Strategic Redistribution Center and Core Distribution Agreement



 Exhibit 10.23 

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 
 CDA+SRC 

McKesson Corporation 

Strategic Redistribution Center and Core Distribution Agreement 

This Strategic Redistribution Center and Core Distribution Agreement (“Agreement”) is entered into between McKesson Corporation
(“McKesson”), a pharmaceutical distributor, and Zogenix, Inc. (“Manufacturer”), a pharmaceutical manufacturer. 
 McKesson
performs certain Core Services (as hereinafter defined) in connection with the distribution of pharmaceutical products manufactured by manufacturers. The parties now wish to define more precisely the amount and manner of the consideration to be
received by McKesson from Manufacturer for its performance of the Core Services. 
 Now, therefore, McKesson and Manufacturer agree as follows:

  

	 	I.	Obligations of McKesson 

  

	 	a.	McKesson agrees to provide the following core distribution services to the extent customarily performed by a full-range pharmaceutical distributor consistent with then
current industry practices (“Core Services”): 

  

	 	i.	Strategic Redistribution Center (“SRC”) – single destination shipping location in Aurora, Colorado. McKesson utilizes the SRC to reroute products to its
local distribution centers and/or customer warehouses utilizing state-of-the-art technology; 

  

	 	ii.	Efficient Inventory Levels – maintenance of efficient inventory levels to reflect true customer demand and maintain high customer service levels;


  

	 	iii.	Enhanced Reporting Package – electronic transmissions of 852 and 867 data via the Electronic Data Interchange (“EDI”), including levels and aggregate
sales out by Distribution Center (“DC”). All data metrics available in the 852 and 867 data sets are listed in Attachment A; 

  

	 	iv.	Returns Processing – receiving and reselling saleable returned product from customers and returning un-saleable product to the Manufacturer;


  

	 	v.	Contract Pricing Administration – updating price changes to existing contracts and adding new customer contracts in a timely manner; 


 

	 	vi.	Chargeback Processing – accurate and timely processing of customer chargebacks due to contract pricing between the customer and Manufacturer.


  

	 	b.	Services that are not Core Services (“Value Added Services”) are not included in this Agreement and shall be priced individually and separate from this
Agreement 

  

	 	II.	Obligations of Manufacturer 

  

	 	a.	Manufacturer agrees to replenish McKesson’s inventory orders in a timely and efficient manner. Manufacturer will utilize purchase order numbers provided by
McKesson when placing orders on behalf of McKesson. 

 COPYRIGHT © 2008
MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

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	 	b.	Manufacturer desires to deliver products to the SRC in lieu of making separate deliveries to each distribution center in McKesson’s distribution center network;


  

	 	c.	All products shall be delivered F.O.B. McKesson Strategic Redistribution Center in Aurora, CO freight and insurance prepaid; 


 

	 	d.	Manufacturer will use commercially reasonable efforts to ensure that McKesson’s inventory replenishment is operational, except for any scheduled down time needed
to maintain effective operations and/or when interruptions are necessary or caused by conditions outside of Manufacturer’s control. 

  

	 	e.	In consideration of the Core Services to be provided pursuant to this Agreement, Manufacturer will pay a fee to McKesson determined in accordance with Attachment
B. 

  

	 	III.	Additional Terms and Conditions 

  

	 	a.	Payment calculations are all based on gross branded pharmaceutical purchases by McKesson. 


 

	 	b.	In the event Manufacturer acquires pharmaceutical products after date on which this Agreement becomes effective from a third party (“Seller”) and Seller was
paying McKesson a fee for service with respect to the distribution of such products, Manufacturer agrees, to extent permitted by law, to pay McKesson a fee for service within the same amount and manner as paid by Seller for the period following such
acquisition until March 31st. After such period, such products will be subject to fee for service payments as set forth in this agreement. 


Manufacturer agrees, as part of such acquisition, to obtain the consent from Seller for disclosure by McKesson to Manufacturer of the
information necessary for purposes of complying with the foregoing paragraph. 
  

	 	IV.	Confidentiality and Disclosure 


This Agreement and all information which is provided by each party to the other party pursuant to this Agreement are confidential. Each
party agrees to maintain all such information confidential, and except as may be required by law or order of any court or governmental agency, not to disclose to any third party any such information unless such party shall obtain a written release
from the other party. Each party further agrees to limit access to such information to only those of its officers and employees who reasonably need to know such information. Manufacturer acknowledges that information generated, compiled or stored by
McKesson reflecting the purchase and resale of its products to customers does not constitute the confidential information of Manufacturer. 
  

	 	V.	Effective Date 

  

	 	a.	This Agreement shall become effective as of December 28, 2010 and shall remain in effect until terminated in accordance with Section b., below.


  
 COPYRIGHT © 2008
MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

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 CDA+SRC 
  

	 	b.	Either party may terminate this Agreement with or without cause at any time on [***] days prior written notice to the other party. 


 

	 	VI.	General 

  

	 	a.	This Agreement is in addition to and shall not supersede any existing agreement in effect between McKesson and Manufacturer, including but not limited to the McKesson
Buying Terms Form or McKesson Supplier Terms and Conditions entered into between the parties. 

  

	 	b.	This Agreement will be governed by and construed in accordance with the laws of California, without regard to or application of conflict of law, rules or principles.


  

	 	c.	In no event shall either party be liable to the other party under this Agreement for any special, consequential, incidental or indirect damages, however caused, on any
theory of liability and whether or not either party has been advised of the possibility of such damages. 

  

	 	d.	The parties to this Agreement are independent contractors. Accordingly, this Agreement does not constitute a partnership or other joint venture between the parties and
neither party shall be deemed to be an agent or representative of the other. 

  

	 	e.	The failure of either party to enforce at any time or for any period of time any one or more of the provisions hereof shall not be construed to be a waiver of such
provisions or of the right of such party thereafter to enforce each such provision. 

  

	 	f.	Except for the obligation to pay money, neither party will be liable to the other party for any failure or delay in performance caused by reasons beyond such
party’s reasonable control, including but not limited to acts of God, war, riot, acts of terrorism, fire, shortage of materials or transportation, strikes or acts of civil or military authorities, provided such party gives prompt written notice
thereof to the other party. 

  

	 	g.	In the event Manufacturer requires services (i.e. distribution, pharmacy, marketing or logistics) that McKesson Specialty can provide, McKesson Specialty will be given
the opportunity to bid on providing these services to Manufacturer at the time they may be put out for bid, along with any other competitor(s) that Manufacturer may so choose. 


 

	 	h.	This agreement may not be assigned by either party without the prior written consent of the other party. Notwithstanding the foregoing, McKesson may assign its rights
and obligations hereunder without the consent of Manufacturer to a subsidiary or affiliate or to an entity which purchases all or substantially all of McKesson’s stock or assets or acquires control of McKesson, whether by merger, acquisition,
or to a financial institution in connection with the grant of security interest herein. Notwithstanding the foregoing, Manufacturer may assign its rights and obligations hereunder without the consent of McKesson to a subsidiary or affiliate or to an
entity which purchases all or substantially all of Manufacturer’s stock or assets or acquires control of Manufacturer, whether by merger, acquisition, or to a financial institution in connection with the grant of security interest herein.


 [Remainder of Page Intentionally Left Blank] 

 

	***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted
portions. 

  
 COPYRIGHT
© 2008 MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

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 IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year
written below and the persons signing warrant that they are duly authorized to sign for and on behalf of the respective parties. This Agreement shall be deemed accepted by McKesson only upon execution by a duly authorized representative of McKesson.

  

							
	For Zogenix, Inc.:	 	For McKesson Corporation:
				
	By:	 	 /s/ Roger Hawley
	 	By:	 	 /s/ Mark Q. Miller

				
	Name:	 	Roger Hawley	 	Name:	 	Mark Miller
		 	 (Print or Type)
	 		 	 (Print or Type)

				
	Title:	 	CEO	 	Title:	 	VP, Procurement Services
				
	Date:	 	December 28, 2009	 	Date:	 	2-1-10
		 	 /s/ David Nassif, CFO
	 		 	

 [Signature Page to the Strategic Redistribution Center and Core Distribution Agreement]

  
 COPYRIGHT © 2008
MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

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 Attachment A 

852 / 867 DATA 
  

	1.	Testing Electronic Transmissions 

  

	 	•	 	 852 and 867 data cannot be sent until the EDI transmission has been tested and certified by the Manufacturer’s EDI data team.



  

	2.	Data Frequency 

  

	 	•	 	 852 data can be sent only in one frequency - daily, weekly, or monthly. It cannot be sent in a combination of frequencies (i.e. daily and
monthly). 


  

	 	•	 	 867 data can be sent only in one frequency - daily, weekly, or monthly. It cannot be sent in a combination of frequencies (i.e. daily and
monthly). 


  

	 	•	 	 852 and 867 can be sent in different frequencies from each other – i.e. 852 can be sent weekly and 867 can be sent monthly.



  

	3.	Substitute Data 

  

	 	•	 	 Substitute inventory or sales data can be provided only if a Manufacturer is not EDI compliant or has not contracted with a third party data
processor 


  

	 	•	 	 A NISR report can be substituted for the 852 


  

	 	•	 	 A Sales Tracing report can be substituted for the 867 



 

	 	•	 	 Relative to 852 and 867, the NISR and Sales Tracing reports respectively are not as robust, may not provide the same level of detail, and are only
available in weekly or monthly frequencies (not available daily). 


  

	4.	McKesson will not provide any back history sales data. 

  

	5.	Transmissions through AS2, a secure Internet transmission protocol, will incur no additional incremental fee. Transmissions through a VAN (Value Added Network) are
subject to an additional incremental fee. 

 Please select the data report type and then select the frequency (choose only
one). The default selection is Weekly if no choice is indicated. 
 Inventory Data (Choose only one and then select frequency for your
choice) 
  

	 ̈	852 Inventory Data via EDI transmission 

  

					
	  ̈       Monthly
	  	  ̈       Weekly
	  	 x       Daily



 

	 ̈	NISR (used as a substitute for 852 only if not EDI compliant) 


 

					
	  ̈       Monthly
	  	  ̈       Weekly
	  	

 Sales Data (Choose only one and then select frequency for your choice) 

 

	 ̈	867 Sales Data via EDI transmission 

  

					
	  ̈       Monthly
	  	 x       Weekly
	  	  ̈       Daily



 

	 ̈	Sales Tracing (used as a substitute for 867 only if not EDI compliant) 


 

					
	  ̈       Monthly
	  	  ̈       Weekly
	  	

 Please complete contact information to begin testing and certification process 

 

			
	MANUFACTURER EDI CONTACT	  	MCKESSON EDI CONTACT
	Name: Dayna Bauman	  	Name: Dennis Lim
	Phone #: 615 - 715 - 6755	  	Phone #: 415-983-9320
	Email: dbauman@zogenix.com	  	Email: dennis.lim@mckesson.com

  

COPYRIGHT © 2008 MCKESSON CORPORATION. ALL
RIGHTS RESERVED. 
 THIS DOCUMENT IS
PROPRIETARY AND CONFIDENTIAL. 
  

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 The following pages are listings and definitions of the available fields for the 852s and 867s. Please
note that due to system constraints, no additional fields are available and these fields and qualifiers are not negotiable. 

Data Fields and Definitions 

852s (Limited to fields listed below) 
  

					
	Data Range Start	  	Start date of the data	  	
			
	Data Range End	  	End date of the data	  	
			
	DC DEA Number	  	Distribution Center Drug Enforcement Administration number	  	
			
	NDC	  	National Drug Code – if available	  	
			
	UPC	  	Universal Product Code – if available	  	
			
	Econo	  	McKesson Item Number – if available	  	
			
	Status	  	Active SKU codes are: A, G, M, N, and W; the rest are inactive	  	
			
		  		  	Qualifiers
			
	Total Orders	  	Quantity ordered – sales + omits	  	QX
			
	Sales Quantity	  	 Aggregate of sales including:
  

•     customer end sales

 
 •     dock to
dock sales
  

•     drop ship sales

 
 •     repacked
sales
  
 Note: Transfers out of the Memphis Regional Distribution Center or
other DCs are not considered sales and therefore are not included here.
	  	QS
			
	Lost Sales Quantity	  	Unfiltered omitted units	  	QO
			
	Saleable On-hand	  	 Actual quantity currently stocked in the warehouse available for sale

 
 Note: Pending customer orders not filled are not subtracted out (see QC –
Committed quantity)
	  	QA
			
	Ending Saleable On-hand	  	Same as saleable on-hand	  	QE
			
	Unsaleable On-hand	  	On-hand in the reclamation center (a.k.a. morgue) – this is not considered as on-hand for ordering purposes	  	TS

  

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RIGHTS RESERVED. 
 THIS DOCUMENT IS
PROPRIETARY AND CONFIDENTIAL. 
  

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	Total On-order	  	Total on-order quantity, including orders placed to the manufacturer, transfers from the Memphis Regional Distribution Center, the Denver Strategic Redistribution Center, and
transfers from other DCs	  	QP
			
	Manufacturer On-order	  	On-order quantity from manufacturer	  	Q1
			
	DC to DC In-transit	  	Transfer on-order from McKesson DC to another McKesson DC (inter-DC transfers)	  	QM
			
	RxPak/Specialty On-order	  	On-order quantity from McKesson RxPak & McKesson Specialty divisions	  	QL
			
	Quantity Received	  	Receipt quantities	  	QR
			
	Inventory Adjustments	  	Adjustments to inventory not included in sales, transfers, or receipts	  	QT
			
	SKU Weekly Forecast	  	 SKU weekly customer demand forecast
  

Note: For the Regional Distribution Center (8194), forecasts are derived by adding the forecasts from all forward DCs plus the forecasts for the
RDC’s sales to warehouse customers. It is important to note that the buying system does not use this specific number for calculating order quantities.
	  	QD
			
	SKU Four Week Forecast	  	Weekly forecast times four (QD x 4)	  	QF
			
	 Order Projections

13 weeks out
	  	Based on current information, projected unit order quantities (to the vendor) by week for 13 weeks. (First instance = one week out, second instance = two weeks out,
etc.)	  	OQ
			
	Lines Sold	  	Unfiltered lines sold, no adjustments	  	WQ
			
	Lines Lost	  	Lines Lost is defined as Lines Ordered – Lines Sold	  	LS
			
	Inter-DC Transfers Out	  	Quantity transferred out	  	QW
			
	Inter-DC Transfers In	  	Quantity transferred received	  	QZ
			
	 SKU Quantity Returned

into Inventory
	  	Saleable customer returns	  	Q2
			
	 SKU Quantity Returned

to Morgue
	  	Unsaleable customer returns	  	Q3
			
	SKU Reserved Quantity	  	Additional quantity maintained in the buying system, typically used for new business and holiday builds	  	QH
			
	SKU Committed Quantity	  	Customer orders to be filled	  	QC
			
	Customer End Sales	  	Regular sales to customers through McKesson DCs (does not include transfers to McKesson distribution centers)	  	RE
			
	Dock-to-dock Sales	  	Dock-to-dock sales	  	QI
			
	Drop Ship Sales	  	Drop ship sales	  	OF
			
	SRC Sales	  	Sales by the Strategic Redistribution Center (SRC) to outside customers (does not include transfers to McKesson distribution centers)	  	QK

  

COPYRIGHT © 2008 MCKESSON CORPORATION. ALL
RIGHTS RESERVED. 
 THIS DOCUMENT IS
PROPRIETARY AND CONFIDENTIAL. 
  

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	Repacked Sales	  	Repack (RxPak) finished goods sales	  	OP
			
	SKU Standard Deviation	  	SKU customer forecast standard deviation percent	  	PA
			
	Planned Inventory Qty	  	Planned inventory quantity buy, typically manually calculated special quantities	  	QN
			
	SKU Reorder Point	  	Buying system reorder point	  	PO
			
	SKU Lead Time	  	Buying system SKU lead time	  	BS
			
	 SKU Lead Time

Variability
	  	Lead time standard deviation percent	  	MS

  

COPYRIGHT © 2008 MCKESSON CORPORATION. ALL
RIGHTS RESERVED. 
 THIS DOCUMENT IS
PROPRIETARY AND CONFIDENTIAL. 
  

 iv 








 867s (Limited to fields listed below) 

 

			
	Processing Date	  	Date file is created
		
	Data Range Start	  	Start date of the data
		
	Data Range End	  	End date of the data
		
	Transaction Date	  	Transaction date
		
	Invoice#	  	Invoice number
		
	Invoice Date	  	Invoice date
		
	Contract Number	  	Contract number if contract sale
		
	Manufacturer DEA#	  	Manufacturer Drug Enforcement Administration number – for Class II as well as III-V vendor numbers
		
	Manufacturer Name	  	Manufacturer name
		
	DC DEA#	  	Distribution Center Drug Enforcement Administration number
		
	DC Name	  	DC name
		
	NDC	  	National Drug Code – if available
		
	UPC	  	Universal Product Code – if available
		
	Econo	  	McKesson Item Number – if available
		
	UOM	  	Selling unit of measure
		
	Cost	  	Wholesale acquisition cost (WAC)
		
	 Quantity Purchased

(or transferred)
	  	 Quantity filled – includes:
  

•     customer end sales

 
 •     dock to
dock sales
  

•     drop ship sales

 
 •     repacked
sales
  

•     transfers

 
 See Sales Type Codes to distinguish the transaction



 
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MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

 v 









			
	Sales Type Code	  	 1 = Customer end sales
  

2 = Dock to dock
  

3 = Drop ship
  

4 = Rx Pak
  

5 = Returns, saleable
  

6 = Returns, unsaleable
  

7 = Inter-DC transfers; regular transfers out
  

8 = Inter-DC transfers; transfer cancellations

		
	Customer Returns	  	Saleable and unsaleable returns
		
	Customer Name	  	 Customer name
  

For blocked customer, the name will be “Blocked Per Customer”

		
	Customer DEA#	  	 Customer Drug Enforcement Administration number
  

For blocked customer, the DEA# will not be sent

		
	Customer Address	  	 Customer street address
  

For blocked customer, the address will not be sent

		
	City	  	 Customer city
  

For blocked customer, the city will not be sent

		
	State	  	 Customer state
  

For blocked customer, the state will not be sent

		
	Zip	  	 Customer zip
  

For blocked customer, only the first 3 digits of the zip code will be populated



Note: McKesson will not provide any customer information where it violates the customer contract with McKesson. 

*        *        * 

ENHANCED REPORTING PACKAGE ELECTION 

Service Level Report 
  

	 ̈	Yes 


	 ̈	No 

 Un-saleable Product Report
(provided only if a Manufacturer is not EDI compliant or has not contracted with a third party data processor) 
  

	 ̈	Yes 


	 ̈	No 

  

COPYRIGHT © 2008 MCKESSON CORPORATION. ALL
RIGHTS RESERVED. 
 THIS DOCUMENT IS
PROPRIETARY AND CONFIDENTIAL. 
  

 vi 








 Attachment B 

STRATEGIC REDISTRIBUTION CENTER AND CORE DISTRIBUTION AGREEMENT 

FEE SCHEDULE 
  

	1.	In consideration of the Core Services to be provided pursuant to this Agreement, including SRC services, Manufacturer shall provide a total fee of [***]


  

	 	A.	For the SRC services performed hereunder, Manufacturer shall pay to McKesson a fee equal to [***] [***]; and 


 

	 	B.	For the Core Services (other than the SRC services) performed hereunder, Manufacturer shall pay to McKesson a fee equal to [***]. 


 

	 	C.	If in the [***] Zogenix does not hit the volume goal of [***] with McKesson the Core Services fee will increase an additional [***] to a total of [***].


  

	2.	In further consideration of the Core Services to be provided pursuant to this Agreement [***]. 


 

	3.	All fees will be invoiced monthly with [***] day payment terms from the date of the invoice. 


 

	***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted
portions. 

  
 COPYRIGHT
© 2008 MCKESSON CORPORATION. ALL RIGHTS RESERVED. 

THIS DOCUMENT IS PROPRIETARY AND CONFIDENTIAL.

  

 i