SETTLEMENT AGREEMENT AND RELEASE

(i)                                      The United States contends that, from August 2004 through October 2006, NeuroMetrix knowingly and willfully offered and paid illegal remuneration to induce physicians to refer and recommend purchase of the NC-stat System, in violation of 42 U.S.C. §1320a-7b(b)(2) through marketing programs known as the “Referral Rewards Program” and “Customer Referral Program.”  As a result, NeuroMetrix knowingly caused the submission of false or fraudulent claims to the Medicare Programs for nerve conduction studies performed with the NC-stat System for which no payments should have been made.

(ii)                                   The United States contends that, from January 2003 through April 2006, NeuroMetrix knowingly caused the submission of false or fraudulent claims for payment to Medicare by providing coding reports to physicans that falsely indicated the nerve conduction studies performed with the NC-stat System should be billed under CPT Codes 95903 when no F-wave had been obtained, and which services should have been billed under CPT Code 95900 instead, a specific code for nerve conduction studies where no F-wave was obtained.  As a result, NeuroMetrix knowingly caused the submission of false or fraudulent claims to Medicare that resulted in excess payments from Medicare to which the physicians were not entitled.

E.                                       NeuroMetrix’s conduct as described in the Information attached to the Deferred Prosecution Agreement and Preamble Paragraph D is hereafter referred to as the “Covered Conduct.”

F.                                       WHEREAS, HHS-OIG contends that it has certain administrative claims against NeuroMetrix, as specified in Paragraph 4 below, for engaging in the Covered Conduct.

G.                                      WHEREAS, this Agreement is neither an admission of facts or liability by NeuroMetrix nor a concession by the United States that its claims are not well-founded, and NeuroMetrix denies that it engaged in any conduct giving rise to criminal or civil liability with the sole exception of such admissions as NeuroMetrix makes in connection with  the Deferred Prosecution Agreement referenced in Paragraph B above.

2

H.                                     WHEREAS, to avoid the delay, expense, inconvenience, and uncertainty of protracted litigation of these claims, the Parties mutually desire to reach a full and final settlement as set forth below.

III. TERMS AND CONDITIONS

NOW, THEREFORE, in reliance on the representations contained herein and in consideration of the mutual promises, covenants, and obligations set forth below in this Agreement, and for good and valuable consideration as stated herein, the Parties agree as follows:

1.                                        NeuroMetrix agrees to pay to the United States the sum of two million four hundred ninety eight thousand three hundred thirty seven dollars ($2,498,337), plus interest in an amount of 2.75% per annum on the Settlement Amount as further set forth below ($188.23 per day) from January 1, 2009 and continuing until and including the day before complete payment is made (the “Settlement Amount”).  This sum shall constitute a debt immediately due and owing to the United States on the Effective Date of this Agreement.  The Settlement Amount shall be electronically transferred pursuant to instructions provided by the United States Attorney’s Office for the District of Massachusetts no later than the second business day following the date on which this Agreement is fully executed by the parties.

2.                                        Subject to the exceptions in Paragraphs 3 and 4 below, and in consideration of the obligations of NeuroMetrix set forth in this Agreement, conditioned upon NeuroMetrix’s payment in full of the Settlement Amount, subject to Paragraph 12 below (concerning bankruptcy proceedings commenced within 91 days of the Effective Date of this Agreement or any payment under this Agreement), and subject to the simultaneous execution of the Deferred Prosecution Agreement described in Preamble Paragraph B, the United States, on behalf of itself, and its officers, agents, agencies, and departments, agrees to release NeuroMetrix, its predecessors, and its current and former parents, affiliates, divisions, subsidiaries, successors and assigns, and their current and former directors, officers , and employees, from any civil or administrative monetary claim that the United States has or may have under the False Claims

3

Act, 31 U.S.C. §§ 3729-33; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-12;  the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a;  any statutory provision applicable to the federal funded program in this Agreement for which the Civil Division, United States Department of Justice has actual and present authority to assert and compromise pursuant to 28 C.F.R. Part O, Subpart I, Section 0.45(d); and common law claims for fraud, unjust enrichment, payment by mistake, or disgorgement for the Covered Conduct.

3.                                        Notwithstanding any term of this Agreement, the United States specifically does not release any person or entity from any of the following claims or liabilities:  (a) any criminal, civil, or administrative claims arising under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability except as set forth in the Deferred Prosecution Agreement;  (c) any liability to the United States (or any agencies thereof) for any conduct other than the Covered Conduct; (d) any claims based upon obligations created by this Agreement; (e) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (f) any express or implied warranty claims or other claims for defective or deficient products and services provided by NeuroMetrix; (g) any claims for personal injury or property damage or for other consequential damages arising from the Covered Conduct; (h) any claim based on a failure to deliver items or services due; or (i) any civil or administrative claims against individuals, including current and former directors, officers, and employees of NeuroMetrix, its predecessors, subsidiaries, and affiliates, who receive written notification that they are the target of a criminal investigation, are criminally indicted or charged, or are convicted, or who enter into a criminal plea agreement.

4.                                        In consideration of the obligations of NeuroMetrix set forth in this Agreement, and the Corporate Integrity Agreement (“CIA”) entered into between OIG-HHS and NeuroMetrix, conditioned on NeuroMetrix’s payment in full of the Settlement Amount, and subject to Paragraph 12 below (concerning bankruptcy proceedings commenced within 91 days of the effective date of this Agreement or any payment under this Agreement), OIG-HHS agrees to release and refrain from instituting, directing, or maintaining any administrative action seeking

4

exclusion from the Medicare, Medicaid, or other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) against NeuroMetrix, its predecessors, and its current or former parents, affiliates, divisions, subsidiaries, successors, and assigns, under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Law), or 42 U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks or other prohibited activities), for the Covered Conduct, except as reserved in Paragraph 3 above, and as reserved in this Paragraph.  The OIG-H