Sample Business Contracts

Contract Manufacturing Agreement - Advanced Electronics Inc. and NeuroMetrix Inc.

Sponsored Links



                            ADVANCED ELECTRONICS, INC
                                12 CHANNEL STREET
                                BOSTON, MA 02210


                                  62 FOURTH AVE
                                WALTHAM, MA 02451


                             MANUFACTURING AGREEMENT

           Agreement made this 20th day of NOVEMBER 2002, and between

                           NEUROMETRIX, INC. (Buyer) a

              Corporation, with its principal place of business at

                                 62 FOURTH AVE.
                                WALTHAM, MA 02451


Advanced Electronics, Inc., with a principal place of business located at 12
Channel Street, Boston, MA 02210 ("AEI") sets forth the terms and conditions
under which AEI will perform certain production work on behalf of the Buyer.

1.0      GENERAL

1.1      LIABILITY

         Except as otherwise provided in this Agreement, neither party shall be
         liable for special, indirect, incidental or consequential damages
         arising out of or in connection with claims brought by third parties,
         or any indemnifications granted by either party in connection with this


         If any provision of this Agreement is held to be invalid or
         unenforceable, such invalidity of unenforceability shall not affect the
         enforceability of any other provisions of this Agreement not held to be


         Modification of this Agreement must be made in writing, signed by a
         duly authorized Corporate Officer of each party. No Amendment shall be
         deemed effective, until a duplicate original of such Amendment is
         received by each party.


         Both parties agree to comply with all applicable laws, rules and
         regulations with regard to the performance of its obligations under the
         Agreement and indemnify and hold the other party harmless from any loss
         resulting from its failure to obey all such laws, rules and
         regulations. This Agreement is made in, governed by, and shall be
         construed in


         accordance with the laws of The Commonwealth of Massachusetts
         including, unless provided otherwise herein, the Uniform Commercial
         Code as implemented in Massachusetts General Laws.

1.5      WAIVER

         Either party's failure to exercise, in whole or in part, or delay in
         exercising any right under this Agreement will not preclude any future
         exercise of the same right or the exercise of any other right

1.6      All notices pertaining to this Agreement shall be in writing, delivered
         to the party at this address set forth below.

         To: Advanced Electronics, Inc  To: (Buyer): NEUROMetrix, Inc.
             12 Channel St                           62 Fourth Ave.
             Boston, MA 02111                        Waltham MA 02451

             Attn: Ms. Ching-Wah Wong                Attn: Mr. Charles Fendrock


         Neither party will be liable nor deemed to be in default for delay or
         failure in performance or interruption of service hereunder resulting
         directly or indirectly from acts of God, wars, floods, riots, labor
         strikes, worldwide parts shortages, or transportation shortages,
         provided, however, the provisions of this section shall not apply to
         obligations to make payments when due. The time for performance so
         affected or delayed will be deemed extended for the period of such
         delay. The party claiming excuse for failure to perform due to force
         majeure shall notify the other party in writing within five (5) days of
         the existence of the force majeure cause and its expected duration.


         Each party hereby agrees for a period of three (3) years from the
         Effective Date that all information in writing or other physical form
         delivered to it by the other party which is designated to be
         proprietary and confidential will be safeguarded in the same manner the
         receiving party safeguards its own proprietary and confidential
         information or like character, and will not be divulged to their
         parties. Information which is initially orally or visually submitted
         and identified at the time of initial disclosure as proprietary shall
         be safeguarded by the receiving party only if the submitting party
         notifies the receiving party in writing within ten (10) business days
         of such initial oral or visual disclosure, with a specific
         identification of the proprietary information contained in such initial
         oral or visual disclosure.

         This Agreement shall not impose any obligation upon the receiving party
         with respect to any portion of the received information with (I) is
         now, or which hereafter, through no act or failure to act on the party
         of the receiving party, becomes generally known or available, (II) is
         known to the receiving party at the time of receiving such information,
         (III) is furnished by the disclosing party to others without
         restriction on disclosure, (IV) is hereafter


         furnished to the receiving party by a third party, as a manner or right
         and without restriction on disclosure, (V) is independently developed
         by the receiving party, or (VI) more than three (3) years after such
         information is disclosed to the receiving party, or (VII) is authorized
         in writing for release by the disclosing party.

1.9      AUTHORITY

         Buyer warrants that it has the unqualified right to enter this
         Agreement, that it is the owner of or has the right to transfer all
         rights and licenses to all technology, intellectual property and other
         deliverables under the terms of this Agreement, and that it has the
         right to perform all obligations under this Agreement.


         Neither party may assign or otherwise transfer its rights and
         obligations under this Agreement without the prior written consent of
         the other party, which consent shall not be unreasonably withheld.


         This Agreement sets forth the entire agreement and understanding
         between the parties with respect to the subject matter hereof and
         merges all prior discussions and negotiations between them. There are
         no oral representations or inducements pertaining thereto which are not
         contained herein; and neither of the parties hereto shall be bound by
         any conditions, warranties, understandings to representations with
         respect to such subject matter other than as expressly provided herein.


         The parties understand that except as may be otherwise expressly stated
         herein, the terms and conditions of the Agreement shall not be
         considered in any way as a grant of any license whatsoever under either
         party's present or future trademarks, trade secrets, or other
         proprietary rights, nor is any such license granted by implication, or

2.0      WORK SCOPE

         During the term of this Agreement, AEI will supply product that meets
         all assembly, test, quality and documentation requirements at a cost
         provided in the quotation for the product, and on a delivery schedule
         guided by the purchase order. Assembly & test, labeling and production
         records must meet all applicable FDA QSR regulations and ISO medical
         product standards. Product is assembled, tested and labeled per
         customer specifications. Customer has responsibility to ensure their
         specifications meet applicable regulatory requirements and effectively
         communicate requirements to AEI.

         AEI shall manufacture, sell and deliver product, listed on Exhibit A,
         exclusively to Buyer under the terms and conditions of this Agreement.
         All parts and components purchased and inventory used in the
         construction of the Product, shall be sourced from the Buyer's AVL
         (Approved Vendor List). Parts and components NOT listed on the


         Buyer's AVL shall NOT be used unless approved by the Buyer. Any
         modifications to the Buyer AVL must be approved, in writing, by the
         Buyer, through the ECO process, as defined in Paragraph 7.0 AEI shall
         provide manufacturing and testing for the products in accordance with
         the Buyer's specifications.


         The terms and conditions of this agreement shall apply to all products
         listed on Exhibit A and other future products to be manufactured by AEI
         for Buyer.

         The Contract Manufacturing Agreement is good until otherwise modified
         or terminated by mutual written Agreement.


         The Initial Term of this Agreement is twelve (12) months.

         Upon the effective date, and at each subsequent renewal date, Buyer
         will provide AEI with a twelve (12) month rolling forecast of the
         product to be ordered for the succeeding twelve (12) month period, and
         thereafter, in the first week of each succeeding quarter, Buyer will
         update the twelve (12) month forecast. The Initial twelve (12) month
         forecast will be the base used for setting yearly volumes and
         determining pricing.

         Unless terminated earlier as provided in Section 10.0, the Agreement is
         automatically renewed at twelve (12) months increments, unless either
         party gives written notice to the other party not to renew with not
         less than 90 days of notice.


         Buyer will issue a purchase order for the initial Term, with specific
         release schedules for the first three (3) months and with sufficient
         time to permit AEI to obtain the long lead-time components. Thereafter,
         Buyer will maintain a three (3) month window of release schedules and
         will provide a rolling twelve (12) month forecast, which will include
         the three (3) months firm release.

         Buyer's purchase orders ("Orders") must be in writing and with the
         following information: (I) identification of the Products by quantity,
         model number, revision and description; (II) shipment instructions,
         including requested shipment date, and (III) price. All orders must
         incorporate by reference the terms and conditions of this Agreement.
         The terms and conditions of this Agreement shall supersede all terms
         and conditions contained in Buyer's purchase orders. All requirements
         shall be scheduled per the Order, and all scheduled dates shall be
         regarded as dates of shipment from AEI's facilities.

         AEI will utilize the forecast to secure long lead-time components (i.e.
         components that exceed 8 weeks lead-time.) on behalf of the Buyer. AEI
         will only procure material based on the available lead time plus the
         manufacturing offset time.



         Buyer may make changes and reschedule the individual assembly to be
         manufactured and delivered in accordance with the following;

         The order for product in the nearest 3-month period will be
         non-cancelable, and any orders beyond 3 months may be increased or
         decreased by an amount agreed to by AEI.

         The starting day of the remaining lead-time is defined as the first day
         of the following month, after the written schedule change notices
         received by AEI.

3.4      In the case of cancellation, Buyer is responsible for any undamaged
         material, at quoted standard cost inventoried by AEI in support of
         Buyers' Purchase Order (s) that is not reusable by AEI or returnable to
         the supplier. Additionally, Buyer is responsible for any cancellation
         charges, restocking charges, or any noncancelable commitments incurred
         by AEI for such material. Such inventory items will be identified upon
         the initial execution of this Agreement, and as they become otherwise
         identified during the course of this Agreement.

3.5      If there is an increase in forecasted requirements, AEI shall make
         reasonable efforts to service the increase and shall advise Buyers of
         its efforts to service the increased requirements. Buyer and AEI shall
         jointly work with suppliers of the long-lead items to ensure that an
         adequate supply of critical components is available at all times. Buyer
         will be liable for the material cost plus the quoted material mark-up
         on long lead items and minimum buy components with AEI has procured
         either to meet Buyer's forecasts or as a result of written
         authorization from Buyer.

3.6      In the event that AEI is required to maintain a significant excess
         inventory as a result of the above (3.4) provision, reductions of the
         forecast, engineering changes or other Buyer actions, the parties agree
         to a monthly carrying charge of l 1/2% or full prepayment to cover the
         costs associated with maintaining this inventory. This carrying charge
         is in addition to Buyer's material liability stated above.


         For the convenience of the Buyers, and if agreed to by AEI, Buyer may
         cancel the remaining orders under the following conditions:

         a.       Buyer pays for all goods already shipped.

         b.       Buyer pays for all finished goods and work-in-process still at

         c.       Buyer pays for all raw materials in AEI inventory that cannot
                  be returned to Vendor for credit.

         d.       Buyer pays for all non-cancelable materials ordered that are
                  still at Vendors's.

         e.       Buyer pays for all the cancellation charges incurred by AEI
                  and, once the materials are used or processed or received by
                  AEI, the handling charges incurred by AEI shall apply.



         Buyer will be responsible for all undamaged material, at quoted
         standard cost, inventoried by AEI in support of Buyer's Purchase Order
         that is not reusable by AEI or returnable to the supplier.
         Additionally, Buyer is responsible for any cancellation charges,
         restocking charges, or any non-cancelable commitments incurred by AEI
         for such material. Such items will be identified upon the initial
         execution of this Agreement, and as they become otherwise identified
         during the course of this Agreement.


         Tooling, fixtures and set up charges shall be acquired and maintained
         by AEI, and invoiced to Buyer. Title to fixtures and tools will pass to
         Buyer upon receipt of payment to AEI. Neurometrix will be responsible
         for providing AEI with complete current documentation, documentation
         changes, special test fixtures, and technical support as needed to
         build and test product.


         Printed circuit assemblies will be manufactured in accordance with
         IPC-A-610A Class 2. All assemblies will comply with Buyer's
         specifications and drawings. Neurometrix will provide assistance and
         guidance to AEI to ensure that the manufacturing, labeling, and
         production records are in compliance with all applicable FDA QSR and
         ISO regulations and standards. Production cannot commence until
         Neurolnetrix provides AEI with a written notice that it is in

6.0      WARRANTY


         Under the condition that AEI's product conforms to Buyer's AVL and
         applicable specification, AEI warrants its product, for a period of
         twelve (12) months from the date of shipment.

         a.       to be free from material and workmanship defects in the case
                  of turn-key project.

         b.       to be free from workmanship defects in the case of consignment


         This warranty is limited to replacement or repair, at AEI'S option of
         defective units and does not apply to Units which have been. abused or
         improperly stored, modified, or repaired. AEI will respond to warranty
         repair claims and, if unable to respond in a timely fashion, agrees to
         allow the Buyer to repair or have repaired the defective Products, at
         AEI equivalent time and materials charge-backs to AEI.


         AEI's warranty obligations hereunder do not extend to damage caused by
         improper use of the Product, accident, or operation of the Product
         outside of the specified environment conditions, by parties other than
         AEI, its subcontractors, or agents.

         The express warranties set forth in this Paragraph are the only
         warranties given by AEI with respect to any Product furnished


         Warranty claims by Buyer shall state the specific nature of the defect,
         unit, part number, serial number and date the unit was discovered to be
         defective and shall be verified within thirty (30) working days of
         receipt by AEI. Products returned to AEI under warranty shall be
         repaired or replaced at AEI's option. AEI shall pay one way
         transportation cost for the return of such Products from domestic
         locations. Prior to return of any warranty materials Buyer must contact
         AEI to receive a Return of Materials Authorization (RMA) number.


         AEI shall perform all required out-of-warranty repairs for assemblies
         returned by the Buyer on a time and materials basis. AEI shall provide
         the Buyer with a written quotation for each repair prior to
         commencement of any such work.


7.1      Engineering changes (EC's) may be initiated by either party, under the
         following terms:

         a.       Buyer gives advance written notice to AEI of any EC requested
                  by Buyer. If the EC is identified as critical by Buyer, AEI
                  will respond to the EC within (forty eight) 48 hours of
                  receipt of such notice. Implementation of the requested EC is
                  contingent upon material availability. All other EC
                  implementation schedules will be per mutual agreement,

         b.       AEI shall provide a written assessment on an ECO summary sheet
                  of the anticipated effects of EC's on AEI's schedule and
                  manufacturing costs (including costs associated with scrap and
                  rework, retooling, fixtures, and any changes to the recurring
                  product price). AEI and Buyer shall negotiate in good faith on
                  the costs associated with processing and implementing those

7.2      For EC's proposed by AEI; AEI shall give advance written notice to
         Buyer on an ECO summary sheet. No EC shall be implemented without
         Buyer's prior written consent.

         AEI shall provide a written assessment of the anticipated effects of
         any EC on AEI's schedule and manufacturing costs (including costs
         associated with scrap and rework). AEI and Buyer shall negotiate the
         costs associated with processing and implementing those engineering

7.3      Buyer will reimburse AEI for the reasonable cost as a result of any EC
         of any parts and/or material or forecast, long lead components and
         minimum buy components that


         cannot be used by AEI to produce Products; such cost includes the
         contract pricing and material mark-ups. In the case of parts and
         materials not yet delivered by the suppliers, the cancellation charges
         or other liabilities incurred by AEI in canceling such parts and
         materials shall be borne by Buyer. Neurometrix will be responsible for
         all rework or scrap costs incurred by AEI that result from, design,
         test, component or material changes made by Neurometrix. AEI shall use
         reasonable effort to minimize Buyer's liability.

7.4      TEST FALL-OUT

         If despite repeated attempts at test and repair, the assemblies fail to
         pass expectations, such assemblies shall be afforded to the Buyer for
         engineering evaluation. AEI will be fully reimbursed for the entire
         units, if the assemblies have failed because of a design problem. AEI
         will not be reimbursed if the assemblies have failed because of faulty
         material or workmanship.



         a.       Unit pricing listed in Exhibit A and shall be specific to the
                  revision level of the assembly.

         b.       Except as provided in 8.le.below pricing cannot be changed
                  without written approval by both parties, which shall not be
                  unreasonably withheld.

         c.       All prices are FOB AEI's facility in Boston, Massachusetts.
                  Buyer shall be responsible for and pay all shipping and
                  insurance costs for Products.

         d.       All taxes will be borne by Buyer. If sales to buyer are exempt
                  from any taxes, Buyer shall furnish to AEI a Certificate of
                  Exemption from the application taxing authority.

         e.       Initial Term pricing shall remain fixed for a minimum of
                  (twelve) 12 months. Successive years negotiated prices will be
                  firm, for each one (1) year period. If there is a volume
                  change in excess of +/-10% of any forecast, engineering
                  changes, or if there are substantial variations in material
                  cost; e.g., memory prices, the parties agree to analyze the
                  pricing involved and make appropriate adjustments if

8.2      Title of the Products shall be passed to Buyer upon shipment from AEI,
         Boston, Massachusetts.


         Initial Payment terms are to be agreed upon between AEI and
         NEUROMetrix. Once credit performance is established, the standard
         payment terms is net thirty (30) days from the date of invoice from
         AEI. AEI reserves the right to change payment terms and credit
         arrangements at any time if Buyer's financial condition or previous
         payment record so warrants.



10.1     If either party breaches a material provision of these Agreements and
         the breach is not cured within sixty (60) days after receipt of written
         notice from the other party specifying the nature of the breach or if a
         plan is not in place to expeditiously cure such breach, the
         non-breaching party may terminate the Agreement by written notice to
         the party in breach.

10.2     Either party may terminate this Agreement by written notice upon the
         concurrence of any of the following events, unless such event is
         eliminated or cured within sixty (60) days of notice therefore.

         a.       the filing by the other party of a petition in bankruptcy or
                  insolvency; or

         b.       any adjudication that the other party is bankrupt or
                  insolvent; or

         c.       the filing by the other party of any petition or answer
                  seeking reorganization, readjustment, or rearrangement of the
                  business under any law relating to bankruptcy or insolvency;

         d.       the appointment of a receiver for all or substantially all of
                  the property of other party, or

         e.       the making by the other party of any assignment or attempted
                  assignment of the benefit of creditors; or

         f.       the institution of any proceedings for the liquidation or
                  winding up of the business or for the termination of the
                  corporate charter of the other party.

10.3     Termination of this Agreement shall not affect the survival of any
         rights or obligations hereunder which by their nature are to survive
         and be effective following termination of this Agreement.


         Buyer shall settle or defend, at Buyer's expense, and pay all costs,
         fines, attorney fees and damages resulting from all proceedings or
         claims against AEI and its Subsidiaries for infringement or alleged
         infringement by the units furnished under this Agreement, or any part
         or use thereof of copyrights, patents, or intellectual property rights
         now or thereafter existing in the United States or in any other country
         where Buyer, its Subsidiaries of affiliates heretofore have furnished
         or furnish similar Units. Buyer shall notify AEI if it is or becomes
         aware of any right of, or protection afforded to, a third party as set
         forth above that might affect AEI's ability to provide units under this
         Agreement. AEI shall provide written notice to Buyer of any such
         proceeding or claim of which it becomes aware. Buyer will, at AEI's
         request, identify the countries in which Buyer, its Subsidiaries or
         affiliates hereto have furnished similar items. The provision states
         the entire rights and obligations of Buyer and AEI regarding
         infringement of copyrights, patents, or intellectual property rights
         now or hereafter existing in the United States or in any other country
         and shall survive expiration or termination of this Agreement.


                                 SIGNATURE PAGE

ADVANCE ELECRONICS, INC.                           BUYER

/s/ CHING-WAH WONG                                 /s/ CHARLES FENDROCK
-----------------------------                      ---------------------------
Ching-Wah Wong,                                    Charles Fendrock
President &                                        Vice President
Chief Executive Officer                            Of Manufacturing

Date: September 26, 2003                           Date: October 2, 2003


*** Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [***]. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

                                    EXHIBIT A

         ASSEMBLY NO.                   DESCRIPTION                  QUANTITY                    UNIT PRICING
        -------------                   -----------                 ----------                   ------------
           NC-STAT2                    NC-122 System                    ***                           ***