this Agreement. Employee and the Company acknowledge that they have been advised
by legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:

                A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
                MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

        Employee and the Company, being aware of said code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.

        15. Authority. The Company represents and warrants that the undersigned
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf. Each Party warrants and represents that there are no liens or claims of
lien or assignments in law or equity or otherwise of or against any of the
claims or causes of action released herein.

        16. No Representations. Each party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither party has
relied upon any representations or statements made by the other party hereto
which are not specifically set forth in this Agreement.

        17. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.

        18. Entire Agreement. This Agreement represents the entire agreement and
understanding between the Company and Employee concerning Employee's separation
from the Company, and supersedes and replaces the Employment Agreement.

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        19. No Oral Modification. This Agreement may only be amended in writing
signed by Employee and the Chief Executive Officer of the Company.

        20. Governing Law. This Agreement shall be governed by the laws of the
State of California.

        21. Effective Date. This Agreement is effective seven days after it has
been signed by both Parties.

        22. Counterparts. This Agreement may be executed in counter-parts, and
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.

        23. Voluntary Execution of Agreement. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:

               (a) They have read this Agreement;

               (b) They have been represented in the preparation, negotiation,
and execution of this Agreement by legal counsel of their own choice or that
they have voluntarily declined to seek such counsel;

               (c) They understand the terms and consequences of this Agreement
and of the releases it contains;

               (d) They are fully aware of the legal and binding effect of this
Agreement.

        24. Non-Solicitation. For three years following the Effective Date,
Employee shall not solicit, recruit or hire, or assist any other person or
entity to solicit, recruit or hire, any employee of the Company or any of its
affiliates or any person who was employed by the Company or any of its
affiliates during the 30-day period immediately preceding the date hereof.

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        IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.

Dated: October 31, 2001

                                        PAIN THERAPEUTICS, INC.

                                        By:  /s/ REMI BARBIER
                                           --------------------------------
                                             Remi Barbier
                                             Chairman of the Board
                                             President & Chief Executive Officer

                                        BARRY SHERMAN, MD, an individual

                                        /s/ Barry Sherman
                                        -----------------------------------
                                             BARRY SHERMAN, MD

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