EXHIBIT 10.5 EMPLOYMENT AGREEMENT BY AND BETWEEN JAZZ PHARMACEUTICALS, INC. AND MATTHEW K. FUST

EXHIBIT 10.5

EMPLOYMENT AGREEMENT

BY AND BETWEEN

JAZZ PHARMACEUTICALS, INC.

AND

MATTHEW K. FUST

TABLE OF CONTENTS

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EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the " Agreement ") is made and entered into on February 18, 2004, by and between JAZZ PHARMACEUTICALS, INC., a Delaware corporation (the " Company "), and MATTHEW K. FUST (the " Executive "). The Company and the Executive are hereinafter collectively referred to as the " Parties ", and individually referred to as a " Party ".

RECITALS

A. The Company retained the services of the Executive pursuant to an offer letter, dated April 22, 2003 (the " Offer Letter ").

B. In connection with the Company’s sale of Series A Preferred Stock to investors, the Executive and the Company entered into the Amended and Restated Stock Purchase Agreement, dated April 30, 2003 (the " Stock Agreement ").

C. Certain parties are now proposing to purchase shares of the Company’s Series B Preferred Stock and Series B Prime Preferred Stock.

D. The Company and the Executive wish to enter into this Agreement in order to (i) amend and restate the terms and conditions of the Company’s retention of the Executive’s services and (ii) amend and restate the terms and conditions of certain restrictions on the capital stock of the Company held by the Executive.

AGREEMENT

NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE PARTIES AGREE AS FOLLOWS:

This Agreement and the Transactional Agreements constitute the entire agreement between the Company and the Executive regarding the subject matter hereof and thereof and supersede and replace any and all prior oral and written negotiations, correspondence, understandings and agreements between the parties regarding the subject matter hereof and thereof; provided, however, the Offer Letter, the Stock Agreement, and the Employee Confidential Information and Inventions Agreement between the Company and the Executive shall remain in full force and effect. To the extent this Agreement conflicts with the Offer Letter or the Stock Agreement, this Agreement controls. To the extent this Agreement conflicts with the Employee Confidential Information and Inventions Agreement, the Employee Confidential Information and Inventions

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Agreement controls. To the extent this Agreement conflicts with the terms of the Company’s employee handbook in effect from time to time, this Agreement controls. For purposes of this Agreement, the " Transactional Agreements " shall mean the Preferred Stock Purchase Agreement (the " Purchase Agreement ") dated January 27, 2004 among the Company and other parties identified therein, the Amended and Restated Investor Rights Agreement (the " Investor Rights Agreement ") of even date herewith among the Company and other parties identified therein, the Amended and Restated Right of First Refusal and Co-Sale Agreement (the " Right of First Refusal Agreement ") of even date herewith among the Company and the parties identified therein, and the Amended and Restated Voting Agreement (the " Voting Agreement ") of even date herewith among the Company and the parties identified therein, each as may be amended in accordance with its terms.

For purposes of this Agreement, the following terms shall have the following meanings:

2.1. " Affiliate " shall mean, with respect to any Person, a Person directly or indirectly controlling, controlled by, or under common control with, such Person.

2.2. " Annual Bonus Rate for the Termination Year " shall mean:

2.2.1. if the Executive has not previously received an annual bonus at the time of termination, the Executive’s Bonus Rate; and

2.2.2. if the Executive has previously received an annual bonus payment at the time of termination, the lesser of the Executive’s Bonus Rate and the product of the Managers’ Bonus Rate for the year in which the termination occurs times the Executive’s target bonus percentage for the year in which the termination occurs.

2.3. " Annual Bonus Rate for the Reference Year " shall mean:

2.3.1. if the Executive has not previously received an annual bonus at the time of termination, the Executive’s Bonus Rate; and

2.3.2. if the Executive has previously received an annual bonus payment at the time of termination, the lesser of the Executive’s Bonus Rate and the product of the Managers’ Bonus Rate for the Reference Year times the Executive’s target bonus percentage for the year in which the termination occurs.

2.4. " Call " shall mean the right of the Company to buy Vested Shares pursuant to Section 9.4.

2.5. " Cause " shall mean the occurrence of any of the following events:

2.5.1. the Executive’s willful misconduct or gross negligence that is materially injurious to the Company;

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2.5.2. the Executive’s conviction or plea of guilty or nolo contendere to any felony or crime involving moral turpitude;

2.5.3. the Executive’s commission of any act of fraud with respect to the Company;

2.5.4. the Executive’s willful violation of any federal or state securities law; or

2.5.5. the Executive’s willful and continued failure to perform the Executive’s job duties after 30 days’ written notice from the Board setting forth in detail the specific respects in which it believes the Executive has willfully and not substantially performed such job duties and a failure by Executive to cure within such 30-day period if capable of being cured.

2.6. " Change of Control " means (i) a sale of all or substantially all of the assets of the Company to a Person that is neither an Initial B/P Holder nor an Affiliate of an Initial B/P Holder, or to a Group that does not include an Initial B/P Holder or an Affiliate of an Initial B/P Holder, or a sale of all or substantially all of the assets of the Company to a Person in which the stockholders of the Company immediately prior to such transaction do not control more than 50% of the voting power immediately following the transaction; (ii) a transaction or series of related transactions by the Company (other than transaction(s) determined by the Board of Directors to be primarily for cash financing purposes) or by any stockholder or stockholders of the Company resulting in more than 50% of the voting power of the Company being held by a Person that is neither an Initial B/P Holder nor an Affiliate of an Initial B/P Holder, or by a Group that does not include an Initial B/P Holder or an Affiliate of an Initial B/P Holder; (iii) a merger or consolidation of the Company with or into a Person that is neither an Initial B/P Holder nor an Affiliate of an Initial B/P Holder, or with or into a Group that does not include an Initial B/P Holder or an Affiliate of an Initial B/P Holder, if and only if, after such merger or consolidation, directors of the Company immediately prior to such merger or consolidation do not constitute a majority of the directors of the surviving entity or its parent.

2.7. " Change of Control Severance " shall mean:

2.7.1. an amount, payable in one lump sum at the time of termination, equal to the product of (a) one-twelfth of the Executive’s annual base salary in effect at the time of termination times (b) the number of months included in the Severance Period, subject to standard deductions and withholdings;

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2.7.2. an amount, payable in one lump sum at the time of termination, equal to the product of the Executive’s Bonus Rate times the Executive’s base salary in effect at the time of termination prorated, on the basis of a 365-day year, to reflect the number of days elapsed in the year of Executive’s termination prior to and including the date of termination;

2.7.3. an amount, payable in one lump sum at the time of termination, equal to the product of (a) one-twelfth of the Executive’s annual base salary as in effect at the time of termination times (b) the Executive’s Bonus Rate times (c) the number of months included in the Severance Period, subject to standard deductions and withholdings; and

2.7.4. an amount, payable monthly, equal to the monthly COBRA payments to continue medical and dental benefits for a period ending on the earlier of (a) the end of the last month of the Severance Period and (b) the date on which the Executive is covered by medical and dental insurance through his or her own employment.

2.8. " Common Shares " shall mean the shares of Common Stock that the Executive now owns or hereafter acquires from the Company.

2.9. " Complete Disability " shall mean the inability of the Executive to perform the Executive’s duties under this Agreement because the Executive has become permanently disabled within the meaning of any policy of disability income insurance then in force covering employees of the Company. In the event the Company has no policy of disability income insurance in force covering employees of the Company, the term " Complete Disability " shall mean the inability of the Executive to perform the Executive’s duties under this Agreement by reason of any incapacity, physical or mental, which the Board, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board and the Executive, determines to have incapacitated the Executive from performing all of the Executive’s usual services for the Company for a period of at least 120 days during any 12 month period (whether or not consecutive) and is expected to continue to incapacitate the Executive thereafter. Based upon such medical advice or opinion, the determination of the Board shall be final and binding and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement.

2.10. " Executive’s Bonus Rate " shall mean:

2.10.1. if the Executive has not previously received an annual bonus, the target bonus percentage for the year in which the termination occurs;

2.10.2. if the Executive has previously received one annual bonus payment at the time of termination, that percentage calculated by dividing the annual bonus actually paid for the year to which the bonus relates by the salary actually paid for such year; or

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2.10.3. if the Executive has received more than one annual bonus payment at the time of termination, the average over the prior two years of the percentage calculated by dividing the bonus actually paid for the year to which the bonus relates by the salary actually paid for such year.

2.11. " Fair Market Value " shall mean the value of the Shares determined in good faith by the Board of Directors, provided that (a)(i) if the Shares are listed on any established stock exchange or a national market system, their fair market value shall be the average of the closing sales price for the Shares as quoted on such system or exchange (or the largest such exchange) over the 5-trading-day period ending immediately prior to the date of the Notice of Put/Call Exercise, as reported in the Wall Street Journal or similar publication, and (ii) if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, their fair market value shall be the mean between the closing bid and asked prices for the Shares on the date of the Notice of Put/Call Exercise (or if there are no quoted prices for such date, then for the last preceding business day on which there were quoted prices), and (b) if clauses (a)(i) or (a)(ii) are not applicable, the Board of Directors shall apply valuation techniques generally used by reputable investment bankers (without giving effect to any premium that might be paid by a strategic buyer in an acquisition) to determine the value of the Shares as of the date of the Notice of Put/Call Exercise.

2.12. " Founder Shares " shall mean shares of Common Stock that the Executive owns immediately prior to the Initial Closing (as defined in the Purchase Agreement).

2.13. " Good Reason " shall mean the occurrence of any of the following events without the Executive’s written consent:

2.13.1. a substantial diminution by the Company in the nature or status of the Employee’s responsibilities or an adverse change in title or reporting level as they exist on the date of this Agreement, or the addition of responsibilities of a nature or status inconsistent with the office of Senior Vice President and Chief Financial Officer of a company such as the Company;

2.13.2. the relocation of the Company’s executive offices or principal business location to a point more than 20 miles (or greater distance with the prior written consent of the Executive) from the Company’s current facilities in Palo Alto, California;

2.13.3. a reduction by the Company of the Executive’s base salary or bonus rate as initially set forth herein or as the same may be increased from time to

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time, other than a comparable across-the-board reduction in base salary or bonus rate of (a) the Company’s employees generally, or (b) the senior officers generally (if approved by a majority of the Company’s senior officers), in each case as a result of the Company’s need to conserve capital;

2.13.4. any action by the Company (including the elimination of benefit plans without providing substitutes thereof or the reduction of the Executive’s benefits thereunder) that would materially diminish the aggregate value of the Executive’s fringe benefits as they exist at such time, other than a comparable across-the-board diminution in fringe benefits of (a) the Company’s employees generally, or (b) the senior officers generally (if approved by a majority of the Company’s senior officers), in each case as a result of the Company’s need to conserve capital; or

2.13.5. a material breach of this Agreement by the Company.

2.14. " Group " means two or more Persons acting together as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of or voting securities of the Company.

2.15. " Initial B/P Holder " means a Person that holds any shares of Series B/P Preferred as of the date the first share of Series B/P Preferred is issued.

2.16. " Manager " shall mean any of Samuel R. Saks, Bruce C. Cozadd, Robert M. Myers, Matthew K. Fust, Carol A. Gamble and Janne L. T. Wissel.

2.17. " Managers’ Bonus Rate " shall mean the average for all Managers of X/Y where X is the actual bonus paid for the year in which a termination occurs or the Reference Year, as appropriate, and Y is the target bonus for such year; but including only those Managers who were employed for the entire year; provided that if there were no Managers employed for the entire year, then the Managers’ Bonus Rate shall equal the Executive’s Bonus Rate.

2.18. " Management Team " shall mean the Chairman of the Board (if the Chairman is an officer of the Company), the Chief Executive Officer, and the management employees reporting directly to the Chairman or the Chief Executive Officer, in office immediately prior to a Significant Transaction.

2.19. " Original Purchase Price " for each Share shall mean the price paid by the Executive for that Share (as appropriately adjusted for any stock combination, stock split, stock dividend, recapitalization or other similar transaction after the date hereof).

2.20. " Person " means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature, and "control" shall have the meaning given such term under Rule 405 of the Securities Act of 1933, as amended (the "Securities Act").

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2.21. " Preferred Shares " shall mean the shares of the Company’s Series A Preferred Stock and Series B Preferred Stock (or Common Stock issuable upon conversion of the Series A Preferred Stock or Series B Preferred Stock) that the Executive now owns or hereafter acquires from the Company.

2.22. " Put " shall mean the right of the Executive or his/her estate to require the Company to buy Vested Shares pursuant to Section 9.4.

2.23. " Reference Year " shall mean the year following the year in which the Executive’s employment termination occurs.

2.24. " Regular Severance " shall mean:

2.24.1. an amount, payable in accordance with the Company’s customary payroll practices, for each month during the Severance Period, equal to one-twelfth of the Executive’s base salary in effect at the time of termination, subject to standard deductions and withholdings; plus

2.24.2. an amount, payable monthly, equal to the monthly COBRA payments to continue medical and dental benefits for a period ending on the earlier of (a) the end of the last month of the Severance Period and (b) the date on which the Executive is covered by medical and dental insurance through his or her own employment;

2.24.3. an amount, payable at such time as bonus payments are due to other employees of the Company for the year in which the termination occurs, equal to the sum of (a) one-half of the Annual Bonus Rate for the Termination Year times Executive’s base salary in effect at the time of termination prorated, on the basis of a 365-day year, to reflect the number of days elapsed in the year of Executive’s termination prior to and including the date of termination plus (b) the Annual Bonus Rate for the Termination Year times Executive’s base salary in effect at the time of termination prorated, on the basis of a 365-day year, to reflect the number of days remaining in the year of Executive’s termination after the date of termination; and

2.24.4. an amount, payable at such time as bonus payments are due to other employees of the Company for the Reference Year, equal to the Annual Bonus Rate for the Reference Year times the Executive’s base salary in effect at the time of termination prorated, on the basis of a 365-day year, to reflect the number of days elapsed in the year of Executive’s termination prior to and including the date of termination.

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2.25. "Right of Repurchase" shall mean the Company’s right to repurchase Unvested Shares pursuant to Section 8.1.

2.26. " Severance Period " shall mean 12 months plus one additional month for each quarter, up to a maximum of 12, that the Executive has been employed by the Company in excess of two years. For avoidance of doubt, the maximum Severance Period is two years.

2.27. " Shares " shall mean the Common Shares and the Preferred Shares.

2.28. " Significant Transaction " shall mean a merger or consolidation of the Company with or into any Person, or an acquisition of all of the business of another Person regardless of form, if and only if, after such merger, consolidation or acquisition, directors of the Company immediately prior to such merger, consolidation or acquisition constitute a majority of the directors of the surviving entity or its parent.

2.29. " Transactional Agreements " shall have the meaning assigned in Section 1.

2.30. " Unvested Founder Shares " shall mean the Founder Shares held by the Executive that are then subject to the Right of Repurchase.

2.31. " Vested Shares " shall mean the Shares held by the Executive that are not subject to the Right of Repurchase.

2.32. " Vesting Base Date " shall mean the date(s) set forth on Exhibit A .

3.1. Term . The Company hereby employs the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement. The term of the Executive’s employment under the terms and conditions of this Agreement shall continue until the fifth anniversary of the date of this Agreement, subject to the provisions of Section 5.

3.2. Title . The Executive shall have the title of Senior Vice President and Chief Financial Officer of the Company and shall also serve in such other capacity or capacities as the Board of Directors of the Company (the " Board ") may from time to time prescribe. The Executive shall report to the Chief Executive Officer of the Company.

3.3. Duties . The Executive shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the position of Senior Vice President and Chief Financial Officer, consistent with the bylaws of the Company and as required by the Board.

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3.4. Location . Unless the Parties otherwise agree in writing, during the term of Executive’s employment under this Agreement, the Executive shall perform the services Executive is required to perform pursuant to this Agreement at the Company’s offices, located in Palo Alto, California; provided, however, that the Company may from time to time require the Executive to travel temporarily to other locations in connection with the Company’s business.

3.5. Commitment . Unless otherwise agreed to in advance by the Company’s Board of Directors, during the Executive’s employment by the Company, the Executive shall devote substantially all of Executive’s business energies, interest, abilities and productive time to the proper and efficient performance of Executive’s duties under this Agreement; provided, however, the Executive may engage in other outside business activity listed on Exhibit B hereto. If the Executive wishes to engage in any other outside work, the Executive agrees to notify and consult with the Board of Directors and shall not engage in such other outside work without the prior approval of the Board of Directors.

4.1. Base Salary . The Company shall pay the Executive a base salary at a rate of three hundred thousand dollars ($300,000) per year for calendar year 2004, subject to increases approved by the Board of Directors for calendar years thereafter, less payroll deductions and all required withholdings, payable in regular periodic payments in accordance with Company policy. Such base salary shall be prorated for any partial year of employment on the basis of a 365-day year.

4.2. Bonus . In addition to Executive’s base salary, the Executive will be entitled to receive a bonus determined in accordance with an executive bonus plan established by the Board of Directors. The target bonus for the Executive shall be 40% (subject to increases approved by the Board of Directors) of the annual base salary rate.

4.3. Employment Taxes . All of the Executive’s compensation shall be subject to customary withholding taxes and any other employment taxes as are commonly required to be collected or withheld by the Company.

4.4. Benefits . The Executive shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to participate in benefits under any executive benefit plan or arrangement which may be in effect from time to time and made available to the Company’s executive or key management employees.

4.5. Vacation . Executive shall be eligible for paid time off and holidays in accordance with the Company’s standard policies for executive employees.

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4.6. Expenses . The Company shall reimburse Executive for all reasonable, documented out-of-pocket business expenses incurred on behalf of the Company in the performance of the Executive’s duties.

5.1. Termination by the Company . The Executive’s employment with the Company may be terminated under the following conditions:

5.1.1. Death or Disability . The Executive’s employment with the Company shall terminate effective upon the date of the Executive’s death or Complete Disability.

5.1.2. For Cause . The Company may terminate the Executive’s employment under this