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Non-recurring engineering (NRE): definition , examples of contracts, etcdont_mind_my_lurking in message # 12581 replied to my post, "TO houslp : VOYT & calculating WSR payments" In his comments he included: (1) ..." I believe you may have misinterpreted the 8K -or- I misinterpreted what you're trying to say."... and his comments included: (2) ..."To be clear, the initial payment received was for NRE charges. Not for the product delivery."... and he also commented: (3) ..."Again, what has been received by Voyant is the NRE payment...What is due in 4 months is the first 100 radios. Not the remainder of the $2M payment or the remaining 2900 radios."... As I say, all the time, and especially in my post(s) to houslp, do NOT rely on any of my calculations, etc. BTW, the message(s) to houslp were to answer "particular" questions ased by houslp. My messages are always only to be used as starting points for your own research. Since dont_mind_my_lurking & others tend to use terms like, but not limited to NRE, without writing what they stand for or giving links and examples, you might want to review the following. MLD38 Non-recurring engineering (NRE): definition , examples of contracts, etc Non-recurring engineering (NRE) From Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Non-recurring_engineering ...Non-recurring engineering (NRE) refers to the one-time cost of researching, developing, designing, and testing a new product. When budgeting for a project, NRE must be considered in order to analyze if a new product will be profitable. Even though a company will pay for NRE on a project only once, NRE can be considerably high and the product will have to sell well enough to produce a return on the initial investment. NRE is unlike production costs, which must be paid continually in order to maintain production of a product. In a project-type company, large parts (possibly all) of the project represent NRE. In this case the NRE costs are likely be included in the first project's costs. If the company cannot recover these costs, it will have to consider funding part of these from reserves (possibly make a project loss) in the hope that the investment can be recovered from additional profit on future projects. Example ...Imagine that you are running a bicycle company. Company B, a competitor, is selling bicycles of lighter weight than yours. You decided that the best way for your company to compete is to create even lighter bicycles. So you hire some engineers to design lighter bicycles for you. You pay their hourly wages, you pay for the materials they need to build prototypes, and you pay for any equipment they may need to accomplish this task. Eventually they finish the design of the new bicycle. Then, you may need to build new machines to fabricate bicycles according to your new design. After all of that your new bicycle will go into production. The money that you paid for the engineer's wages, the testing equipment, and building the new machines is the NRE because you no longer need to pay those costs now that the bicycle has entered production. Now you have to keep production costs low enough so that you can recover the NRE and profit from the sales of your bicycles that have the new design.... ================================ Example of a 2000 Letter Agreement that includes Non-recurring engineering (NRE) information. NOTE: I do understand this is NOT the letter of agreement by VOYT & its WSR customer and is from 2000. I am using it as example only. 2000: Technology Integration and Distribution Letter Agreement CARDIAC SCIENCE INC. AND DATA CRITICAL CORPORATION http://contracts.onecle.com/cardiac/data.distrib.2000.03.17.shtml starts off .."This Letter Agreement ("Agreement") is made between Cardiac Science Inc. ("CSI"), a Delaware Corporation and Data Critical Corporation (" Data Critical or "DCC"), a Delaware Corporation. Both have executed a Non-Disclosure Agreement regarding this Agreement and the technologies involved."... #2 is : TECHNOLOGY FEE ...DCC will charge CSI a non-refundable Technology Fee of $150,000.00 (one hundred fifty thousand dollars) upon DCC's acceptance of this Agreement. This Technology Fee is for past services rendered in connection with the development of this proposal. CSI will pay DCC this non-refundable fee within three (3) months of signing this Agreement.... # 8 is : DCC DEVELOPMENT OBLIGATIONS/NON-RECURRING ENGINEERING (NRE) ...DCC will perform the required development, engineering, and testing work necessary to interface DCC's AlarmView system into CSI's Powerheart such that the resulting product can be sold, distributed and supported to end user customers in the U.S. and Canada. Such work will be targeted to be completed within ninety (90) days of the signing of this agreement, though this timeframe might be shortened or extended upon completion of a technical review by both parties. In return for such obligations, CSI shall agree to purchase and distribute AlarmView products in accordance with the terms of this Agreement and shall pay DCC a Non-Recurring Engineering ("NRE") fee of $25,000 at the Release Date of Product.... # 9. is : ONGOING OBLIGATIONS ...DCC will provide CSI with ongoing engineering support for the AlarmView product during the term of the agreement at DCC's cost after the Release Date of Product.... ************************************** Example of a 2004 Letter Agreement that includes Non-recurring engineering (NRE) information. NOTE: I do understand this is NOT the letter of agreement by VOYT & its WSR customer and is from 2004. I also understand this sample contract uses XXXXX, since some of the information may still remain non-public material. I am using it as example only. 2004: Strategic Alliance Agreement between Sophia Wireless Inc. and Gigabeam Corporation http://contracts.onecle.com/gigabeam/sophia.saa.2004.02.06.shtml starts off: RECITALS ...WHEREAS, Gigabeam and Sophia wish to enter into a strategic alliance and agree to reciprocal exclusivity to enable Gigabeam to market and distribute a wireless communications system utilizing a frequency range of 57 GHz through 100 GHz and incorporating components procured from Sophia; WHEREAS, in consideration of certain non-refundable advance payments, Sophia will perform research and development related to component parts that are to be built utilizing Sophia's proprietary know-how and intellectual properties, which component parts meet certain technical and business requirements to be identified through the collaborative efforts of both Sophia and Gigabeam; and WHEREAS, the parties desire to enter into an arrangement whereby Gigabeam may purchase such components from Sophia for purposes of integrating the same into Gigabeam's digital radios within an exclusive field of business to be identified by the parties.... Example of use of XXXXX is found in the Definitions "Field of Exclusivity" ....means the sale and distribution of Products (as defined herein) for use with XXXXX data links. The term "Field of Exclusivity" will include sales and distribution of Products to commercial entities and government agencies, but does not include sales or distribution of products that are not within the scope of the term "Product," as defined herein. The term "Field of Exclusivity" does not include sales or distribution of any products that include or perform XXXXX.... In # 1 Responsibilities of Parties is # 1.1 Initial Collaboration; Development and Prototyping which contains: ...In consideration for payment by Gigabeam to Sophia of the Non-Recurring Engineering Fees as contemplated in Section 3.1, during the initial XXXXX of the Term, Sophia will exercise reasonable efforts to develop prototype RF Modules meeting the general technical requirements set forth in the Initial Functional Requirements Statement.... # 1.1.3 contains: ...Sophia's price per RF Module System ("Agreed Price") for the initial pricing of RF Modules shall not exceed the following price (the "Not To Exceed Price"): XXXXX X (XXXXX times) its cost of direct materials and labor (plus overhead) in the case of RF Module Systems assembled in house or, alternatively, in the case of RF Module Systems purchased from a third party manufacturer, XXXXX X (XXXXX times) the price paid to the third party manufacturer plus XXXXX X (XXXXX times) direct labor (plus overhead) and materials for any improvements, upgrades or testing of the RF Module Systems performed at Sophia's facility prior to shipment to Gigabeam. At the time that the parties are able to reach agreement upon such pricing, they shall memorialize such pricing in writing ("Agreed Prices" and the date of such written agreement, the "Manufacturing Commencement Date" with respect to such particular prototype). In the event of a failure to agree on price, either party may choose to set the price at the Not To Exceed Price.... # 3 is Payment 3.1 ( includes items like Functional Requirements Statement ; Non Recurring Expenses ; XXXXX ; etc ) ...In consideration for Sophia's performance of certain research and development related to RF Modules, Gigabeam will pay to Sophia all fees identified as "Non Recurring Expenses" in the applicable Functional Requirements Statement or otherwise required herein, which fees will be due and payable in accordance with such Functional Requirements Statement, unless otherwise agreed between the parties in writing and supported by a purchase order from Gigabeam, provided that if the relevant Functional Requirements Statement or purchase order fails to state when such payments are due and no separate written agreement has been signed with respect thereto, all such amounts under any particular Functional Requirements Statement shall be due and payable within XXXXX of the date of Sophia's invoice. Without limiting the foregoing, in consideration for Sophia's performance of its obligations under Section 1.1 with respect to the Initial Functional Requirements Statement, in accordance with the payment schedule set forth in Exhibit B and provided Sophia performs the work as stipulated, Gigabeam shall pay Sophia $750,000 in Non -Recurring Engineering Fees as set forth in such Exhibit B. If, as of the relevant due dates for payments under Exhibit B applicable to each of the 4th, 5th or 6th month of this Agreement, GigaBeam has not received commitments from investors or other funding sources to provide at least $2,000,000 in total cumulative funding to Gigabeam, GigaBeam may elect not to make payments due for such month as indicated in Exhibit B, and may exercise such election by sending written notice to Sophia of Gigabeam's failure to raise such funding. Such notice must be received before the applicable due date for such month. If GigaBeam gives such notice for any of the 4th, 5th and/or 6th months hereunder, Sophia may, at its option, take any or several of the following actions: (1) suspend work on research and development or other performance under this Agreement, (2) agree to an extension of time to allow GigaBeam to raise the required funding, (3) terminate this Agreement. If GigaBeam does not give such written notice before the due date for the relevant month, then GigaBeam will continue to beobligated to make payments for months 4, 5, and 6 to Sophia, as applicable. # 3.2 starts off: ...In consideration for the sale of RF Modules hereunder, Gigabeam shall pay to Sophia the Agreed Prices applicable to such RF Modules, which amounts shall be due and payable within XXXXX following the date of invoice.... |
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Msg # | Subject | Author | Recs | Date Posted |
12593 | Re: Non-recurring engineering (NRE): definition , examples of contracts, etc | dont_mind_my_lurking | 0 | 1/16/2009 1:04:00 PM |