Exhibit
      10.1

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (this “Agreement”)
      is
      made as of the 12th day of December, 2007 (the “Execution
      Date”)
      by and
      among North American Scientific, Inc. (the “Company”),
      a
      Delaware corporation, with its principal offices at 20200 Sunburst Street,
      Chatsworth, California 91311, and the purchasers whose names and addresses
      are
      set forth on the signature pages hereto (the “Purchasers”).

     

    IN
      CONSIDERATION of the mutual covenants contained in this Agreement, and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the Company and the Purchasers hereby agree as
      follows:

     

    Section
      1. Purchase
      and Sale of Securities.

     

    Subject
      to the terms and conditions of this Agreement, on the Closing Date (as defined
      herein), each Purchaser agrees to purchase severally and not jointly and the
      Company agrees to issue and sell to such Purchaser severally and not jointly
      (i) that number of whole shares (the “Shares”)
      of the
      Company’s common stock, $0.01 par value, (the “Common
      Stock”)
      and
      (ii) warrants to purchase shares of Common Stock in substantially the form
      attached hereto as Exhibit A (the “Warrants,”
      together with the Shares, the “Securities”),
      shown
      below such Purchaser’s name on the signature pages hereto at a purchase price
      that is equal to $0.246 per Security, of which $0.01 is allocated as
      consideration for the Warrants (the
      “Purchase
      Price”).

     

    Section
      2. The
      Closing.

     

    2.1. The
      Closing.

     

    (a) The
      purchase and sale of the Securities upon the terms and conditions hereof will
      take place at a closing (the “Closing”)
      to be
      held at the offices of Latham & Watkins LLP, 12636 High Bluff Drive, Ste.
      400, San Diego, CA 92130, or such other location as the parties may agree,
      on a
      date and at such time as shall be agreed upon by the Company and the Purchasers
      (the “Closing
      Date”).

     

    (b) Prior
      to
      the Closing, the Company shall provide wire transfer instructions for the
      payment of the Purchase Price by the Purchasers at the Closing.

     

    (c) At
      the
      Closing, the Company and each Purchaser, severally and not jointly, shall
      satisfy all of the conditions set forth in Sections 2.2 and 2.3,
      respectively.

     

    2.2. Stockholder
      Approval.

     

    (a) Within
      five (5) business days after the Execution Date, the Company will file with
      the
      Securities and Exchange Commission (the “Commission”)
      a
      preliminary proxy statement, information statement or consent solicitation
      statement (the “Proxy
      Statement”)
      in
      order to solicit approval from the Company’s stockholders of the transactions
      contemplated hereby in accordance with Nasdaq Stock Market Rule 4350(i)(1)
      and
      any other applicable rules of the Nasdaq Global Market. The Company shall use
      its reasonable best efforts to respond to any comments of the staff of the
      Commission regarding the Proxy Statement, and as soon as practicable thereafter
      or after the lapse of any applicable waiting period, shall cause the Proxy
      Statement in definitive form to be promptly mailed to the stockholders of the
      Company. The Company shall provide Three Arch Partners IV, L.P. and affiliated
      funds (collectively, “Three
      Arch Partners”)
      with a
      draft of the Proxy Statement in advance of filing and shall make such changes
      thereto as may be reasonably requested by Three Arch Partners and as are
      permitted by applicable law.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) The
      Company’s Board of Directors shall recommend that all of the proposals set forth
      in the Proxy Statement be approved, subject to the fiduciary duties of the
      Board
      of Directors. The
      Company shall notify Three Arch Partners promptly of the receipt of any comments
      from the Commission and of any request by the Commission or any other government
      authority for amendments or supplements to the Proxy Statement for additional
      information, and shall promptly supply Three Arch Partners with copies of all
      correspondence between the Company or any of its representatives, on the one
      hand, and the Commission, its staff or any other government authority, on the
      other hand, with respect to the Proxy Statement or the transactions contemplated
      hereby.

     

    2.3. Conditions
      to Closing.

     

    (a) The
      Company’s obligation to complete the purchase and sale of the Securities and
      deliver such stock certificate(s) and warrant certificates to each Purchaser
      is
      subject to:

     

    (i) receipt
      by the Company of immediately available funds in the full amount of the Purchase
      Price for the Securities being purchased hereunder as set forth below such
      Purchaser’s name on such Purchaser’s signature page hereto, in accordance with
      the wire transfer instructions delivered by the Company pursuant to
      Section 2.1(b);

     

    (ii) the
      accuracy in all material respects of the representations and warranties made
      by
      such Purchaser in Section 4 below as of the Closing Date and the
      fulfillment in all material respects of those undertakings of such Purchaser
      in
      this Agreement to be fulfilled on or prior to the Closing Date;

     

    (iii) confirmation
      that the Shares and the Warrant Shares have been approved for listing on the
      Nasdaq Global Market or the Nasdaq Capital Market, or alternatively, that the
      Common Stock is eligible for quotation on the OTC Bulletin Board;

     

    (iv) the
      aggregate Purchase Price to be paid by the Purchasers for the Securities at
      the
      Closing shall be greater than or equal to $15,500,000; and

     

    (v) approval
      by the stockholders of the Company of the matter contemplated in
      Section 2.2(a).

     

    
      
         

      

      
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    (b) Each
      Purchaser’s obligation to complete the purchase and sale of the Securities is
      subject to:

     

    (i) the
      accuracy in all material respects of the representations and warranties made
      by
      the Company in Section 3 below as of the Closing Date and the fulfillment
      in all material respects of those undertakings of the Company in this Agreement
      to be fulfilled on or prior to the Closing Date;

     

    (ii) the
      Purchasers shall have received on the Closing Date a certificate, addressed
      to
      the Placement Agent and the Purchasers and dated the Closing Date, of the chief
      executive officer and the chief financial officer or chief accounting officer
      of
      the Company to the effect that: (i) the representations and warranties of
      the Company in this Agreement were true and correct when made and are true
      and
      correct as of the Closing Date; (ii) the Company has performed all of its
      covenants and agreements and satisfied all conditions required to be satisfied
      by the Company contained herein; and (iii) they have carefully examined the
      Memorandum (defined below) and (A) as of its date and as of the Closing
      Date, the Memorandum and the documents incorporated by reference therein did
      not
      and do not include any untrue statement of a material fact and did not omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading, (B) since the date thereof through the Closing Date, no
      event has occurred which should have been set forth in a supplement or otherwise
      required an amendment to the Memorandum, and (C) there has not occurred any
      material adverse change in the condition, financial or otherwise, or in the
      earnings, business or operations or prospects of the Company, from that set
      forth in the Memorandum;

     

    (iii) confirmation
      that the Shares and the Warrant Shares have been approved for listing on the
      Nasdaq Global Market or the Nasdaq Capital Market, or alternatively, that the
      Common Stock is eligible for quotation on the OTC Bulletin Board;

     

    (iv) delivery
      by the Company to such Purchaser of an opinion, dated as of the Closing Date,
      from Seyfarth Shaw LLP, counsel to the Company, in the form attached hereto
      as
      Exhibit B;

     

    (v) delivery
      by the Company to such Purchaser of an opinion related to certain intellectual
      property matters, dated as of the Closing Date, from McDermott Will & Emery
      LLP, counsel to the Company, in the form attached hereto as Exhibit
      C;

     

    (vi) delivery
      by the Company to such Purchaser of an opinion related to certain regulatory,
      litigation and intellectual property matters, dated as of the Closing Date,
      from
      David King, consultant to the Company, in the form attached hereto as Exhibit
      D;

     

    (vii) the
      Company’s delivery to its transfer agent of irrevocable instructions to issue,
      subject to the fulfillment of conditions set forth in Section 2.3(a), to
      such Purchaser or in such nominee name(s) as designated by such Purchaser in
      the
      Securities Certificate Questionnaire attached hereto as Appendix I such number
      of Shares set forth on such Purchaser’s signature page hereto, or if requested
      by the Purchaser, one or more certificates representing such Securities
      registered in such name(s) or nominee name(s) requested by such
      Purchaser;

     

    
      
         

      

      
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    (viii) approval
      by the stockholders of the Company of the matter contemplated in
      Section 2.2(a);

     

    (ix) amendment
      of the Rights Agreement between the Company and U.S. Stock Transfer Corporation
      dated October 16, 1998, as amended on April 28, 2004 and June 5, 2006, to exempt
      the issuance and sale of the Securities, and the issuance of the Warrant Shares
      upon due exercise of the Warrants, from the provisions of any “poison pill” or
      other take-over arrangement thereunder;

     

    (x) execution
      by each of the Purchasers and each of the Company’s executive officers and
      directors of his, her or its enforceable written lock-up agreement in the form
      attached to this Agreement as Exhibit E (“Lock-Up
      Agreement”);
      and

     

    (xi) the
      aggregate Purchase Price to be paid by the Purchasers for the Securities at
      the
      Closing shall be greater than or equal to $15,500,000.

     

    Section
      3. Representations,
      Warranties and Covenants of the Company.
      Except
      as specifically contemplated by this Agreement, the Company hereby represents
      and warrants to, and covenants with, each Purchaser on the Execution Date and
      as
      of the Closing Date (or such other date specified below) as
      follows:

     

    3.1. No
      Material Misstatement.
      The
      Confidential Private Placement Memorandum, dated December 11, 2007, relating
      to
      the offering of the Securities, including all exhibits, documents incorporated
      by reference and annexes thereto, as the same may be amended or supplemented,
      (the “Memorandum”),
      did
      not, as of its date, does not as of the date hereof, and will not as of the
      Closing Date, contain any untrue statement of a material fact or omit to state
      any material fact required to be stated therein or necessary in order to make
      the statements therein, in light of the circumstances under which they were
      made, not misleading. 

     

    3.2. Incorporated
      Documents.

     

    (a) The
      documents incorporated by reference in the Memorandum or attached as exhibits
      thereto and any further documents so filed and incorporated by reference in
      the
      Memorandum and filed on or before the Closing Date, at the time they were filed
      with the Commission, as the case may be, complied in all material respects
      with
      the requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange
      Act”),
      and
      the rules and regulations of the Commission thereunder (the “Rules”),
      and
      none of such documents as of such time contained an untrue statement of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

     

    (b) In
      the
      past twelve (12) months, the Company has filed all documents required to be
      filed by it prior to the date hereof with the Commission pursuant to the
      reporting requirements of the Exchange Act (the “SEC
      Documents”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Documents prior to the expiration of any such
      extension.

     

    
      
         

      

      
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    3.3. Financial
      Statements.
      The
      financial statements of the Company (including all notes and schedules thereto)
      included or incorporated by reference in the Memorandum present fairly and
      in
      all material respects the financial position of the Company and its consolidated
      subsidiaries at the dates indicated and the statement of operations,
      stockholders’ equity and cash flows of the Company and its consolidated
      subsidiaries for the periods specified; and such financial statements and
      related schedules and notes thereto, and the unaudited financial information
      incorporated by reference in the Memorandum, have been prepared in conformity
      with generally accepted accounting principles, consistently applied throughout
      the periods involved subject, in the case of any unaudited financial
      information, to the absence of note disclosure and normal year-end adjustments.
      The summary and selected financial data included in the Memorandum present
      fairly the information shown therein as at the respective dates and for the
      respective periods specified and have been presented on a basis consistent
      with
      the consolidated financial statements set forth in the Memorandum and other
      financial information, subject, in the case of any unaudited financial
      information, to the absence of note disclosure and normal year-end
      adjustments.

     

    3.4. Independent
      Accountants.
      Singer
      Lewak Greenbaum & Goldstein LLP and PricewaterhouseCoopers LLP, whose
      reports are filed with the Commission as a part of the information incorporated
      by reference in the Memorandum, are and, during the periods covered by their
      reports, were independent registered public accounting firms as required by
      the
      Securities Act of 1933, as amended (the “Securities
      Act”)
      and
      the rules and regulations of the Commission thereunder and the Public Company
      Accounting Oversight Board.

     

    3.5. Organization;
      Good Standing.
      The
      Company and each of its subsidiaries is duly organized, validly existing and
      in
      good standing under the laws of their respective jurisdictions of incorporation
      or organization. The Company and each of its subsidiaries is duly qualified
      to
      do business and is in good standing as a foreign corporation in each
      jurisdiction in which the nature of the business conducted by it or location
      of
      the assets or properties owned, leased or licensed by it requires such
      qualification, except for such jurisdictions where the failure to so qualify
      individually or in the aggregate would not have a material adverse effect on
      the
      assets, properties, condition, financial or otherwise, or in the results of
      operations, business affairs or business prospects of the Company and its
      subsidiaries considered as a whole (a “Material
      Adverse Effect”);
      and
      to the Company’s knowledge, no proceeding has been instituted in any such
      jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit
      or
      curtail, such power and authority or qualification.

     

    3.6. Permits.
      The
      Company and each of its subsidiaries has all requisite corporate power and
      authority, and all necessary authorizations, approvals, consents, orders,
      licenses, certificates and permits of and from all governmental or regulatory
      bodies or any other person or entity (including, but not limited to, those
      that
      may be required by the U.S. Food and Drug Administration (the “FDA”)
      and
      any state, federal or foreign agencies or bodies engaged in the regulation
      of
      medical devices) (collectively, the “Permits”),
      to
      own, lease and license its assets and properties and conduct its business,
      all
      of which are valid and in full force and effect, except where the lack of such
      Permits, individually or in the aggregate, would not have a Material Adverse
      Effect. The Company and each of its subsidiaries has fulfilled and performed
      in
      all material respects all of its material obligations with respect to such
      Permits and no event has occurred that allows, or after notice or lapse of
      time
      would allow, revocation or termination thereof or results in any other material
      impairment of the rights of the Company hereunder. Except as may be required
      under the Securities Act and state and foreign Blue Sky laws, no other Permits
      are required to enter into, deliver and perform this Agreement and to issue
      and
      sell the Securities.

     

    
      
         

      

      
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    3.7. Intellectual
      Property.
      The
      Company and each of its subsidiaries owns or possesses legally enforceable
      rights to use all patents, patent applications, patent rights, inventions,
      trademarks, trademark applications, trade secrets, trade names, service marks,
      copyrights, copyright applications, licenses, know-how and other similar rights
      and proprietary knowledge (collectively, “Intangibles”)
      necessary for the conduct of its business. Except as otherwise disclosed in
      the
      SEC Documents or the Memorandum: (A) there are no rights of third parties
      to any such Intangibles; (B) the Company is not aware of any material
      infringement by third parties of any such Intangibles; (C) there is no
      pending or threatened action, suit, proceeding or claim by others challenging
      the Company’s rights in or to any such Intangibles, and the Company is unaware
      of any facts which would form a reasonable basis for any such claim;
      (D) there is no pending or threatened action, suit, proceeding or claim by
      others challenging the validity or scope of any such Intangibles, and the
      Company is unaware of any facts which would form a reasonable basis for any
      such
      claim; (E) there is no pending or threatened action, suit, proceeding or
      claim by others that the Company infringes or otherwise violates any patent,
      trademark, copyright, trade secret or other proprietary rights of others, and
      the Company is unaware of any other fact which would form a reasonable basis
      for
      any such claim; (F) there is no U.S. patent or published U.S. patent
      application which contains claims that dominate or may dominate any Intangibles
      described in the SEC Documents and the Memorandum as being owned by or licensed
      to the Company or that interferes with the issued or pending claims of any
      such
      Intangibles; and (G) there is no prior art of which the Company is aware
      that may render any U.S. patent held by the Company invalid or any U.S. patent
      application held by the Company unpatentable which has not been disclosed to
      the
      U.S. Patent and Trademark Office.

     

    3.8. Clinical,
      Pre-clinical Studies and Tests.
      The
      clinical, pre-clinical and other studies and tests conducted by or on behalf
      of
      or sponsored by the Company or in which the Company or its products or product
      candidates have participated that are described in the SEC Documents or the
      Memorandum or the results of which are referred to in the SEC Documents or
      the
      Memorandum were and, if still pending, are being conducted in material
      compliance with all applicable laws, regulations and standard medical and
      scientific research procedures. The descriptions in the SEC Documents and the
      Memorandum of the results of such studies and tests are accurate and complete
      in
      all material respects and fairly present the data derived from such studies
      and
      tests, and the Company has no knowledge of any other studies or tests the
      results of which contradict or otherwise call into question the results
      described or referred to in the SEC Documents and the Memorandum. Except to
      the
      extent disclosed in the SEC Documents or the Memorandum, the Company has not
      received any notices or other correspondence from the FDA or any other
      governmental agency requiring the termination, suspension or modification of
      any
      clinical or pre-clinical studies or tests that are described in the SEC
      Documents or the Memorandum or the results of which are referred to in the
      SEC
      Documents or the Memorandum.

     

    
      
         

      

      
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    3.9. FDA
      Permits.
      The
      Company holds and is operating in compliance with such exceptions, permits,
      licenses, franchises, authorizations and clearances of the FDA and/or any
      committee thereof required, for the conduct of its business as currently
      conducted (collectively, the “FDA
      Permits”),
      and
      all such FDA Permits are in full force and effect, subject in each case to
      such
      exceptions and qualifications as are set forth in the SEC Documents or the
      Memorandum or where the lack of such FDA Permits, individually or in the
      aggregate, would not have a Material Adverse Effect. The Company has fulfilled
      and performed all of its obligations with respect to the FDA Permits, and,
      no
      event has occurred which allows, or after notice or lapse of time would allow,
      revocation or termination thereof or results in any other impairment of the
      rights of the holder of any FDA Permit, subject in each case to such exceptions
      and qualifications as are set forth in the SEC Documents or the
      Memorandum.

     

    3.10. FDA
      Compliance.
      Except
      as described in the SEC Documents or the Memorandum, the Company and its
      subsidiaries: (A) is and at all times has been in material compliance with
      all statutes, rules, regulations, or guidance applicable to the ownership,
      testing, development, manufacture, packaging, processing, use, distribution,
      marketing, labeling, promotion, sale, offer for sale, storage, import, export
      or
      disposal of any product under development, manufactured or distributed by the
      Company (“Applicable
      Laws”);
      (B) has not received any FDA Form 483, notice of adverse finding, warning
      letter, untitled letter or other correspondence or notice from the FDA or any
      other federal, state, local or foreign governmental or regulatory authority
      alleging or asserting noncompliance with any Applicable Laws or any licenses,
      certificates, approvals, clearances, authorizations, permits and supplements
      or
      amendments thereto required by any such Applicable Laws (“Authorizations”);
      (C) has not received notice of any claim, action, suit, proceeding,
      hearing, enforcement, investigation, arbitration or other action from the FDA
      or
      any other federal, state, local or foreign governmental or regulatory authority
      or third party alleging that any product operation or activity is in violation
      of any Applicable Laws or Authorizations and has no knowledge that the FDA
      or
      any other federal, state, local or foreign governmental or regulatory authority
      or third party is considering any such claim, litigation, arbitration, action,
      suit, investigation or proceeding; (D) has not received notice that the FDA
      or any other federal, state, local or foreign governmental or regulatory
      authority has taken, is taking or intends to take action to limit, suspend,
      modify or revoke any Authorizations and has no knowledge that the FDA or any
      other federal, state, local or foreign governmental or regulatory authority
      is
      considering such action; (E) has filed, obtained, maintained or submitted
      all reports, documents, forms, notices, applications, records, claims,
      submissions and supplements or amendments as required by any Applicable Laws
      or
      Authorizations and that all such reports, documents, forms, notices,
      applications, records, claims, submissions and supplements or amendments were
      complete and correct on the date filed (or were corrected or supplemented by
      a
      subsequent submission); and (F) has not, either voluntarily or
      involuntarily, initiated, conducted, or issued or caused to be initiated,
      conducted or issued, any recall, market withdrawal or replacement, safety alert,
      post sale warning, “dear doctor” letter, or other notice or action relating to
      the alleged lack of safety or efficacy of any product or any alleged product
      defect or violation and, to the Company’s knowledge, no third party has
      initiated, conducted or intends to initiate any such notice or
      action.

     

    3.11. Real
      and Personal Property.
      The
      Company and each of its subsidiaries has good and marketable title in fee simple
      to all real property, and good and marketable title to all other property owned
      by it, in each case free and clear of all liens, encumbrances, claims, security
      interests and defects, except such as do not materially affect the value of
      such
      property and do not materially interfere with the use made or proposed to be
      made of such property by the Company and its subsidiaries and except as
      otherwise disclosed in the corresponding section of the Company’s disclosure
      schedules attached hereto as Exhibit F (the “Disclosure
      Schedules”).
      All
      property held under lease by the Company and its subsidiaries is held by them
      under valid, existing and enforceable leases, free and clear of all liens,
      encumbrances, claims, security interests and defects, except such as are not
      material and do not materially interfere with the use made or proposed to be
      made of such property by the Company and its subsidiaries except as otherwise
      disclosed in the Disclosure Schedules attached hereto.

     

    
      
         

      

      
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    3.12. No
      Material Adverse Change.
      Since
      the date of the most recent financial statements of the Company incorporated
      by
      reference in the Memorandum and except as otherwise disclosed in the Memorandum
      (i) there has not been any change in the capital stock or long-term debt of
      the Company or any of its subsidiaries, or any dividend or distribution of
      any
      kind declared, set aside for payment, paid or made by the Company on any class
      of capital stock, or any material adverse change, or any development involving
      a
      prospective material adverse change, in or affecting the business, properties,
      management, financial position, stockholders’ equity, results of operations or
      prospects of the Company and its subsidiaries taken as a whole;
      (ii) neither the Company nor any of its subsidiaries has sustained any
      material loss or interference with its business from fire, explosion, flood
      or
      other calamity, whether or not covered by insurance, or from any labor
      disturbance or dispute or any action, order or decree of any court or arbitrator
      or governmental or regulatory authority, and (iii) since the date of the
      latest balance sheet included in the Memorandum, neither the Company nor its
      subsidiaries has (A) issued any securities or incurred any liability or
      obligation, direct or contingent, for borrowed money, except such liabilities
      or
      obligations incurred in the ordinary course of business or (B) entered into
      any transaction not in the ordinary course of business.

     

    3.13. Material
      Contracts.
      Each
      description of any contract, document or other agreement in the Memorandum
      accurately reflects in all respects the terms of the underlying contract,
      document or other agreement. Each such contract, document or other agreement
      is
      in full force and effect and is valid and enforceable by and against the Company
      or its subsidiary, as the case may be, in accordance with its terms. Except
      as
      set forth on the Disclosure Schedule attached hereto, neither the Company nor
      any of its subsidiaries, if a subsidiary is a party, nor to the Company’s
      knowledge, any other party is in default in the observance or performance of
      any
      term or obligation to be performed by it under any such agreement, and no event
      has occurred which with notice or lapse of time or both would constitute such
      a
      default, in any such case which default or event, individually or in the
      aggregate, would have a Material Adverse Effect. No default exists, and no
      event
      has occurred which with notice or lapse of time or both would constitute a
      default, in the due performance and observance of any term, covenant or
      condition, by the Company or its subsidiary, if a subsidiary is a party thereto,
      of any other agreement or instrument to which the Company or any of its
      subsidiaries is a party or by which Company or its properties or business or
      a
      subsidiary or its properties or business may be bound or affected which default
      or event, individually or in the aggregate, would have a Material Adverse
      Effect.

     

    3.14. Statistical
      Data.
      The
      statistical and market related data included in the Memorandum are based on
      or
      derived from sources that the Company believes to be reliable and
      accurate.

     

    
      
         

      

      
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    3.15. No
      Violation.
      Neither
      the Company nor any of its subsidiaries is in violation of any term or provision
      of its charter or by-laws or of any franchise, license, permit, judgment,
      decree, order, statute, rule or regulation, where the consequences of such
      violation, individually or in the aggregate, would have a Material Adverse
      Effect.

     

    3.16. Due
      Authorization.
      Subject
      to the approval of the Company’s stockholders contemplated by
      Section 2.2(a) of this Agreement, this Agreement has been duly authorized,
      executed and delivered by the Company as of the date hereof and assuming proper
      execution by each of the parties thereto other than the Company, constitutes
      the
      legal, valid and binding obligation of the Company, enforceable in accordance
      with its terms. As of the Closing Date, the Warrant Agreement between the
      Company and the Warrant Agent (the “Warrant
      Agreement”)
      has
      been duly authorized, executed and delivered by the Company and assuming proper
      execution by the Warrant Agent, constitutes the legal, valid and binding
      obligation of the Company, enforceable in accordance with its terms. All
      necessary corporate action has been duly and validly taken by the Company to
      authorize the execution, delivery and performance of this Agreement, the Warrant
      Agreement and the issuance and sale of the Securities by the
      Company.

     

    3.17. No
      Default or Consents.
      Neither
      the execution, delivery and performance of this Agreement or the Warrant
      Agreement by the Company nor the consummation of any of the transactions
      contemplated hereby (including, without limitation, the issuance and sale by
      the
      Company of the Securities) will give rise to a right to terminate or accelerate
      the due date of any payment due under, or conflict with or result in the breach
      of any term or provision of, or constitute a default (or an event which with
      notice or lapse of time or both would constitute a default) under, or require
      any consent or waiver under, or result in the execution or imposition of any
      lien, charge or encumbrance upon any properties or assets of the Company or
      its
      subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust
      or
      other agreement or instrument to which the Company or any of its subsidiaries
      is
      a party or by which either the Company or its subsidiaries or any of their
      properties or businesses is bound, or any franchise, license, permit, judgment,
      decree, order, statute, rule or regulation applicable to the Company or any
      of
      its subsidiaries or violate any provision of the charter or by-laws of the
      Company or any of its subsidiaries, except for the approval of the Company’s
      stockholders contemplated by Section 2.2(a) of this Agreement and such
      consents or waivers which have already been obtained and are in full force
      and
      effect.

     

    
      
         

      

      
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    3.18. Capitalization.
      The
      Company has authorized and outstanding capital stock as set forth under the
      caption “Description of Common Stock and Warrants” in the Memorandum. The
      certificates evidencing the Shares and the Warrants are in due and proper legal
      form and have been duly authorized for issuance by the Company. All of the
      issued and outstanding shares of Common Stock have been duly and validly issued
      and are fully paid and nonassessable. There are no statutory preemptive or
      other
      similar rights to subscribe for or to purchase or acquire any shares of Common
      Stock of the Company or any of its subsidiaries or any such rights pursuant
      to
      its Certificate of Incorporation or by-laws or any agreement or instrument
      to or
      by which the Company or any of its subsidiaries is a party or bound other than
      this Agreement. All of the Company’s options, warrants and other rights to
      purchase or exchange any securities for shares of the Company’s capital stock
      have been duly authorized and validly issued, conform to the description thereof
      contained in the SEC Documents and the Memorandum and were issued in compliance
      with federal and state securities laws. There is no and has been no policy
      or
      practice of the Company to intentionally coordinate the grant of options to
      employees with the release or other public announcement of material information
      regarding the Company or its results of operations or prospects to minimize
      the
      exercise price of such options. The Shares, when issued and delivered and paid
      for as provided herein, will be duly and validly issued, and will be fully
      paid
      and nonassessable and will be issued free and clear of any security interests,
      liens, encumbrances, equities or claims. As of the Closing Date and subject
      to
      approval of the Company’s stockholders of an increase in the number of
      authorized shares of Common Stock, the Company will have reserved from its
      duly
      authorized capital stock the number of Warrant Shares, required to be reserved
      pursuant to the Warrant Agreements. The Warrant Shares, when issued and
      delivered against receipt of payment therefor upon exercise of the Warrants
      in
      accordance with their terms, will be duly authorized, validly issued, fully
      paid
      and nonassessable and will be issued free and clear of any security interests,
      liens, encumbrances, equities or claims. Except as disclosed in the Memorandum,
      the SEC Documents and the Disclosure Schedules attached hereto, there is no
      outstanding option, warrant or other right calling for the issuance of, and
      there is no commitment, plan or arrangement to issue, any share of stock of
      the
      Company or any of its subsidiaries or any security convertible into, or
      exercisable or exchangeable for, such stock. The Common Stock and the Securities
      conform in all material respects to all statements in relation thereto contained
      in the Memorandum. All outstanding shares of capital stock of each of the
      Company’s subsidiaries have been duly authorized and validly issued, and are
      fully paid and nonassessable and are owned directly by the Company or by another
      wholly-owned subsidiary of the Company free and clear of any security interests,
      liens, encumbrances, equities or claims, except as disclosed in the Disclosure
      Schedules attached hereto. The Company has taken all action necessary to exempt
      (i) the issuance and sale of the Securities, and (ii) the issuance of
      the Warrant Shares upon due exercise of the Warrants, from the provisions of
      any
      stockholder rights plan or other “poison pill” arrangement, any anti-takeover,
      business combination or control share law or statute binding on the Company
      or
      to which the Company or any of its assets and properties may be subject and
      any
      provision of the Company’s Certificate of Incorporation or Bylaws that is or
      could reasonably be expected to become applicable to any Purchaser as a result
      of the transactions contemplated hereby, including without limitation, the
      issuance of the Securities and the ownership, disposition or voting of the
      Securities by each Purchaser or the exercise of any right granted to each
      Purchaser pursuant to this Agreement or the Warrant Agreements. The issuance
      and
      sale of the Securities hereunder will not obligate the Company to issue shares
      of Common Stock or other securities to any other Person (other than the
      Purchasers) and will not result in the adjustment of the exercise, conversion,
      exchange or reset price of any outstanding security, except as disclosed in
      the
      Disclosure Schedules attached hereto.

     

    3.19. No
      Registration Rights.
      Except
      as otherwise disclosed in the Memorandum and the Disclosure Schedules attached
      hereto, no holder of any security of the Company has any right, which has not
      been waived, to have any security owned by such holder included in the offering
      of Securities contemplated by the Memorandum or to demand registration of any
      security owned by such holder for the period from the date of this Agreement
      through the ninetieth day following the effective date of the Initial
      Registration Statement as defined in Section 6.1(a)(i) below. Each director
      and executive officer of the Company has delivered to the Placement Agent his,
      her or its enforceable written Lock-Up Agreement.

     

    
      
         

      

      
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    3.20. Legal
      Proceedings.
      Except
      as otherwise disclosed in the Memorandum, there are no legal or governmental
      proceedings pending to which the Company or any of its subsidiaries is a party
      or of which any property of the Company or any of its subsidiaries is the
      subject which, if determined adversely to the Company or any of its subsidiaries
      could individually or in the aggregate have a Material Adverse Effect; and
      to
      the knowledge of the Company, no such proceedings are threatened or contemplated
      by governmental authorities or threatened by others. Except as otherwise
      disclosed in the Memorandum, the Company is not aware of any threatened or
      pending litigation between the Company or its subsidiaries and any of its
      executive officers which, if adversely determined, could have a Material Adverse
      Effect and has no reason to believe that such officers will not remain in the
      employment of the Company.

     

    3.21. Employees.
      Neither
      the Company nor any of its subsidiaries is involved in any labor dispute nor,
      to
      the knowledge of the Company, is any such dispute threatened, which dispute
      would have a Material Adverse Effect. The Company is not aware of any existing
      or imminent labor disturbance by the employees of any of its principal suppliers
      or contractors which would have a Material Adverse Effect.

     

    3.22. Market
      Stabilization.
      The
      Company has not taken, nor will it take, directly or indirectly, any action
      designed to or which might reasonably be expected to cause or result in, or
      which has constituted or which might reasonably be expected to constitute,
      the
      stabilization or manipulation of the price of the Common Stock or any security
      of the Company to facilitate the sale or resale of any of the Shares or the
      Warrant Shares.

     

    3.23. Taxes.
      The
      Company and each of its subsidiaries has filed all Federal, state, local and
      foreign tax returns which are required to be filed through the date hereof,
      which returns are true and correct in all material respects or has received
      timely extensions thereof, and has paid all taxes shown on such returns and
      all
      assessments received by it to the extent that the same are material and have
      become due. There are no tax audits or investigations pending, which if
      adversely determined would have a Material Adverse Effect; nor, to the Company’s
      knowledge, are there any material proposed additional tax assessments against
      the Company or any of its subsidiaries.

     

    3.24. Listing
      Compliance.
      Except
      as otherwise disclosed in the Memorandum, the Company has taken no action
      designed to, or likely to have the effect of, terminating the registration
      of
      the Common Stock under the Exchange Act or the listing of the Common Stock
      on
      the Nasdaq Global Market, nor, except as disclosed in the Memorandum, has the
      Company received any notification that the Commission or the Nasdaq Global
      Market is contemplating terminating such registration or listing. The
      transactions contemplated by this Agreement will not contravene the rules and
      regulations of the Nasdaq Global Market. The Company will use commercially
      reasonable efforts to continue the listing and trading of its Common Stock
      on
      the Nasdaq Global Market or the Nasdaq Capital Market and to comply in all
      material respects with the Company’s reporting, filing and other obligations
      under the rules of the Nasdaq Global Market or the Nasdaq Capital Market, as
      applicable. As of the Closing Date, the Shares and the Warrant Shares will
      have
      been duly authorized for listing on the Nasdaq Global Market or the Nasdaq
      Capital Market, or alternatively, the Common Stock will be eligible for
      quotation on the OTC Bulletin Board.

     

    
      
         

      

      
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    3.25. Books
      and Record Keeping.
      The
      books, records and accounts of the Company and its subsidiaries accurately
      and
      fairly reflect, in all material respects, in reasonable detail, the transactions
      in, and dispositions of, the assets of, and the results of operations of, the
      Company and its subsidiaries. The Company and each of its subsidiaries maintains
      a system of internal accounting controls sufficient to provide reasonable
      assurances that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles and to maintain asset
      accountability, (iii) access to assets is permitted only in accordance with
      management’s general or specific authorization and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

     

    3.26. Internal
      Controls.
      The
      Company has established and maintains disclosure controls and procedures (as
      such term is defined in Rule 13a-15 under the Exchange Act), which: (i) are
      designed to ensure that material information relating to the Company is made
      known to the Company’s principal executive officer and its principal financial
      officer by others within the Company; (ii) provide for the periodic
      evaluation of the effectiveness of such disclosure controls and procedures
      at
      the end of the periods in which the periodic reports are required to be
      prepared; and (iii) are effective in all material respects to perform the
      functions for which they were established.

     

    3.27. No
      Deficiencies or Frauds.
      Based
      on the evaluation of its disclosure controls and procedures, the Company is
      not
      aware of (i) any significant deficiency in the design or operation of
      internal controls which could adversely affect the Company’s ability to record,
      process, summarize and report financial data or any material weaknesses in
      internal controls; or (ii) any fraud, whether or not material, that
      involves management or other employees who have a role in the Company’s internal
      controls.

     

    3.28. Off
      Balance Sheet Arrangements.
      There
      are no material off-balance sheet arrangements (as defined in Item 303 of
      Regulation S-K) that have or are reasonably likely to have a material current
      or
      future effect on the Company’s financial condition, revenues or expenses,
      changes in financial condition, results of operations, liquidity, capital
      expenditures or capital resources.

     

    3.29. Audit
      Committee.
      The
      Company’s Board of Directors has validly appointed an audit committee whose
      composition satisfies the requirements of Rule 4350(d)(2) of the Rules of the
      National Association of Securities Dealers (the “NASD
      Rules”)
      and
      the Board of Directors and/or the audit committee has adopted a charter that
      satisfies the requirements of Rule 4350(d)(1) of the NASD Rules. The audit
      committee has reviewed the adequacy of its charter within the past twelve
      months.

     

    3.30. Sarbanes-Oxley
      Act.
      The
      Company is in compliance in all material respects with all other applicable
      provisions of the Sarbanes-Oxley Act of 2002, any related rules and regulations
      promulgated by the Commission and corporate governance requirements under the
      NASD Rules upon the effectiveness of such provisions and has no reason to
      believe that it will not be able to comply in all material respects with such
      provisions at the time of effectiveness.

     

    
      
         

      

      
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    3.31. Insurance.
      The
      Company and its subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are
      customary for companies of approximately equal size to the Company and its
      subsidiaries which are engaged in the businesses in which they are engaged
      or
      propose to engage after giving effect to the transactions described in the
      Memorandum; all policies of insurance and fidelity or surety bonds insuring
      the
      Company or any of its subsidiaries or the Company’s or its subsidiaries’
respective businesses, assets, employees, officers and directors are in full
      force and effect; the Company and each of its subsidiaries are in compliance
      with the terms of such policies and instruments in all material respects; and
      neither the Company nor any subsidiary of the Company has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that is not materially greater
      than the current cost. Neither the Company nor any of its subsidiaries has
      been
      denied any insurance coverage which it has sought or for which it has
      applied.

     

    3.32. Consents
      and Approvals.
      Each
      approval, consent, order, authorization, designation, declaration or filing
      of,
      by or with any regulatory, administrative or other governmental body necessary
      in connection with the execution and delivery by the Company of this Agreement
      and the consummation of the transactions herein contemplated required to be
      obtained or performed by the Company has been obtained or performed, except
      for
      the approval of the Company’s stockholders contemplated by Section 2.2(a)
      of this Agreement.

     

    3.33. Environmental
      Laws.

     

    (a) (i)
      Each
      of the Company and each of its subsidiaries is in compliance in all material
      respects with all rules, laws and regulation relating to the use, treatment,
      storage and disposal of toxic substances and protection of health or the
      environment (“Environmental
      Laws”)
      which
      are applicable to its business; (ii) neither the Company nor its
      subsidiaries has received any notice from any governmental authority or third
      party of an asserted claim under Environmental Laws; (iii) each of the
      Company and each of its subsidiaries has received all permits, licenses or
      other
      approvals required of it under applicable Environmental Laws to conduct its
      business and is in compliance with all terms and conditions of any such permit,
      license or approval (except where failure to receive such permits, licenses
      or
      approvals would not have a Material Adverse Effect); (iv) to the Company’s
      knowledge, no facts currently exist that will require the Company or any of
      its
      subsidiaries to make future material capital expenditures to comply with
      Environmental Laws; and (v) no property which is or has been owned, leased
      or occupied by the Company or its subsidiaries has been designated as a
      Superfund site pursuant to the Comprehensive Environmental Response,
      Compensation of Liability Act of 1980, as amended (42 U.S.C. Section 9601,
      et. seq.) or otherwise designated as a contaminated site under applicable state
      or local law. Neither the Company nor any of its subsidiaries has been named
      as
      a “potentially responsible party” under the CERCLA 1980.

     

    (b) In
      the
      ordinary course of its business, the Company periodically reviews the effect
      of
      Environmental Laws on the business, operations and properties of the Company
      and
      its subsidiaries, in the course of which the Company identifies and evaluates
      associated costs and liabilities (including, without limitation, any capital
      or
      operating expenditures required for clean-up, closure of properties or
      compliance with Environmental Laws, or any permit, license or approval, any
      related constraints on operating activities and any potential liabilities to
      third parties). On the basis of such review, the Company has reasonably
      concluded that such associated costs and liabilities would not, singly or in
      the
      aggregate, have a Material Adverse Effect.

     

    
      
         

      

      
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    3.34. Hazardous
      Materials.
      There
      has been no storage, generation, transportation, handling, treatment, disposal,
      discharge, emission, or other release of any kind of toxic or other wastes
      or
      other hazardous substances by, due to, or caused by the Company or any other
      entity for whose acts or omissions the Company is or may be liable upon any
      of
      the property now or previously owned or leased by the Company, or upon any
      other
      property, in violation of any statute or any ordinance, rule, regulation, order,
      judgment, decree or permit or which would, under any statute or any ordinance,
      rule (including rule of common law), regulation, order, judgment, decree or
      permit (including, without limitation those by the California Department of
      Health and, if applicable, the Nuclear Regulatory Commission, pertaining to
      radioactive materials) give rise to any liability; there has been no disposal,
      discharge, emission or other release of any kind onto such property or into
      the
      environment surrounding such property of any toxic or other wastes or other
      hazardous substances.

     

    3.35. Investment
      Company.
      The
      Company is not and, after giving effect to the offering and sale of the
      Securities and the application of the proceeds thereof as described in the
      Memorandum, will not be an “investment company” or an entity “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
      as amended, and the rules and regulations of the Commission
      thereunder.

     

    3.36. Foreign
      Corrupt Practices Act.
      The
      Company or any other person associated with or acting on behalf of the Company
      including, without limitation, any director, officer, agent or employee of
      the
      Company or its subsidiaries, has not, directly or indirectly, while acting
      on
      behalf of the Company or its subsidiaries (i) used any corporate funds for
      unlawful contributions, gifts, entertainment or other unlawful expenses relating
      to political activity; (ii) made any unlawful payment to foreign or
      domestic government officials or employees or to foreign or domestic political
      parties or campaigns from corporate funds; (iii) violated any provision of
      the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
      other unlawful payment.

     

    3.37. Foreign
      Transactions Reporting Act.
      The
      operations of the Company and its subsidiaries are and have been conducted
      at
      all times in compliance with applicable financial recordkeeping and reporting
      requirements of the Currency and Foreign Transactions Reporting Act of 1970,
      as
      amended, the money laundering statutes of all jurisdictions, the rules and
      regulations hereunder and any related or similar rules, regulations or
      guidelines, issued, administered or enforced by any governmental agency
      (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving the Company or any of it
      subsidiaries with respect to the Money Laundering Laws is pending, or to the
      best knowledge of the Company, threatened.

     

    3.38. OFAC.
      Neither
      the Company nor any of its subsidiaries nor, to the knowledge of the Company,
      any director, officer, agent, employee or affiliate of the Company or any of
      its
      subsidiaries is currently subject to any U.S. sanctions administered by the
      Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the offering,
      or
      lend, contribute or otherwise make available such proceeds to any subsidiary,
      joint venture partner or other person or entity, for the purpose of financing
      the activities of any person currently subject to any U.S. sanctions
      administered by OFAC.

     

    
      
         

      

      
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    3.39. ERISA.
      The
      Company has fulfilled its obligations, if any, under the minimum funding
      standards of Section 302 of the U.S. Employee Retirement Income Security
      Act of 1974 (“ERISA”)
      and
      the regulations and published interpretations hereunder with respect to each
      “plan” as defined in Section 3(3) of ERISA and such regulations and
      published interpretations in which its employees are eligible to participate
      and
      each such plan is in compliance in all material respects with the presently
      applicable provisions of ERISA and such regulations and published
      interpretations. No “Reportable Event” (as defined in 12 ERISA) has occurred
      with respect to any “Pension Plan” (as defined in ERISA) for which the Company
      could have any liability.

     

    3.40. Brokers
      or Finders.
      No
      broker, investment banker, financial advisor or other individual, corporation,
      general or limited partnership, limited liability company, firm, joint venture,
      association, enterprise, joint securities company, trust, unincorporated
      organization or other entity (each a “Person”),
      other
      than the Placement Agent, the fees and expenses of which will be paid by the
      Company, is entitled to any broker’s, finder’s, financial advisor’s financial
      advisor’s or other similar fee or commission in connection with the transactions
      contemplated by this Agreement based upon arrangements made by or on behalf
      of
      the Company.

     

    3.41. Use
      of
      Proceeds.
      The
      Company intends to use the net proceeds from the sale of the Securities as
      described in the Memorandum.

     

    3.42. Solicitation;
      Other Issuances of Securities.
      Neither
      the Company, its subsidiaries nor any affiliates, nor any Person acting on
      its
      or their behalf, (i) has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the Securities
      Act) in connection with the offer or sale of the Securities, (ii) has,
      directly or indirectly, made any offer or sale of any security or solicited
      any
      offer to buy or exchange any security, under any circumstances that would
      require registration of the Securities under the Securities Act or
      (iii) has issued any shares of Common Stock or shares of any series of
      preferred stock or other securities or instruments convertible into,
      exchangeable for or otherwise entitling the holder thereof to acquire shares
      of
      Common Stock which would be integrated with the sale of the Securities to such
      Purchaser for purposes of the Securities Act or of any applicable stockholder
      approval provisions, including, without limitation, under the rules and
      regulations of the Nasdaq Global Market, nor will the Company nor any of its
      subsidiaries or affiliates take any action or steps that would require
      registration of any of the Securities under the Securities Act or cause the
      offering of the Securities to be integrated with other offerings. Assuming
      the
      accuracy of the representations and warranties of Purchasers, the offer and
      sale
      of the Securities by the Company to the Purchasers pursuant to this Agreement
      will be exempt from the registration requirements of the Securities
      Act.

     

    3.43. No
      Restrictions on Subsidiaries.
      Except
      as otherwise disclosed in the Disclosure Schedules attached hereto, the
      subsidiaries of the Company are not currently prohibited, directly or
      indirectly, under any agreement or other instrument to which any subsidiary
      is a
      party or is subject, from paying any dividends to the Company, from making
      any
      other distribution on the subsidiary’s capital stock, from repaying to the
      Company any loans or advances to the subsidiary from the Company or from
      transferring any of such subsidiary’s properties or assets to the
      Company.

     

    
      
         

      

      
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    3.44. SEC
      Filing and Press Release.
      The
      Company shall file with the Commission not later than one (1) business day
      after
      the Execution Date, a Current Report on Form 8-K under the Exchange Act
      describing the transactions contemplated hereby and attaching as exhibits
      thereto all material documents relating to the transactions contemplated hereby.
      In the event such Form 8-K is not filed by the Company, the Purchasers shall
      each have the right to make a public disclosure, in the form of a press release,
      of the transactions contemplated hereby only upon the review and approval of
      such public disclosure by the Company, which such approval shall not be
      unreasonably withheld. Not later than one (1) business day after the Closing,
      the Company shall issue a press release that publicly discloses, to the extent
      the same have not been publicly disclosed previously, the material terms of
      the
      transactions contemplated hereby.

     

    3.45. Registration
      Statement.
      The
      Company will use reasonable best efforts to meet, as of the Closing Date and
      upon filing and effectiveness, the requirements for use of Form S-3 or such
      other applicable form available to the Company under the Securities Act for
      secondary offerings.

     

    3.46. Related
      Party Transactions.
      Except
      for those transactions that are not required to be disclosed by the Company
      pursuant to the rules and regulations of the Exchange Act, no transaction has
      occurred between or among the Company or its subsidiaries and any of its
      officers or directors, shareholders or any affiliate of any such officer or
      director or shareholder that is not described in the Memorandum.

     

    3.47. Company
      Acknowledgement of Purchaser Representation.
      The
      Company acknowledges and agrees that Purchaser does not make or has not made
      any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Section 4 of this
      Agreement, or in the Registration Statement Questionnaire.

     

    Section
      4. Representations,
      Warranties and Covenants of Each Purchaser.

     

    Each
      Purchaser for itself and no other Purchaser hereby represents and warrants
      to,
      and covenants with, the Company as of the Closing Date (or such other date
      specified below) as follows:

     

    4.1. Organization.
      Such
      Purchaser is an entity duly organized and validly existing in good standing
      (to
      the extent such concepts are applicable) under the laws of its jurisdiction
      of
      organization. Such Purchaser has all requisite corporate power and authority
      and
      all necessary governmental approvals to carry on its business as now being
      conducted, except as would not result in a Material Adverse Effect on such
      Purchaser’s ability to consummate the transactions contemplated by this
      Agreement. Such Purchaser’s principal executive offices are in the jurisdiction
      set forth immediate below the Purchaser’s name on the signature pages
      hereto.

     

    4.2. Authorization,
      Enforcement, and Validity.
      Such
      Purchaser has the requisite power and authority to enter into this Agreement
      and
      to consummate the transactions contemplated hereby. Such Purchaser has taken
      all
      necessary action to authorize the execution, delivery and performance of this
      Agreement. Upon the execution and delivery of this Agreement, this Agreement
      shall constitute a valid and binding obligation of the Purchaser enforceable
      in
      accordance with its terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
      creditors’ and contracting parties’ rights generally and except as
      enforceability may be subject to general principles of equity.

     

    
      
         

      

      
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    4.3. Consents
      and Approvals; No Violation.
      The
      execution, delivery and performance of this Agreement by such Purchaser and
      the
      consummation by such Purchaser of the transactions contemplated hereby will
      not
      (i) result in a violation of such Purchaser’s organizational documents;
      (ii) conflict with, or constitute a default or give to others any rights of
      termination, amendment, acceleration or cancellation of, any material agreement,
      indenture or instrument to which such Purchaser is a party (except for such
      conflicts, defaults, terminations, amendments, accelerations, cancellations
      and
      violations as would not, individually or in the aggregate, result in a Material
      Adverse Effect on such Purchaser’s ability to consummate the transactions
      contemplated by this Agreement); or (iii) result in a violation of any law,
      rule, regulation, order, judgment or decree applicable to such Purchaser or
      any
      of its Subsidiaries, except for such violations as would not, individually
      or in
      the aggregate, result in a Material Adverse Effect on such Purchaser’s ability
      to consummate the transactions contemplated by this Agreement. Such Purchaser
      is
      not required to obtain any consent, authorization or order of, or make any
      filing or registration with, any court or governmental agency or any regulatory
      or self-regulatory agency in order for it to execute, deliver or perform any
      of
      its obligations under or contemplated by this Agreement, except where the
      failure to obtain such consents, authorization or orders or to make such filings
      or registrations would not, individually or in the aggregate, result in a
      Material Adverse Effect on such Purchaser’s ability to consummate the
      transactions contemplated by this Agreement.

     

    4.4. Investment
      Experience.
      Such
      Purchaser is an accredited investor within the meaning of Rule 501 of Regulation
      D promulgated under the Securities Act, is knowledgeable, sophisticated and
      experienced in making, and is qualified to make, decisions with respect to
      investments in shares representing an investment decision like that involved
      in
      the purchase of the Securities.

     

    4.5. Limitation
      on Dispositions.
      (a) Such Purchaser is acquiring Securities for its own account and has no
      intention of selling or distributing any of such Securities or any arrangement
      or understanding with any other Persons regarding the sale or distribution
      of
      such Securities except in accordance with the provisions of Section 6 and
      except as would not result in a violation of the Securities Act, (b) such
      Purchaser will not, directly or indirectly, offer, sell, pledge, transfer,
      exchange or otherwise dispose of (or solicit any offers to buy, purchase or
      otherwise acquire or take a pledge of) any of the Securities except in
      accordance with the provisions of Section 6 or pursuant to and in
      accordance with the Securities Act and (c) such Purchaser has completed or
      caused to be completed the Registration Statement Questionnaire attached hereto
      as part of Appendix I for use in preparation of any registration statement
      that
      includes the Registrable Securities (as defined below) (the “Registration
      Statement”),
      and
      the answers thereto are true and correct as of the date hereof and will be
      true
      and correct as of the effective date of such Registration Statement and such
      Purchaser will notify the Company immediately of any material change in any
      such
      information provided in such Registration Statement Questionnaire until such
      time as such Purchaser has sold all of the Registrable Securities included
      in
      such Registration Statement or until the Company is no longer required to keep
      such Registration Statement effective, except that such Purchaser shall not
      be
      required to advise the Company of any sales of the Registrable Securities
      pursuant to the Registration Statements. 

     

    
      
         

      

      
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    4.6. Information
      and Risk.

     

    (a) Such
      Purchaser has received and reviewed the Memorandum and has requested, received,
      reviewed and considered all other information relevant in making an informed
      decision to purchase the Securities. Such Purchaser has had an opportunity
      to
      discuss the Company’s business, management and financial affairs with its
      management and also had an opportunity to ask questions of officers of the
      Company that were answered to such Purchaser’s satisfaction.

     

    (b) Such
      Purchaser recognizes that an investment in the Securities involves a high degree
      of risk, including a risk of total loss of such Purchaser’s investment. Such
      Purchaser is able to bear the economic risk of holding the Securities for an
      indefinite period, and has knowledge and experience in the financial and
      business matters such that it is capable of evaluating the risks of the
      investment in the Securities.

     

    (c) Such
      Purchaser has, in connection with such Purchaser’s decision to purchase
      Securities, not relied upon any representations or other information (whether
      oral or written) other than as set forth in the representations and warranties
      of the Company contained herein, the Memorandum, the SEC Documents and the
      other
      information described in Section 4.6(a), and such Purchaser has, with
      respect to all matters relating to this Agreement and the offer and sale of
      the
      Securities, relied solely upon the advice of such Purchaser’s own counsel and
      has not relied upon or consulted any counsel to the Placement Agent or counsel
      to the Company.

     

    4.7. Disclosures
      to the Company.
      Such
      Purchaser understands that the Company is relying on the statements contained
      herein to establish an exemption from registration under federal and state
      securities laws. Such Purchaser will promptly notify the Company of any changes
      in the information set forth in any Registration Statement regarding such
      Purchaser.

     

    4.8. Nature
      of Purchasers.
      To the
      knowledge of such Purchaser, such Purchaser: (i) is not an affiliate (as
      such term is defined pursuant to Rule 12b-2 promulgated under the Exchange
      Act)
      of any other Purchaser, (ii) is not constituted as a partnership,
      association, joint venture or any other type of joint entity with any other
      Purchaser, and (iii) is not acting as part of a group (as such term is
      defined under Section 13(d) of the Exchange Act) with any other Purchaser.
      If at any time after the Closing Date such Purchaser becomes an affiliate (as
      defined herein) of any other Purchaser, such Purchaser will provide prompt
      written notice to the Company.

     

    4.9. Ownership.
      Such
      Purchaser (including any Person controlling, controlled by, or under common
      control with such Purchaser, as the term “control” is defined pursuant to the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and its
      implementing regulations (the “HSR
      Act”))
      does
      not, and upon the consummation of the transactions contemplated by this
      Agreement will not, hold voting securities of the Company exceeding an aggregate
      fair market value as of the Closing Date of fifty million dollars ($50,000,000),
      calculated pursuant to the HSR Act.

     

    
      
         

      

      
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    4.10. Brokers
      or Finders.
      No
      broker, investment banker, financial advisor or other Person is entitled to
      any
      broker’s, finder’s, financial advisor’s or other similar fee or commission in
      connection with the transactions contemplated hereby based upon arrangements
      made by or on behalf of such Purchaser.

     

    4.11. Acknowledgement.
      Such
      Purchaser acknowledges and agrees that the Company does not make and has not
      made any representations or warranties with respect to the transactions
      contemplated by this Agreement other than those specifically set forth in
      Section 3.

     

    4.12. Confidential
      Treatment.
      The
      Purchasers shall hold in strict confidence all information concerning this
      Agreement and the offering of the Securities until such time as the Company
      has
      made a public announcement concerning this Agreement pursuant to
      Section 3.44.

     

    4.13. Short
      Sales.
      Between
      the time such Purchaser obtained knowledge of the proposed sale of the
      Securities contemplated hereby and 30 days following the public announcement
      of
      the transaction, such Purchaser has not taken and will not take any action
      that
      has caused or will cause such Purchaser to have, directly or indirectly, sold
      or
      agreed to sell any shares of Common Stock, effected any short sale, whether
      or
      not against the box, established any “put equivalent position” (as defined in
      Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended) with
      respect to the Common Stock, granted any other right (including, without
      limitation, any put or call option) with respect to the Common Stock or with
      respect to any security that includes, relates to or derived any significant
      part of its value from the Common Stock.

     

    4.14. Restricted
      Securities.
      Without
      limiting the registration rights granted to the Purchasers under Section 6
      hereto, such Purchaser understands that the Securities upon issuance will be
      “restricted securities” as such term is defined in Rule 144 promulgated under
      the Securities Act and must be held indefinitely unless the Securities are
      subsequently registered or qualified under applicable state and federal
      securities laws or an exemption from such registration or qualification is
      available. Such Purchaser understands that it may resell the Securities pursuant
      to Rule 144 only after the satisfaction of certain requirements, including
      the
      requirement that the Securities be held for at least one year prior to resale
      or
      any other time as may be required under Rule 144.

     

    Section
      5. Survival
      of Representations and Warranties.

     

    Notwithstanding
      any investigation made by any party to this Agreement or by the Placement Agent,
      all representations and warranties as to each respective Closing made by the
      Company and the Purchasers herein shall survive for a period of eighteen (18)
      months following the Closing Date.

     

    
      
         

      

      
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    Section
      6. Registration
      of the Shares and Warrant Shares; Compliance with the Securities Act; Other
      Agreements.

     

    6.1. Registration
      Procedures and Expenses.

     

    (a) Except
      during a Suspension (as defined below), the Company will, subject to receipt
      of
      necessary information from the Purchasers:

     

    (i) as
      soon
      as practicable use reasonable best efforts to prepare and file with the
      Commission a registration statement on Form S-3 or other applicable form
      available to the Company (the “Initial
      Registration Statement”)
      covering the resale of all of the Shares and the Warrant Shares of each
      Purchaser that has complied with Section 6.4, together with any shares of
      capital stock issued or issuable, from time to time, upon any reclassification,
      share combination, share subdivision, stock split, share dividend or similar
      transaction or event or otherwise as a distribution on, in exchange for or
      with
      respect to any of the foregoing, in each case held at the relevant time by
      a
      Purchaser (the “Registrable
      Securities”);
      provided,
      however,
      that in
      the event that publicly-available written guidance, rules of general
      applicability of the Commission staff, or written comments, requirements or
      request of the Commission staff to the Company in connection with the review
      of
      any registration statement, in any case, relating to the availability of Form
      S-3 under General Instruction I.B.3 to Form S-3 (the “SEC
      Guidance”)
      does
      not permit the Initial Registration Statement to include all Registrable
      Securities of each Purchaser (provided
      that,
      the Company shall use reasonable best efforts to advocate with the Commission
      for the registration of all or the maximum number of the Registrable Securities
      permitted by SEC Guidance), then the Company will use reasonable best efforts
      to
      file such additional Registration Statements (the “Subsequent
      Registration Statements”)
      at the
      earliest practicable date on which the Company is permitted by SEC Guidance
      to
      file such additional Registration Statements related to the Registrable
      Securities (the “Subsequent
      Filing Dates”).
      If
      any SEC Guidance sets forth a limitation on the number of Registrable Securities
      to be registered on a particular Registration Statement, the number of
      Registrable Securities to be registered on such Registration Statement will
      first be reduced by the Registrable Securities represented by Warrant Shares
      on
      a pro rata basis based on the total number of unregistered Warrant Shares held
      by such Purchasers, and second by the Registrable Securities represented by
      Shares on a pro rata basis based on the total number of unregistered Shares
      held
      by such Purchasers;

     

    (ii) use
      reasonable best efforts to cause (1) the Initial Registration Statement, as
      amended, to become effective under the Securities Act no earlier than after
      the
      filing of the next annual report on Form 10-K and no later than 4:00 p.m.
      Eastern Time on the one hundred eightieth (180th)
      day
      after the Closing Date and (2) any Subsequent Registration Statements, as
      amended, which may be required to be filed hereunder pursuant to
      Section 6.1(a)(i) to become effective under the Securities Act as soon as
      practicable but in any event no later than 4:00 p.m. Eastern Time on the
      forty-fifth (45th)
      day
      after such Subsequent Filing Date, or if such Subsequent Registration Statement
      is reviewed by the Commission, on the ninetieth (90th)
      day
      after such Subsequent Filing Date (each, its “Required
      Effective Date”);

     

    
      
         

      

      
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    (iii) use
      reasonable best efforts to cause any prospectus used in connection with any
      Registration Statement (a “Prospectus”)
      to be
      filed with the Commission pursuant to Rule 424(b) under the Securities Act
      as
      soon as practicable but in any event no later than 9:00 a.m. Eastern Time the
      next business day following the date such Registration Statement is declared
      effective by the Commission;

     

    (iv) use
      its
      reasonable best efforts to promptly prepare and file with the Commission such
      amendments and supplements to the Registration Statements and any Prospectus
      used in connection therewith (A) as may be necessary to keep such
      Registration Statements continuously effective until the earlier of (i) the
      second anniversary of the Closing Date, (ii) such time as all Registrable
      Securities have been sold pursuant to such Registration Statements or
      (iii) the date on which all of the Securities (including the Warrant
      Shares) may be resold by each of the Purchasers without registration pursuant
      to
      Rule 144(k) and (B) as may be reasonably requested by a Purchaser in order
      to incorporate information concerning such Purchaser or such Purchaser’s
      intended method of distribution;

     

    (v) so
      long
      as any Registration Statement is effective covering the resale of Registrable
      Securities owned by the Purchasers, furnish to each Purchaser with respect
      to
      the Registrable Securities registered under such Registration Statement (and
      to
      each underwriter, if any, of such Registrable Securities) such reasonable number
      of copies of Prospectuses and such other documents as such Purchaser may
      reasonably request in order to facilitate the public sale or other disposition
      of all or any of the Registrable Securities by such Purchaser;

     

    (vi) use
      commercially reasonable efforts to file documents required of the Company for
      normal Blue Sky clearance in any states specified in writing by the Purchasers;
      provided, however, that the Company shall not be required to qualify to do
      business generally in any jurisdiction in which the Company is not now so
      qualified;

     

    (vii) bear
      all
      expenses in connection with the procedures in paragraphs (i) through (vi)
      of this Section 6.1(a) and the registration of the Registrable Securities
      pursuant to the Registration Statements, other than fees and expenses, if any,
      of counsel or other advisors to the Purchasers or underwriting discounts,
      brokerage fees and commissions incurred by the Purchasers, if any, in connection
      with an underwritten offering of the Registrable Securities;

     

    (viii) use
      all
      commercially reasonable efforts to prevent the issuance of any stop order or
      other order suspending the effectiveness of the Registration Statements and,
      if
      such an order is issued, to obtain the withdrawal thereof at the earliest
      possible time and to notify each Purchaser of the issuance of such order and
      the
      resolution thereof;

     

    (ix) furnish
      to each Purchaser, two (2) business days after the date that any Registration
      Statement becomes effective, (x) a letter, dated such date, of outside
      counsel representing the Company (and reasonably acceptable to such Purchaser)
      addressed to such Purchaser, confirming the effectiveness of such Registration
      Statement and, to the knowledge of such counsel, the absence of any stop order,
      and (y) in the case of an underwriting, an opinion addressed to such
      Purchaser, dated such date, of such outside counsel, in such form and substance
      as is required to be given to the underwriters;

     

    
      
         

      

      
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    (x) provide
      to each Purchaser and its representatives, if requested, the opportunity to
      conduct a reasonable inquiry of the Company’s financial and other records during
      normal business hours and make available its officers, directors and employees
      for questions regarding information which such Purchaser may reasonably request
      in order to fulfill any due diligence obligation on its part, provided,
      that in
      the case of this clause (x), the Company shall not be required to provide,
      and
      shall not provide, any Purchaser with material, non-public information unless
      such Purchaser agrees to receive such information and enters into a written
      confidentiality agreement with the Company; and

     

    (xi) not
      less
      than three trading days prior to the filing of a Registration Statement and
      not
      less than two trading days prior to the filing of any related Prospectus or
      any
      amendment or supplement thereto (including any document that would be
      incorporated or deemed to be incorporated therein by reference) or, in the
      case
      of comments made by the staff of the Commission and the Company’s responses
      thereto, within a reasonable period of time following the receipt thereof by
      the
      Company, furnish to each Purchaser copies of all such documents proposed to
      be
      filed or copies of such correspondence from and to the Commission relating
      to
      such Registration Statement, as the case may be, which documents (other than
      those incorporated or deemed to be incorporated by reference) will be subject
      to
      the review of such Purchasers. The Company shall reflect in each such document
      when so filed with the Commission such comments relating to such Purchaser
      as
      such Purchaser may reasonably propose; provided,
      however,
      that
      such comments from such Purchaser must be received by the Company no later
      than
      one trading day prior to the filing of such document with the Commission.
      Notwithstanding any other provision of this Agreement, the Company will have
      no
      obligation to deliver or make available to any Purchaser any Registration
      Statement or Prospectus containing any material, nonpublic information unless
      such Purchaser specifically consents in advance to receive such material,
      nonpublic information in writing and such Purchaser has executed an agreement
      to
      keep such material, nonpublic information confidential and refrain from trading
      in any Company security for so long as such information remains material,
      nonpublic information.

     

    (b) The
      Company shall be permitted after the Initial Registration Statement has become
      effective under the Securities Act to suspend for one or more periods (each
      such
      period, a “Suspension”)
      the
      actions required under Sections 6.1(a)(i) through (iv) to the extent that the
      Board of Directors of the Company concludes in good faith and based on the
      advice of counsel that the disclosure of additional information in the
      Prospectus is necessary. Notwithstanding the foregoing, the Company agrees
      that
      no Suspension shall be for a period of longer than 45 days, and the aggregate
      of
      all Suspensions in any 365-day period shall not exceed 60 days.

     

    (c) With
      a
      view to making available to the Purchasers the benefits of Rule 144 (or its
      successor rule) and any other rule or regulation of the Commission that may
      at
      any time permit the Purchaser to sell Registrable Securities to the public
      without registration, the Company covenants and agrees to: (i) make and
      keep public information available, as those terms are understood and defined
      in
      Rule 144, until the earlier of (A) six months after such date as all of the
      Purchasers’ Registrable Securities may be resold pursuant to Rule 144(k) or any
      other rule of similar effect or (B) such date as all of the Purchasers’
Registrable Securities shall have been resold; (ii) file with the
      Commission in a timely manner all reports and other documents required of the
      Company under the Exchange Act; and (iii) furnish to the Purchaser upon
      request, as long as the Purchaser owns any Registrable Securities, (A) a
      written statement by the Company that it has complied with the reporting
      requirements of the Exchange Act, (B) a copy of the Company’s most recent
      Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such
      other information as may be reasonably requested in order to avail the Purchaser
      of any rule or regulation of the Commission that permits the selling of any
      such
      Registrable Securities without registration.

     

    
      
         

      

      
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    6.2. Delay
      in Effectiveness of Registration Statement.
      If a
      Registration Statement is not declared effective by the Commission on or prior
      to its Required Effective Date, (any such failure or breach being referred
      to as
      an “Event,”
and
      the date on which such Event occurs, being referred to as “Event
      Date”),
      then,
      in addition to any other rights available to the Purchasers, on each such Event
      Date and on each monthly anniversary of each such Event Date (if the applicable
      Event shall not have been cured by such date) until the applicable Event is
      cured, the Company shall pay to each Purchaser, as liquidated damages and not
      as
      a penalty, a cash payment equal to one percent (1%) of the aggregate purchase
      price paid by such Purchaser to the Company with respect to the Shares then
      held
      by such Purchaser. The parties agree that the Company will not be liable for
      liquidated damages or penalties or other remedies under this Section 6.2 in
      respect of the Warrants or the Warrant Shares. The liquidated damages pursuant
      to the terms hereof shall apply on a pro rata basis for any portion of a month
      prior to the cure of an Event; provided
      that the
      maximum aggregate liquidated damages payable to a Purchaser under this
      Section 6.2 shall not exceed twelve percent (12%) of the aggregate purchase
      price of the Securities purchased by such Purchaser pursuant to this Agreement.
      The parties agree that such liquidated damages shall not be the exclusive
      damages under this Agreement with respect to the occurrence of such Event.
      

     

    6.3. Restrictions
      on Transferability.

     

    (a) Each
      Purchaser agrees that it will not effect any disposition of the Securities
      (including the Warrant Shares) or its right to purchase the Securities
      (including any Warrant Shares) that would constitute a sale within the meaning
      of the Securities Act or pursuant to any applicable state securities or Blue
      Sky
      laws of any state, except in accordance with the Lock-Up Agreement between
      the
      Company and such Purchaser and (i) as contemplated in the Registration
      Statement referred to in Section 6.1 above, (ii) pursuant to the
      requirements of Rule 144 (in which case such Purchaser will provide the Company
      with reasonable evidence of such Purchaser’s compliance therewith) or
      (iii) pursuant to a written opinion of legal counsel reasonably
      satisfactory to the Company and addressed to the Company to the effect that
      registration under Section 5 of the Securities Act is not required in
      connection with the proposed transfer; whereupon the holder of such securities
      shall be entitled to transfer such securities. Each certificate evidencing
      the
      securities transferred as above provided shall bear the appropriate restrictive
      legends as may be required by Section 7.

     

    
      
         

      

      
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    (b) Each
      Purchaser acknowledges that there may occasionally be times when the Company
      must suspend the use of a Prospectus forming a part of a Registration Statement
      until such time as an amendment or supplement to such Registration Statement has
      been filed by the Company and declared effective, or until such time as the
      Company has filed an appropriate report with the Commission pursuant to the
      Exchange Act. Each Purchaser hereby covenants that such Purchaser will not
      sell
      any Securities (including the Warrant Shares) pursuant to said Prospectus during
      the period commencing at the time at which the Company gives the Purchasers
      written notice of the suspension of the use of said Prospectus and ending at
      the
      time the Company gives the Purchasers written notice that the Purchasers may
      thereafter effect sales pursuant to said Prospectus. The Company agrees to
      file
      such amendment, supplement or report as soon as practicable following such
      notice of Suspension.

     

    (c) None
      of
      the Securities (including the Warrant Shares) shall be transferable except
      upon
      the conditions specified in this Section 6, which are intended to ensure
      compliance with the provisions of the Securities Act. Each Purchaser will cause
      any proposed transferee of the Securities (including the Warrant Shares) held
      by
      such Purchaser to agree to take and hold such Securities (including the Warrant
      Shares) subject to the provisions and upon the conditions specified in this
      Section 6 if and to the extent that such Securities continue to be
      restricted securities in the hands of the transferee.

     

    (d) Such
      Purchaser covenants that such Purchaser will sell or transfer the Securities
      (including the Warrant Shares) in accordance with such Registration Statement,
      the Securities Act, applicable state securities laws and, to the extent the
      exemption from prospectus delivery requirements in Rule 172 under the
      Securities Act is not available, satisfy the requirement of delivering a current
      prospectus in connection with any proposed transfer or sale of the Securities
      (including the Warrant Shares).

     

    6.4. Furnish
      Information.
      It
      shall
      be a condition to the Company’s obligations to take any action under this
      Agreement with respect to the registration of a Purchaser’s Registrable
      Securities that such Purchaser shall promptly furnish to the Company, upon
      request, such reasonable and customary information regarding itself, such
      Purchaser’s Registrable Securities, and the intended method of disposition of
      such Registrable Securities if such intended method of distribution is different
      from the Plan of Distribution in form of Appendix II attached hereto. In
      connection therewith, each Purchaser shall be required to represent to the
      Company that all such information which is given is both complete and accurate
      in all material respects when made.

     

    6.5. Termination
      of Conditions and Obligations.

     

    (a) The
      conditions precedent imposed by Section 6.3 above regarding the
      transferability of the Securities (including the Warrant Shares) shall cease
      and
      terminate as to any particular number of Securities (including the Warrant
      Shares) upon the passage of two years from the date hereof or at such time
      as an
      opinion of counsel satisfactory in form and substance to the Company shall
      have
      been rendered to the effect that such conditions are not necessary in order
      to
      comply with the Securities Act.

     

    (b) The
      expiration or termination of this Agreement for any reason will have no effect
      on the rights of any of the parties under the provisions of this
      Section 6.

     

    
      
         

      

      
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    6.6. Board
      of Directors.
      At or
      by the time of the next annual stockholders meeting of the Company, the Company
      shall decrease the number of members of its Board of Directors from nine (9)
      members to seven (7) members and the Board of Directors shall include at least
      one (1) representative from Three Arch Partners (the “Three
      Arch Partners Board Member”)
      and
      two (2) new independent members (the “New
      Independent Board Members”)
      with
      relevant industry experience. The Three Arch Partners Board Member shall be
      reimbursed for all out-of-pocket expenses related to attending meetings of
      the
      Board of Directors. In addition if the Company’s Board members receive any
      additional fees or compensation, Three Arch Partners shall be entitled to
      equivalent payment. The Company further covenants and agrees to use commercially
      reasonable efforts to place the Three Arch Partners Board Member on the slate
      of
      directors presented to its stockholders at each annual meeting at which
      directors are elected and to place the New Independent Board Members on the
      slate of directors presented to its stockholders at the next annual meeting
      at
      which directors are elected, in all cases subject to compliance with relevant
      Nasdaq rules and regulations and subject to the approval of such nominees by
      the
      nominating and corporate governance committee of the Board of Directors. If
      the
      nominating and corporate governance committee of the Board of Directors does
      not
      approve any proposed Three Arch Partners Board Member, Three Arch Partners
      shall
      be entitled to propose another candidate who shall be reasonably acceptable
      to
      the Company. The Company shall use all commercially reasonable efforts,
      including preparation of proxy materials and solicitation of the Company’s
      stockholders, to give effect to this Section 6.6. The Company’s obligations
      under this Section 6.6 with respect to the Three Arch Partners Board Member
      shall terminate in their entirety if at any time Three Arch Partners
      beneficially owns less than 5,000,000 shares of Common Stock (including shares
      of Common Stock issuable upon exercise of warrants, and as appropriately
      adjusted for stock splits, stock dividends and recapitalizations), in such
      case,
      the Three Arch Partners Board Member shall resign from the Board effective
      immediately.

     

    6.7. Pre-Emptive
      Rights.
      From
      the Closing Date until the earlier of (a) the third anniversary of the Closing
      Date or (b) the date on which none of the Purchasers beneficially own at least
      10.0% pursuant to Section 13(d) of the Exchange Act of the shares of voting
      stock of the Company then outstanding, the Company shall not directly or
      indirectly, offer, sell or grant any option to purchase (or announce any offer,
      sale, grant or any option to purchase or other disposition of) any Common Stock
      or securities convertible into Common Stock (any such offer, sale, grant,
      disposition or announcement being referred to as a “Subsequent
      Placement”)
      unless
      the Company shall have first complied with this Section 6.7.

     

    (a) The
      Company shall deliver, at least ten (10) business days prior to the closing
      of a
      Subsequent Placement, to each Purchaser then beneficially owning at least 10.0%
      pursuant to Section 13(d) of the Exchange Act of the shares of voting stock
      of
      the Company then outstanding (an “Eligible
      Purchaser”),
      a
      written notice (the “Offer
      Notice”)
      of any
      proposed or intended issuance or sale or exchange (the “Subsequent
      Offer”)
      of the
      securities being offered (the “Offered
      Securities”)
      in a
      Subsequent Placement, which Offer Notice shall (A) identify and describe the
      Offered Securities, (B) describe the price or pricing mechanism and other terms
      upon which they are to be issued, sold or exchanged, and the number or amount
      of
      the Offered Securities to be issued, sold or exchanged, and (C) offer to issue
      and sell to or exchange with each Eligible Purchaser that portion of the Offered
      Securities that represents such Eligible Purchaser’s percentage of beneficial
      ownership pursuant to Section 13(d) of the Exchange Act of the aggregate number
      of shares of voting stock then outstanding (the “Pro
      Rata Amount”),
      provided that in no event shall the Company be required to offer to issue or
      sell, or to issue or sell, to the Eligible Purchasers more than 50% of the
      aggregate amount of the Offered Securities in any Subsequent
      Placement.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    (b) To
      accept
      a Subsequent Offer, in whole or in part, such Eligible Purchaser must deliver
      a
      written notice to the Company prior to the end of the 10th business day after
      such Eligible Purchaser’s receipt of the Offer Notice (the “Offer
      Period”),
      setting forth the portion of such Eligible Purchaser’s Pro Rata Amount that such
      Eligible Purchaser elects to purchase (in either case, the “Notice
      of Acceptance”).

     

    (c) In
      connection with any Subsequent Placement, the Company shall distribute to the
      Eligible Purchasers, other than any Eligible Purchaser that has indicated to
      the
      Company it is not interested in participating in the Subsequent Offer or that
      has not prior to the end of the Offer Period delivered a Notice of Acceptance
      pursuant to subsection (b) above, all agreements and other documents to be
      executed by the purchasers in the Subsequent Placement, at substantially the
      same time such items are distributed to the purchasers in the Subsequent
      Placement other than the Eligible Purchasers. If any Eligible Purchaser shall
      have failed to execute and deliver any such agreement or other document in
      the
      form so distributed by the such time as may be reasonably requested by the
      Company in connection with the Subsequent Placement, then such Eligible
      Purchaser shall not have a right to participate in such Subsequent Placement
      and
      all securities which such Eligible Purchaser would have been eligible to
      purchase in the Subsequent Placement shall be treated as Refused Securities
      with
      respect thereto.

     

    (d) The
      Company shall have ninety (90) days from the expiration of the Offer Period
      above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the Eligible
      Purchasers (the “Refused
      Securities”),
      but
      only upon terms and conditions (including, without limitation, the total amount
      of the financing, unit prices and interest rates) that are not materially more
      favorable to the acquiring person or persons or materially less favorable to
      the
      Company than those set forth in the Offer Notice, except for such changes which
      may, in the reasonable judgment of the Company, be necessary or appropriate
      on
      account of changes in market conditions , provided that if the Company makes
      such changes, it will use reasonable commercial efforts to consult with the
      Eligible Purchasers and to provide them the opportunity to participate in the
      financing as modified by such changes.

     

    (e) Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Eligible Purchasers shall acquire from the Company, and the
      Company shall issue to the Eligible Purchasers, the number or amount of Offered
      Securities specified in the Notices of Acceptance, upon the terms and conditions
      specified in the Subsequent Offer, subject to the terms and conditions contained
      in this Section 6.7.

     

    (f) The
      restrictions and other provisions contained in this Section 6.7 shall not apply
      to the issuance of any Common Stock issued or issuable: (i) to any employee,
      officer, director or consultant in connection with any plan or other
      compensatory arrangement approved by the Board of Directors or the Compensation
      Committee of the Board of Directors of the Company; (ii) upon the exercise
      of
      the Warrants and any warrants outstanding as of the Closing Date; (iii) to
      financial institutions, equipment lessors, brokers or similar persons in
      connection with commercial credit arrangements, equipment financings, commercial
      property lease transactions or similar non-equity transactions; (iv) in
      connection with bona fide acquisition, merger or similar transaction; (v) in
      any
      underwritten public offering; or (vi) to an entity as a component of any
      business relationship with such entity primarily for the purpose of (A) joint
      venture, technology licensing or development activities, (B) distribution,
      supply or manufacture of the Company’s products or services or (C) any other
      arrangements that are primarily for purposes other than raising equity
      capital.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    Section
      7. Legends.

     

    (a) Such
      Purchaser understands and agrees that each certificate or other document
      evidencing any of the Securities (including the Warrant Shares) shall be
      endorsed with the legend in the form set forth below, and such Purchaser
      covenants that such Purchaser will not transfer the Securities (including the
      Warrant Shares) represented by any such certificate without complying with
      the
      restrictions on transfer described in the legend endorsed on such certificate
      (unless there is in effect a registration statement under the Securities Act
      covering such proposed transfer, such Securities (including the Warrant Shares)
      have been sold under Rule 144 promulgated under the Securities Act
      (“Rule
      144”)
      or as
      otherwise permitted by the provisions of Section 6.3 above) and understands
      that the Company will refuse to register a transfer of any Securities (including
      the Warrant Shares) unless the conditions specified in the following legend
      are
      satisfied:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. EXCEPT AS
      SPECIFIED IN THIS LEGEND, SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
      PLEDGED OR HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
      REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT UNLESS
      SOLD
      PURSUANT TO RULE 144 OF SUCH ACT OR UNLESS SUCH SALE, PLEDGE, HYPOTHECATION
      OR
      TRANSFER IS OTHERWISE EXEMPT FROM REGISTRATION AND ANY APPLICABLE STATE
      SECURITIES LAWS. THE COMPANY MAY REQUEST A WRITTEN OPINION OF COUNSEL,
      REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS
      NOT
      REQUIRED IN CONNECTION WITH SUCH SALE OR OTHER TRANSFER.”

     

    (b) Such
      certificates shall not contain any legend (i) while a Registration
      Statement covering the resale of such Securities (including the Warrant Shares)
      is effective under the Securities Act, (ii) following any sale of the
      Securities (including the Warrant Shares) pursuant to an effective Registration
      Statement or Rule 144, or (iii) if the Securities (including the Warrant
      Shares) are eligible for sale under Rule 144(k). Following the effective date
      of
      a Registration Statement or at such earlier time as a legend is no longer
      required for certain Securities (including the Warrant Shares), the Company
      will, no later than three trading days following the delivery by a Purchaser
      to
      the Company of a written request for an unlegended certificate representing
      such
      securities, take such actions as are necessary for the Company’s transfer agent
      to deliver or cause to be delivered to such Purchaser a certificate representing
      such securities that is free from all restrictive and other
      legends.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    (c) Such
      Purchaser covenants that such Purchaser will not transfer the Securities
      (including the Warrant Shares) represented by any such certificate without
      complying with any applicable requirements under the Securities Act to deliver
      a
      final prospectus included in the effective Registration Statement to any offeree
      of the Registrable Securities.

     

    Section
      8. Indemnification.

     

    (a) For
      purposes of this Section 8 only:

     

    (i) the
      term
“Purchaser”
shall
      include the Purchaser and any affiliate (as such term is defined pursuant to
      Rule 12b-2 promulgated under the Exchange Act) of such Purchaser;

     

    (ii) the
      term
“Prospectus”
shall
      mean the prospectus and any amendment or supplement thereto in the form first
      filed with the Commission pursuant to Rule 424(b) promulgated under the
      Securities Act or, if no Rule 424(b) filing is required, filed as part of the
      Registration Statement at the time of effectiveness, as supplemented or amended
      from time to time; and

     

    (iii) the
      term
“Registration
      Statement”
shall
      include any final prospectus, exhibit, supplement or amendment included in
      or
      relating to a Registration Statement.

     

    (b) The
      Company agrees to indemnify and hold harmless each of the Purchasers and each
      Person, if any, who controls any Purchaser within the meaning of the Securities
      Act (each, an “Indemnified
      Party”),
      against any losses, claims, damages, liabilities or expenses, joint or several,
      to which such Indemnified Party may become subject under the Securities Act,
      the
      Exchange Act, or any other federal or state statutory law or regulation, or
      at
      common law or otherwise (including in settlement of any litigation, if such
      settlement is effected with the written consent of the Company), insofar as
      such
      losses, claims, damages, liabilities or expenses (or actions in respect thereof
      as contemplated below) arise out of or are based upon any untrue statement
      or
      alleged untrue statement of any material fact contained in a Registration
      Statement or Prospectus, or arise out of or are based upon the omission or
      alleged omission to state therein a material fact required to be stated therein
      or necessary to make the statements therein, in light of the circumstances
      in
      which they were made, not misleading, or arise out of or are based in whole
      or
      in part on any inaccuracy in the representations and warranties of the Company
      contained in this Agreement, or arise out of the Company’s failure to provide
      written notice of a Suspension, or any failure of the Company to perform its
      obligations hereunder, and will reimburse each Indemnified Party for any legal
      and other expenses reasonably incurred as such expenses are reasonably incurred
      by such Indemnified Party in connection with investigating, defending, settling,
      compromising or paying any such loss, claim, damage, liability, expense or
      action; provided, however, that the Company will not be liable in any such
      case
      to the extent that any such loss, claim, damage, liability or expense arises
      out
      of or is based upon (i) an untrue statement or alleged untrue statement or
      omission or alleged omission made in a Registration Statement or Prospectus
      in
      reliance upon and in conformity with written information furnished to the
      Company by or on behalf of the Indemnified Party expressly for use therein,
      (ii) the failure of such Indemnified Party to comply with the covenants and
      agreements contained in Section 6 above respecting sale of the Securities
      (including the Warrant Shares), (iii) the inaccuracy of any representations
      made by such Indemnified Party herein.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    (c) Each
      Purchaser will severally, and not jointly, indemnify and hold harmless the
      other
      Purchasers and the Company, each of its directors, each of its officers who
      signed a Registration Statement and each Person, if any, who controls the
      Company within the meaning of the Securities Act, against any losses, claims,
      damages, liabilities or expenses to which the Company, each of its directors,
      each of its officers who signed a Registration Statement or controlling Person
      may become subject, under the Securities Act, the Exchange Act, or any other
      federal or state statutory law or regulation, or at common law or otherwise
      (including in settlement of any litigation, if such settlement is effected
      with
      the written consent of such Purchaser) insofar as such losses, claims, damages,
      liabilities or expenses (or actions in respect thereof as contemplated below)
      arise out of or are based upon (i) any failure by such Purchaser to comply
      with the covenants and agreements contained in Section 6.3 above respecting
      the
      sale of the Securities (including the Warrant Shares) unless such failure by
      such Purchaser is directly caused by the Company’s failure to provide written
      notice of a Suspension to such Purchaser, (ii) the inaccuracy of any
      representation made by such Purchaser herein or (iii) any untrue or alleged
      untrue statement of any material fact contained in a Registration Statement
      or
      the Prospectus, or the omission or alleged omission to state therein a material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances in which they were made, not misleading, in each
      case to the extent, but only to the extent, that such untrue statement or
      alleged untrue statement or omission or alleged omission was made in a
      Registration Statement or Prospectus in reliance upon and in conformity with
      written information furnished to the Company by or on behalf of such Purchaser
      expressly for use therein, and will reimburse the Company, each of its
      directors, each of its officers who signed a Registration Statement or
      controlling Person for any legal and other expense reasonably incurred, as
      such
      expenses are reasonably incurred by the Company, each of its directors, each
      of
      its officers who signed a Registration Statement or controlling Person in
      connection with investigating, defending, settling, compromising or paying
      any
      such loss, claim, damage, liability, expense or action; provided, however,
      that
      the aggregate liability of any Purchaser hereunder shall not exceed the net
      proceeds received by such Purchaser upon the sale of the Registrable Securities
      included in the Registration Statement or Prospectus giving rise to such
      indemnification obligation. No Purchaser shall be liable for the indemnification
      obligations of any other Purchaser.

     

    (d) Promptly
      after receipt by an indemnified party under this Section 8 of notice of the
      threat or commencement of any action, such indemnified party will, if a claim
      in
      respect thereof is to be made against an indemnifying party under this
      Section 8, promptly notify the indemnifying party in writing thereof, but
      the omission so to notify the indemnifying party will not relieve it from any
      liability which it may have to any indemnified party hereunder or otherwise
      to
      the extent it is not prejudiced as a result of such failure. In case any such
      action is brought against any indemnified party and such indemnified party
      seeks
      or intends to seek indemnity from an indemnifying party, the indemnifying party
      will be entitled to participate in, and, to the extent that it may wish, jointly
      with all other indemnifying parties similarly notified, to assume the defense
      thereof with counsel reasonably satisfactory to such indemnified party;
      provided, however, if the defendants in any such action include both the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be a conflict between the positions
      of
      the indemnifying party and the indemnified party in conducting the defense
      of
      any such action or that there may be legal defenses available to it and/or
      other
      indemnified parties which are different from or additional to those available
      to
      the indemnifying party, the indemnified party or parties shall have the right
      to
      select separate counsel to assume such legal defenses and to otherwise
      participate in the defense of such action on behalf of such indemnified party
      or
      parties. Upon receipt of notice from the indemnifying party to such indemnified
      party of its election to assume the defense of such action and approval by
      the
      indemnified party of counsel, the indemnifying party will not be liable to
      such
      indemnified party under this Section 8 for any legal or other expenses
      subsequently incurred by such indemnified party in connection with the defense
      thereof unless (i) the indemnified party shall have employed such counsel
      in connection with the assumption of legal defenses in accordance with the
      proviso to the preceding sentence (it being understood, however, that the
      indemnifying party shall not be liable for the expenses of more than one
      separate counsel, reasonably satisfactory to the indemnifying party,
      representing the indemnified parties who are parties to such action) or
      (ii) the indemnified party shall not have employed counsel reasonably
      satisfactory to the indemnified party to represent the indemnified party within
      a reasonable time after notice of commencement of action, in each of which
      cases
      the reasonable fees and expenses of counsel shall be at the expense of the
      indemnifying party. No indemnifying party, in the defense of any claim covered
      by this Section 8, shall, except with the prior written consent of the
      indemnified party, which consent shall not be unreasonably conditioned, withheld
      or delayed, consent to entry of any judgment or enter into any settlement which
      does not include as an unconditional term thereof the giving by the claimant
      or
      plaintiff to such indemnified party of a release from all liability in respect
      to such claim. An indemnified party shall not consent to entry of any judgment
      or enter into any settlement without the prior written consent of the
      indemnifying party.

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    Section
      9. Notices.

     

    (a) All
      notices, requests, consents and other communications hereunder shall be in
      writing, shall be mailed by first-class registered or certified airmail,
      confirmed facsimile or nationally recognized overnight express courier postage
      prepaid, and shall be as addressed as follows:

     

    if
      to the
      Company, to:

     

    North
      American Scientific, Inc.

    20200
      Sunburst Street

    Chatsworth,
      California 91311

    Attention:
      James W. Klingler

    Telephone
      No.: (818) 734-8600

    Telecopy
      No.: (818) 734-5224

     

    with
      a
      copy to:

     

    Seyfarth
      Shaw LLP

    131
      South
      Dearborn Street, Ste. 2400

    Chicago,
      Illinois 60603

    Attention:
      Allan Reich

    Telephone
      No.: (312) 460-5000

    Telecopy
      No.: (312) 460-7000

     

    and
      if to
      any Purchaser, at its address as set forth in Appendix I hereto, or at such
      other address or addresses as may have been previously furnished to the Company
      in writing in accordance with this Section 9.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    (b) Such
      notices or other communications shall be deemed delivered upon receipt, in
      the
      case of overnight delivery, personal delivery, facsimile transmission (as
      evidenced by the confirmation thereof), or mail.

     

    Section
      10. Miscellaneous.

     

    10.1. Amendments.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively) only with the written consent of the Company
      and
      each Purchaser. Any amendment or waiver effected in accordance with this
      Section 10.1 shall be binding upon each holder of any securities purchased
      under this Agreement at the time outstanding (including securities into which
      such securities are convertible), each future holder of all such securities,
      and
      the Company.

     

    10.2. Headings.
      The
      headings of the various sections of this Agreement are for convenience of
      reference only and shall not be deemed to be part of this
      Agreement.

     

    10.3. Severability.
      In the
      event that any provision in this Agreement is held to be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby.

     

    10.4. Governing
      Law and Forum.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York applicable to agreements made and to be fully performed
      therein. The parties hereto agree to submit to the exclusive jurisdiction of
      the
      federal and state courts of the State of New York with respect to the
      interpretation of this Agreement or for the purposes of any action arising
      out
      of or related to this Agreement.

     

    10.5. Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, and all of which together shall constitute one and
      the
      same instrument. In the event that any signature is delivered via facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) the same with
      the same force and effect as if such facsimile signature page were an original
      hereof.

     

    10.6. Entire
      Agreement.
      This
      Agreement contains the entire understanding of the parties with respect to
      the
      matters covered herein, supersede all prior agreements and understandings with
      respect to such matters and executed by and among the Company and any of the
      Purchasers, and, except as specifically set forth herein or therein, neither
      the
      Company nor the Purchasers make any representation, warranty, covenant or
      undertaking with respect to such matters.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    10.7. Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under this Agreement are several and not joint
      with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under this Agreement. Nothing contained herein and no action taken
      by
      any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
      as
      a partnership, an association, a joint venture or any other kind of entity,
      or
      create a presumption that the Purchasers are in any way acting in concert or
      as
      a group, or are deemed affiliates (as such term is defined under the Exchange
      Act) with respect to such obligations or the transactions contemplated by this
      Agreement. Each Purchaser shall be entitled to independently protect and enforce
      its rights, including without limitation the rights arising out of this
      Agreement, and it shall not be necessary for any other Purchaser to be joined
      as
      an additional party in any proceeding for such purpose.

     

    10.8. No
      Fiduciary Duty.
      Each
      Purchaser hereby acknowledges that (a) the price of the Securities set
      forth in this Agreement was established by the Company following discussions
      and
      arms-length negotiations with the Purchasers, and each Purchaser is capable
      of
      evaluating and understanding, and understands and accepts, the terms, risks
      and
      conditions of the transactions contemplated by this Agreement; (b) the
      Placement Agent is not acting as a fiduciary of the Company or any Purchasers;
      and (c) the Company’s engagement of the Placement Agent in connection with
      the offering and the process leading up to the offering is as an independent
      contractor and not in any other capacity. Each Purchaser agrees that it will
      not
      claim that the Placement Agent has rendered advisory services of any nature
      or
      respect, or owe any fiduciary or similar duty to any Purchaser, in connection
      with such transaction or the process leading thereto.

     

    10.9. Expenses.
      Each
      party hereto shall pay all costs and expenses incurred by it in connection
      with
      the execution and delivery of this Agreement, and all the transactions
      contemplated thereby, including fees of legal counsel, except that the Company
      shall reimburse Three Arch Partners for all reasonable fees and expenses
      incurred by Three Arch Partners in connection with the transactions contemplated
      hereby, including the reasonable fees of Heller Ehrman LLP, legal counsel to
      Three Arch Partners.

     

    10.10. Disclosure.
      Three
      Arch Partners shall have an opportunity to review any statement made in any
      public disclosure or government filing in connection with the transactions
      contemplated by this Agreement that mentions the Purchasers or any of their
      affiliates prior to its release to the public or any third party, and the
      Company shall make the changes to such statements as may be reasonably requested
      by Three Arch Partners and are permitted by applicable law.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      and delivered by their duly authorized representatives as of the day and year
      first above written.

     

    
      	 	 	 
	 	NORTH
              AMERICAN SCIENTIFIC, INC.
	 
 	 
 	 
 
	 	By:  	/s/ John
              B.
              Rush
	 	Name: 	
              
John
              B. Rush
	 	Title: 	President and Chief
              Executive
              Officer


    

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    [Investor
      Signature Page]

     

    PURCHASER:

     

    Print
      or
      Type:

    Name
      of
      Purchaser (Individual or Institution):

     

      
        
          

        

      

    

     

    Name
      of
      Individual representing Purchaser (if an Institution):

     

    
      
 

    Title
      of
      Individual representing Purchaser (if an Institution):

     

    
      
 

    Signature
      by Individual Purchaser or Individual Representing Purchaser:

     

    
      
 

    Address:
      

     

    
      

    

     

    
      

    

     

    Telephone:

     

    
      

    

     

    Telecopier:
      

     

    
      
        

      

    

     

    e-mail:
      

     

    
      
        

      

    

     

     

    
      	
              Shares
                to be Purchased

            	 	
              Warrants
                to be Issued

            	 	
              Price
                Per Security in Dollars

            	 	
              Aggregate
                Price

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECURITIES
      CERTIFICATE QUESTIONNAIRE

     

    Pursuant
      to Section 2.3(b) of the Agreement, please provide us with the following
      information:

     

    
      
        
          	1.	
                  The
                    exact name that your Shares and Warrant Shares are to be registered
                    in
                    (this is the name that will appear on your stock certificate(s)
                    and
                    warrant certificate). You may use a nominee name if
                    appropriate:

                


          	 	 


          	 	 


        

      

    

     

    
      	
              2.

            	
              The
                relationship between the Purchaser of the Securities and the Registered
                Holder listed in response to item 1
                above:

            


      	 	 


      	 	 


    

     

    
      	
              3.

            	
              The
                mailing address of the Registered Holder listed in response to item
                1
                above:

            


      	 	 


      	 	 


    

     

    
      	
              4.

            	
              The
                Social Security Number or Tax Identification Number of the Registered
                Holder listed in response to item 1
                above:

            


      	 	 


      	 	 


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Appendix
      I

     

    NORTH
      AMERICAN SCIENTIFIC, INC.

    REGISTRATION
      STATEMENT QUESTIONNAIRE

     

    In
      connection with the preparation of the Registration Statement, please provide
      us
      with the following information:

     

    Plan
      of Distribution

     

    Attached
      as Appendix II hereto is a draft of the “Plan of Distribution” section of the
      Registration Statement. Do you propose to offer or sell any shares of Common
      Stock to be registered on the Registration Statement by means other than those
      described in Appendix II?

     

    o
      Yes  o
      No

     

    If
“yes”,
      please describe the manner in which you propose to offer or sell such Shares
      of
      Common Stock:

     

    
      

    

     

    
      

    

     

    
      

    

     

    Selling
      Stockholders

     

    Pursuant
      to the “Selling Stockholder” section of the Registration Statement, please state
      your or your organization’s name exactly as it should appear in the Registration
      Statement:

     

    
      
 

    Please
      provide the number of shares that you or your organization will own immediately
      after Closing, including those Securities purchased by you or your organization
      pursuant to this Purchase Agreement and those shares purchased by you or your
      organization through other transactions:

     

    
      
 

    Have
      you
      or your organization had any position, office or other material relationship
      within the past three years with the Company or its affiliates?

     

    Yes            No

     

    
      
         

      

      
        I-1

        
          

        

      

      
         

      

    

    If
      yes,
      please indicate the nature of any such relationships below:

     

    
      

    

     

    
      

    

     

    
      

    

     

    Are
      you
      (i) an NASD Member (see definition), (ii) a Controlling (see
      definition) shareholder of an NASD Member, (iii) a Person Associated with a
      Member of the NASD (see definition), (iv) an Underwriter or a Related
      Person (see definition) with respect to the proposed offering; (v) do you
      own any shares or other securities of any NASD Member not purchased in the
      open
      market; or (vi) have you made any outstanding subordinated loans to any
      NASD Member?

     

    Answer: o
      Yes o No If “yes”,
      please describe below:

     

    
      
 

    
      
 

    
      
 

    
      
         

      

      
        I-2

        
          

        

      

      
         

      

    

    NASD
      Member. The term “NASD member” means either any broker or dealer admitted to
      membership in the National Association of Securities Dealers, Inc. (“NASD”).
      (NASD Manual, By-laws Article I, Definitions)

     

    Control.
      The term “control” (including the terms “controlling,” “controlled by” and
“under common control with”) means the possession, direct or indirect, of the
      power, either individually or with others, to direct or cause the direction
      of
      the management and policies of a person, whether through the ownership of voting
      securities, by contract, or otherwise. (Rule 405 under the Securities Act of
      1933, as amended)

     

    Person
      Associated with a member of the NASD. The term “person associated with a member
      of the NASD” means every sole proprietor, partner, officer, director, branch
      manager or executive representative of any NASD Member, or any natural person
      occupying a similar status or performing similar functions, or any natural
      person engaged in the investment banking or securities business who is directly
      or indirectly controlling or controlled by a NASD Member, whether or not such
      person is registered or exempt from registration with the NASD pursuant to
      its
      by-laws. (NASD Manual, By-laws Article I, Definitions)

     

    Underwriter
      or a Related Person. The term “underwriter or a related person” means, with
      respect to a proposed offering, underwriters, underwriters’ counsel, financial
      consultants and advisors, finders, members of the selling or distribution group,
      and any and all other persons associated with or related to any of such persons.
      (NASD Interpretation)

     

    
      
         

      

      
        I-3

        
          

        

      

      
         

      

    

    Appendix
      II

     

    FORM
      OF PLAN OF DISTRIBUTION

     

    The
      selling stockholders, which as used herein includes donees, pledgees,
      transferees or other successors-in-interest selling shares received after the
      date of this prospectus from a selling stockholder as a gift, pledge,
      partnership distribution or other transfer, may, from time to time, sell,
      transfer or otherwise dispose of any or all of their shares on any stock
      exchange, market or trading facility on which the shares are traded or in
      private transactions. These dispositions may be at fixed prices, at prevailing
      market prices at the time of sale, at prices related to the prevailing market
      price, at varying prices determined at the time of sale, or at negotiated
      prices.

     

    The
      selling stockholders may use any one or more of the following methods when
      disposing of shares:

     

    
      	 	
              •

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            


    

     

    
      	 	
              •

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as
                agent, but may position and resell a portion of the block as principal
                to
                facilitate the transaction;

            


    

     

    
      	 	
              •

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            


    

     

    
      	 	
              •

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            


    

     

    
      	 	
              •

            	
              privately
                negotiated transactions;

            


    

     

    
      	 	
              •

            	
              short
                sales effected after the date the registration statement of which
                this
                prospectus is a part is declared effective by the
                Commission;

            


    

     

    
      	 	
              •

            	
              through
                the writing or settlement of options or other hedging transactions,
                whether through an options exchange or
                otherwise;

            


    

     

    
      	 	
              •

            	
              broker-dealers
                may agree with the selling stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            


    

     

    
      	 	
              •

            	
              a
                combination of any such methods of sale;
                or

            


    

     

    
      	 	
              •

            	
              any
                other method permitted pursuant to applicable
                law.

            


    

     

    The
      selling stockholders may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus. The selling stockholders
      are not obligated to, and there is no assurance that the selling stockholders
      will, sell all or any of the shares we are registering. The selling stockholders
      may transfer, devise or gift such shares by other means not described in this
      prospectus.

     

    
      
         

      

      
        II-1

        
          

        

      

      
         

      

    

    In
      connection with the sale of our shares, the selling stockholders may enter
      into
      hedging transactions with broker-dealers or other financial institutions, which
      may in turn engage in short sales of the common stock in the course of hedging
      the positions they assume. The selling stockholders may also sell shares of
      our
      common stock short and deliver these securities to close out their short
      positions, or loan or pledge the common stock to broker-dealers that in turn
      may
      sell these securities. The selling stockholders may also enter into option
      or
      other transactions with broker-dealers or other financial institutions or the
      creation of one or more derivative securities which require the delivery to
      such
      broker-dealer or other financial institution of shares offered by this
      prospectus, which shares such broker-dealer or other financial institution
      may
      resell pursuant to this prospectus (as supplemented or amended to reflect such
      transaction).

     

    The
      aggregate proceeds to the selling stockholders from the sale of the common
      stock
      offered by them will be the purchase price of the common stock less discounts
      or
      commissions, if any. Each of the selling stockholders reserves the right to
      accept and, together with their agents from time to time, to reject, in whole
      or
      in part, any proposed purchase of common stock to be made directly or through
      agents. We will not receive any of the proceeds from this offering. Upon any
      exercise of the warrants by payment of cash, however, we will receive the
      exercise price of the warrants.

     

    Broker-dealers
      engaged by the selling stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the selling stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      selling stockholders do not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved. Any profits on the
      resale of shares by a broker-dealer acting as principal might be deemed to
      be
      underwriting discounts or commissions under the Securities Act. Discounts,
      concessions, commissions and similar selling expenses, if any, attributable
      to
      the sale of shares will be borne by a selling stockholder. The selling
      stockholders may agree to indemnify any agent, dealer or broker-dealer that
      participates in transactions involving sales of the shares if liabilities are
      imposed on that person under the Securities Act.

     

    The
      Company is required to pay certain fees and expenses incurred by the Company
      incident to the registration of the shares.  The Company has agreed to
      indemnify the selling stockholders against certain losses, claims, damages
      and
      liabilities, including liabilities under the Securities Act.

     

    The
      selling stockholders, broker-dealers or agents that participate in the sale
      of
      the common stock may be “underwriters” within the meaning of Section 2(11)
      of the Securities Act. Any discounts, commissions, concessions or profit they
      earn on any resale of the shares may be underwriting discounts and commissions
      under the Securities Act. Selling stockholders who are “underwriters” within the
      meaning of Section 2(11) of the Securities Act will be subject to the
      prospectus delivery requirements of the Securities Act. There is no underwriter
      or coordinating broker acting in connection with the proposed sale of the resale
      shares by the selling stockholders.

     

    The
      selling stockholders may from time to time pledge or grant a security interest
      in some or all of the shares owned by them and, if they default in the
      performance of any of their secured obligations, the pledgees or secured parties
      may offer and sell the shares from time to time under this prospectus as it
      may
      be supplemented from time to time, or under an amendment to this prospectus
      under Rule 424(b)(3) or other applicable provision of the Securities Act
      amending the list of selling stockholders to include the pledgee, transferee
      or
      other successors in interest as selling stockholders under this
      prospectus.

     

    
      
         

      

      
        II-2

        
          

        

      

      
         

      

    

    To
      the
      extent required, the shares to be sold, the names of the selling stockholders,
      the respective purchase prices and public offering prices, the names of any
      agents, dealer or underwriter, any applicable commissions or discounts with
      respect to a particular offer will be set forth in an accompanying prospectus
      supplement or, if appropriate, a post-effective amendment to the registration
      statement that includes this prospectus.

     

    In
      order
      to comply with the securities laws of some states, if applicable, the common
      stock may be sold in these jurisdictions only through registered or licensed
      brokers or dealers. In addition, in some states the common stock may not be
      sold
      unless it has been registered or qualified for sale or an exemption from
      registration or qualification requirements is available and is complied
      with.

     

    The
      anti-manipulation rules of Regulation M under the Exchange Act may apply to
      sales of shares in the market and to the activities of the selling stockholders
      and their affiliates. In addition, we will make copies of this prospectus (as
      it
      may be supplemented or amended from time to time) available to the selling
      stockholders for the purpose of satisfying the prospectus delivery requirements
      of the Securities Act. The selling stockholders may indemnify any broker-dealer
      that participates in transactions involving the sale of the shares against
      certain liabilities, including liabilities arising under the Securities
      Act.

     

    We
      have
      agreed with the selling stockholders to keep the registration statement of
      which
      this prospectus constitutes a part effective until the earlier of (1) the
      passage of two years from [the Closing Date], (2) such time as all of the shares
      covered by this prospectus have been disposed of pursuant to and in accordance
      with the registration statement or (3) the date on which the shares may be
      sold pursuant to Rule 144(k) of the Securities Act.

     

    
      
         

      

      
        II-3

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

    FORM
      OF
      WARRANT AGREEMENT

     

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

    EXHIBIT
      B

     

    FORM
      OF
      COMPANY COUNSEL OPINION

     

    
      
         

      

      
        B-1

        
          

        

      

      
         

      

    

    EXHIBIT
      C

     

    FORM
      OF
      MCDERMOTT, WILL & EMERY IP OPINION

     

    
      
         

      

      
        C-1

        
          

        

      

      
         

      

    

    EXHIBIT
      D

     

    FORM
      OF
      CONSULTANT TO THE COMPANY IP, REGULATORY AND LITIGATION OPINION

     

    
      
         

      

      
        D-1

        
          

        

      

      
         

      

    

    EXHIBIT
      E

     

    FORM
      OF
      LOCK-UP AGREEMENT

     

    
      
         

      

      
        E-1

        
          

        

      

      
         

      

    

    EXHIBIT
      F

     

    DISCLOSURE
      SCHEDULES

     

    
      
         

      

        F-1