THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Northstar Neuroscience (NSTR)

5/2/2006 S-1/A Information

Since January 1, 2003, we have engaged in the following transactions with our executive officers, directors and holders of 5% or more of our voting securities, and their affiliates. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.

Sale of Preferred Stock

In April 2004, we sold an aggregate of 4,821,803 shares of our Series E redeemable convertible preferred stock at $4.77 per share for an aggregate purchase price of $23.0 million to Boston Scientific Corporation.

In April and May 2002, we sold an aggregate of 9,191,248 shares of our Series D redeemable convertible preferred stock at $4.00 per share for an aggregate purchase price of $36.8 million to investors that included one of our directors, several entities affiliated with our directors and other significant shareholders. The following table sets forth the number of shares of Series D redeemable convertible preferred stock sold to such persons or entities: (See page 78 of S-1/A).

We sold the Series D and Series E redeemable convertible preferred stock pursuant to preferred stock purchase agreements, under which we made standard representations, warranties, and covenants, and entered into an investors’ rights agreement, under which we provided the purchasers with certain rights. The only rights that survive beyond this offering are registration rights. These shares of our Series D and Series E redeemable convertible preferred stock will convert automatically into an aggregate of 6,127,498 and 3,214,535 shares of common stock, respectively, upon the effectiveness of this offering. See “Description of Capital Stock—Registration Rights.”

Insurance Brokerage Agreement

Woodruff-Sawyer & Co. serves as our insurance broker. In connection with the services rendered in 2005 for the procurement of our directors’ and officers’, and general and product liability insurance policies, we paid Woodruff-Sawyer & Co. a commission of $19,839. Stephen R. Sawyer is a partial owner of Woodruff-Sawyer & Co. and the brother of Ms. Hutton, one of our directors. Ms. Hutton has no financial ownership or interest in Woodruff-Sawyer & Co. and did not participate in the selection of Woodruff-Sawyer & Co. as our insurance broker.