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Exhibit 10.26    
    

THIS NOTE AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 
 

CARDIONET, INC.
  
    SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE    
    

	$                        	 	August 29, 2006

San Diego, California

        FOR VALUE RECEIVED, CARDIONET, INC., a California corporation (the
"Company"), hereby promises to pay to the order of                        
(the "Purchaser"), the principal sum
of $                        , together with accrued and unpaid interest thereon, each due and payable on the date and in the
manner set forth below. 

        This
note is one of a series of similar notes being issued of even date herewith in the aggregate principal amount of
$                        . The Company has also issued a series of notes
pursuant to the Note and Warrant Purchase Agreement dated May 1, 2006 among the Company and the Purchasers listed on the Schedule of Purchasers attached thereto (the  "Purchase Agreement").
Collectively, the notes issued of even date herewith and the notes issued pursuant to the Purchase Agreement are referred to
herein as "Notes" and each individually as a "Note". All Notes rank in parity with each other Note. This
Note is one of the Notes referred to in and is executed and delivered in connection with that certain Amended and Restated Security Agreement dated as of even date herewith and executed by Company in
favor of the Secured Parties set forth therein (as the same may from time to time be amended, modified or supplemented or restated, the "Security
Agreement"). Additional rights of the Purchaser are set forth in the Security Agreement. 

1.    Maturity Date.    On the first to occur of (i) a sale, lease or other
disposition of all or substantially all of the assets of the Company (an "Asset Transfer"), (ii) (A) any consolidation or merger of the
Company with or into any other corporation or other entity or person in which the shareholders of the Company immediately prior to such consolidation or merger, own less than 50% of the voting power
of the surviving entity immediately after such consolidation or merger or (B) any transaction or series of transactions to which the Company is a party in which in excess of 50% of the
Company's voting power is transferred (an "Acquisition" and, together with an Asset Transfer, a "Disposition
Transaction"), provided that an Acquisition shall not include (x) any consolidation or merger effected exclusively to change the domicile of the Company or
(y) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is
cancelled or converted or a combination thereof, or (iii) February 15, 2007 or such later date as may be determined by the written consent of the holders of at least 67% of the aggregate
principal amount of all Notes (the "Majority Lenders") (the first to occur, the "Maturity Date"), the
entire outstanding principal balance and all unpaid accrued interest hereof shall become fully due and payable to the Purchaser. 

2.    Interest.    Interest shall accrue on the outstanding principal amount hereof
from the date of this Note
until payment or conversion in full, which interest shall be payable at the rate of 8% per annum or the maximum rate permissible by law (which under the laws of the State of California shall be deemed
to be the laws relating to permissible rates of interest on commercial loans), whichever is less. Interest shall be due and payable on the Maturity Date, and shall be calculated on the basis of a
365-day year for the actual number of days elapsed. 

 

3.    Payment.    Unless the indebtedness outstanding under this Note is converted
in accordance with Section 5 hereof, payment shall be made in lawful money of the United States to the Purchaser at the Company's principal offices or, at the option of the Purchaser, at such
other place in the United States as Purchaser shall have designated by written notice to the Company. All payments shall be applied first to accrued interest and thereafter to principal and shall be
made pro rata to all holders of Notes. 

4.    Prepayment.    Subject to Section 3 above, the Company may prepay all
or any part of the principal or accrued interest outstanding under this Note at any time other than at such time as the Company is negotiating or otherwise expecting to enter into a Disposition
Transaction with a specific third party. 

5.    Conversion    

        5.1    Optional Conversion at Next Equity Financing.    Upon the
closing of the Next Equity Financing (as defined below) on or prior to the Maturity Date, the Majority Lenders may, upon prior written notice to the Company, elect to convert all unpaid principal and
accrued interest outstanding under this Note (the "Conversion Amount") as of the date thereof into that number of shares of the Preferred Stock sold by
the Company in the Next Equity Financing as is equal to the Conversion Amount divided by the per share purchase price of the Preferred Stock sold in the Next Equity Financing and on the other terms
and conditions provided to purchasers in the Next Equity Financing. "Next Equity Financing" shall mean the first equity financing following the date
hereof involving the sale by the Company of its Preferred Stock in which the Company receives an aggregate of at least $8,000,000 in cumulative gross proceeds, including conversion of the Notes and
interest hereon and thereon and the conversion of all other indebtedness of the Company. 

        5.2    Optional Conversion at Disposition Transaction.    Immediately
prior to the closing of a Disposition Transaction, the Purchaser may, upon 10 days' prior written notice to the Company, elect to convert the Conversion Amount as of the date thereof into that
number of shares of Series D-1 Preferred (as defined in the warrant issued to the holder of even date herewith (the "Warrant")) as is
equal to the Conversion Amount divided by $3.50 (as adjusted for stock dividends, combinations, splits and other recapitalizations after the date hereof). 

6.    Termination of Rights.    All rights with respect to this Note shall terminate
upon a payment or conversion of the Conversion Amount in full, whether or not this Note has been surrendered. 

7.    Secured Note.    The full amount of this Note is secured by the Collateral
identified and described as security therefor in the Security Agreement. 

8.    Default.    Each of the following events shall be an
"Event of Default" hereunder: 

        (a)   The Company commits a material breach of the representations, warranties or covenants in the Purchase Agreement; 

        (b)   The Company files a petition or action for relief under any bankruptcy, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any action in furtherance of any of the foregoing; 

        (c)   An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within
60 days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take
possession, custody or control of any property of the Company; 

        (d)   An "Event of Default" under the Security Agreement; or 

        (e)   The Company defaults in the payment of principal when due at stated maturity of other indebtedness for borrowed money or
acceleration of such other indebtedness for borrowed money where the aggregate principal amount with respect to which the default or acceleration has 

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occurred
exceeds $50,000, and such acceleration has not been rescinded or annulled within a period of 30 days after written notice as provided in the agreements representing such indebtedness. 

        Upon
the occurrence of an Event of Default, all unpaid principal, accrued interest and other amounts owing hereunder shall, at the option of the Majority Lenders, and, in the case of an
Event of Default pursuant to (b) or (c) above, automatically, be immediately due, payable and
collectible by the Purchaser pursuant to applicable law. Subject to the provisions hereof, the Purchaser shall have all rights and may exercise any remedies available to it under law, successively or
concurrently. 

9.    Subordination.    The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of the Senior Indebtedness. 

        "Senior Indebtedness" shall mean, unless expressly subordinated to or made on a parity with the amounts due under this Note, the principal
of, unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement and other amounts due in connection with (a) indebtedness of the Company secured by (A) the Security
and License Agreement between the Company and Guidant Investment Corporation ("Guidant") dated November 12, 2003, (B) the Purchase
Agreement between the Company and Varian, Inc. ("Varian") dated September 14, 2001, (C) the Pledge and Security Agreement between
the Company and Redevelopment Authority of the County of Montgomery ("Montgomery County") dated December 30, 2003, and (D) the Loan and
Security Agreement between the Company and Silicon Valley Bank dated July 3, 2006, as any such agreement has been or may be amended or supplemented from time to time, and (b) any
additional secured indebtedness of the Company to Guidant or Guidant's affiliates, Varian, Montgomery County or Silicon Valley Bank. 

        9.1    Insolvency Proceedings.    If there shall occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of
all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the Company, (a) no amount shall be paid by the Company in respect of
the principal of, interest on or other amounts due with respect to this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall
be paid in full, and (b) no claim or proof of claim shall be filed by or on behalf of the Purchaser which shall assert any right to receive any payments in respect of the principal of and
interest on this Note except subject to the payment in full of the principal of and interest on all of the Senior Indebtedness then outstanding. 

        9.2    Default on Senior Indebtedness.    If there shall occur an
event of default which has been declared in writing with respect to any Senior Indebtedness, as defined therein, or in the instrument under which it is outstanding, permitting the holder to accelerate
the maturity thereof and the Purchaser shall have received written notice thereof from the holder of such Senior Indebtedness, then, unless and until such event of default shall have been cured or
waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note unless within
180 days after the happening of such event of default the maturity of such Senior Indebtedness shall not have been accelerated. Not more than one notice may be given to the Purchaser pursuant
to the terms of this Section 9.2 during any 360 day period. 

        9.3    Further Assurances.    By acceptance of this Note the Purchaser
agrees to execute and deliver customary forms of subordination agreement requested from time to time by the holders of Senior Indebtedness and, as a condition to the Purchaser's rights hereunder, the
Company may require that the Purchaser execute such forms of subordination agreement, provided that such forms shall not impose on the Purchaser terms less favorable than those provided herein. 

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        9.4    Subrogation.    Subject to the payment in full of all Senior
Indebtedness, the Purchaser shall be subrogated to the rights of the holder(s) of such Senior Indebtedness (to the extent of the payments or distributions made to the holder(s) of such Senior
Indebtedness pursuant to the provisions of this Section 9) to receive payments and distributions of assets of the Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Purchaser, be deemed to be a payment by the
Company to or on account of this Note; and for purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness to which the Purchaser would be entitled except for the
provisions of this Section 9 shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Purchaser, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness. 

        9.5    No Impairment.    Subject to the rights, if any, of the holders
of Senior Indebtedness under this Section 9 to receive cash, securities or other properties otherwise payable or deliverable to the Purchaser, nothing contained in this Section 9 shall
impair, as between the Company and the Purchaser, the obligation of the Company, subject to the terms and conditions hereof, to pay to the Purchaser the principal hereof and interest hereon as and
when the same become due and payable, or shall prevent the Purchaser, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law; and
notwithstanding such rights, if any, of the holders of Senior Indebtedness under this Section 9, nothing contained in this Section 9 shall impair the Purchasers' right to convert the
principal and interest of this Note into equity securities of the Company in accordance with Section 5 hereof. 

        9.6    Lien Subordination.    Any lien or security interest of the
Purchaser, whether now or hereafter existing in connection with the amounts due under this Note, on any assets or property of the Company or any proceeds or revenues therefrom which the Purchaser may
have at any time as security for any amounts due and obligations under this Note, including, without limitation, any Lien on or in the Collateral pursuant to the Security Agreement, shall be
subordinate to all liens or security interests now or hereafter granted to a holder of Senior Indebtedness by the Company or by law notwithstanding the date, order or method of attachment or
perfection of any such lien or security interest or the provisions of any applicable law. 

        9.7    Applicability of Priorities.    The priority of the holder of
the Senior Indebtedness provided for herein with respect to security interests and liens are applicable only to the extent that such security interests and liens are enforceable and have not been
avoided; if a security interest or lien is judicially
determined to be unenforceable or is judicially avoided with respect to any claim of the holder of the Senior Indebtedness or any part thereof, the priority provided for herein shall not be available
to such security interest or lien to the extent that it is avoided or determined to be unenforceable. The foregoing notwithstanding, the Purchaser covenants and agrees that it shall not challenge,
attack or seek to avoid any security interest or lien to the extent that it secures any holder of the Senior Indebtedness. Nothing in this Section 9.7 affects the operation of any subordination
of indebtedness or turnover of payment provisions hereof, or of any other agreements among any of the parties hereto. 

        9.8    Reliance of Holders of Senior Indebtedness.    The Purchaser,
by its acceptance hereof, shall be deemed to acknowledge and agree that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of each holder of
Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the creation of the indebtedness evidenced by this Note, and each such holder of Senior Indebtedness shall
be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness. 

10.    Fractional Shares.    No fractional shares shall be issued upon conversion of
this Note. In lieu of any fractional shares to which the Purchaser would otherwise be entitled, after combining any fractional 

4

 

interests
of the Purchaser into as many whole shares as is possible, the Purchaser shall be paid in cash an amount equal to the product resulting from multiplying such fraction by the then current
Fair Market Value of one share of Preferred Stock (as defined in, and calculated in accordance with, the Warrant). 

11.    No Impairment.    Except and to the extent as waived or consented to by the
Majority Lenders in accordance with Section 15 below, the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of any debt or equity securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Note in order to protect the rights of Purchaser hereunder against impairment. 

12.    Highest Lawful Rate.    Anything herein to the contrary notwithstanding, if
during any period for which interest is computed hereunder, the amount of interest computed on the basis provided for in this Note, together with all fees, charges, and other payments or rights which
are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the
Highest Lawful Rate (as defined below), the Company shall not be obligated to pay, and the Purchaser shall not be entitled to charge, collect, receive, reserve, or take, interest in excess of the
Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate. "Highest Lawful
Rate" means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received, or collected by the
Purchaser in connection with this Note under applicable law. In accordance with this section, any amounts received in excess of the Highest Lawful Rate shall be applied towards the prepayment of
principal then outstanding. 

13.    Waiver.    Subject to any other provision herein or in the other Loan
Documents, the Company hereby waives demand, notice, presentment, protest and notice of dishonor. 

14.    Governing Law.    This Note shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California, without giving effect to conflicts of laws principles. 

15.    Modification; Waiver.    Any provision of this Note may be amended or waived
by the written consent of the Company and the Majority Lenders. 

16.    Counterparts.    This Note may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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        IN WITNESS WHEREOF, the Company has caused this SECURED SUBORDINATED CONVERTIBLE PROMISSORY
NOTE to be executed by its duly authorized officer as of the date first written above. 

	 	 	CARDIONET, INC.
	

 	

 	

By:	

 

	 	 	Name:	James M. Sweeney
	 	 	Title:	Chairman and CEO
	
Acknowledged and Accepted:	

 	

 
	

By:	

 
	

 	

 

[SIGNATURE
PAGE TO SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE] 

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Exhibit 10.26

CARDIONET, INC. SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTEQuickLinks
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Exhibit 10.27    
    

 
 

CARDIONET, INC.
  
    SUBSCRIPTION AGREEMENT    
    

        THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made and entered into as of March 8, 2007, by and among
CardioNet, Inc., a California corporation (the "Company"), and each of those persons and entities, severally and not jointly, whose names are set forth on the Schedule of Purchasers (the
"Schedule of Purchasers") attached hereto as Exhibit A (which persons and entities are hereinafter referred to collectively as "Purchasers" and
each individually as a "Purchaser"). 

 
 

RECITALS    
    

        WHEREAS, the Company has authorized the sale and issuance of an aggregate of $114,883,000 worth of its Mandatorily
Convertible Preferred Stock (the "Shares"); 

        WHEREAS, Purchasers desire to purchase, severally and not jointly, the Shares on the terms and conditions set forth herein; and 

        WHEREAS, the Company desires to issue and sell the Shares to Purchasers on the terms and conditions set forth herein. 

 
 

AGREEMENT    
    

        NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties,
and covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1.     AGREEMENT TO SELL AND PURCHASE.  

	1.1
	Authorization of Shares. On or prior to the Closing (as defined in Section 2 below), the Company shall have authorized
(a) the sale and issuance to Purchasers of the Shares, and (b) the reservation for issuance of such shares of common stock of the Company (the "Common Stock") to be issued upon
conversion of the Shares (the "Conversion Shares"). The Shares and the Conversion Shares shall have the rights, preferences, privileges and restrictions set forth in the Amended and Restated Articles
of Incorporation of the Company, in the form attached hereto as Exhibit B (the "Restated Articles").

	1.2
	Sale and Purchase. Subject to the terms and conditions hereof, at the Closing (as hereinafter defined) the Company hereby agrees to
issue and sell to each Purchaser, severally and not jointly, and each Purchaser agrees to purchase from the Company, severally and not jointly, the number of Shares set forth opposite such Purchaser's
name on Exhibit A, at a purchase price of $1,000.00 per share. 

2.     CLOSING, DELIVERY AND PAYMENT.  

	2.1
	Closing. The closing of the sale and purchase of the Shares under this Agreement (the "Closing") shall take place at 10:00 a.m.
on the date hereof, at the offices of Cooley Godward Kronish LLP, 4401 Eastgate Mall, San Diego, California 92121, or at such other time or place as the
Company and Purchasers may mutually agree (such date is hereinafter referred to as the "Closing Date").

	2.2
	Delivery. At the Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser a certificate
representing the number of Shares to be purchased at the Closing by 

1

 

such
Purchaser, against payment of the purchase price therefor by check, wire transfer made payable to the order of the Company, through the cancellation of debt of the Company issued to a Purchaser
as set forth in Exhibit A, by delivery of other consideration acceptable to the Company or any combination of the foregoing. 

3.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  

        Except as set forth on a Schedule of Exceptions delivered by the Company to the Purchasers at the Closing, specifically identifying the subsection of this
Section 3 to which each such exception relates, the Company hereby represents and warrants to each Purchaser as of the date of this Agreement, and before the effectiveness of the proposed
merger with PDSHeart, Inc., as set forth below: 

	3.1
	Organization, Good Standing, Qualification; Restated Articles and Bylaws. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this
Agreement and the Registration Rights Agreement in the form attached hereto as Exhibit C (the "Registration Rights Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and to reserve and issue the Conversion Shares, and to carry out and perform its obligations under the terms of this Agreement, the Related
Agreements and the Restated Articles and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for
those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business, properties, prospects or financial condition. Attached hereto as  Exhibit B and
Exhibit D, respectively, are copies of the Restated Articles and the
Company's Amended and Restated Bylaws (the "Bylaws"). Said copies are true, correct and complete and contain all amendments as of the date hereof. The Restated Articles have been filed with the
Secretary of State of the State of California.

	3.2
	Subsidiaries. The Company does not own or control, directly or indirectly, any equity security or other interest of any other
corporation, limited partnership or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement. The Company is not a subsidiary of any corporation
or entity. 

3.3   Capitalization; Voting Rights.  

	(a)
	The authorized capital stock of the Company, immediately prior to the Closing, consists of (i) 36,000,000 shares of Common
Stock, without par value, 6,327,889 shares of which are issued and outstanding, and (ii) 19,000,000 shares of Preferred Stock, without par value, (A) 1,563,248 shares of which are
designated Series A Preferred Stock, all of which are issued and outstanding, (B) 4,720,347 shares of which are designated Series B Preferred Stock, 4,707,847 of which are issued
and outstanding, (C) 10,399,011 shares of which are designated Series C Preferred Stock, all of which are issued and outstanding, (D) 1,000,000 shares of which are designated
Series D Preferred Stock, all of which are issued and outstanding, (E) 964,075 shares of which are designated Series D-1 Preferred Stock, none of which are issued and
outstanding and (F) 114,883 shares of which are designated Mandatorily Convertible Preferred Stock, none of which are issued or outstanding.

	(b)
	Under the Company's 2003 Equity Incentive Plan (the "Plan"), which is the only stock option, stock purchase or similar equity incentive
or benefit plan or agreement currently in effect with respect to the Company, (i) 2,428,769 shares have been issued pursuant to the exercise of 

2

 

outstanding
options, (ii) options to purchase 1,573,137 shares have been granted and are currently outstanding, and (iii) stock awards covering 1,098,094 shares of Common Stock remain
available for future grant under the Plan. 

	(c)
	Other than (i) options to purchase up to an aggregate of 5,100,000 shares of Common Stock under the Plan (of which 1,098,094
shares of Common Stock remain available for future grant under the Plan), (ii) a warrant to purchase up to 12,500 shares of Series B Preferred Stock, (iii) warrants to purchase
964,075 shares of Series D-1 Preferred Stock issued to Guidant Investment Corporation/Boston Scientific and to the participants in certain bridge financing transactions in May and
August 2006, and (iv) the conversion rights of the outstanding shares of preferred stock of the Company (the "Preferred Stock"), and except as may be granted pursuant to this Agreement
and the Related Agreements, there are no options outstanding or reserved for issuance, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or shareholder
agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities.

	(d)
	All issued and outstanding shares of Common Stock and Preferred Stock (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable, and (iii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

	(e)
	The rights, preferences, privileges and restrictions of the Shares are as stated in the Restated Articles. Each series of Preferred
Stock is convertible into Common Stock on a one-for-one basis as of the date hereof and the consummation of the transactions contemplated hereunder will not result in any
anti-dilution adjustment or other similar adjustment to the outstanding shares of Preferred Stock. The Conversion Shares have been duly and validly reserved for issuance. When issued in
compliance with the provisions of this Agreement and the Restated Articles, the Shares and the Conversion Shares will be duly and validly issued, fully paid and nonassessable, and will be free of any
liens or encumbrances other than liens and encumbrances created by or imposed upon the Purchasers, and will not be subject to any preemptive rights or other restrictions on transfer; provided,
however, that the Shares and the Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at
the time a transfer is proposed.

	(f)
	No stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of any merger,
consolidated sale of stock or assets, change in control or any other transaction(s) by the Company.

 

	3.4
	Authorization; Binding Obligations. All corporate action on the part of the Company, its officers, directors and shareholders necessary
for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder at the Closing and the authorization, sale, issuance (or
reservation for issuance) and delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the Restated Articles has been taken or will be taken prior to the Closing. The Agreement and
the Related Agreements, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions in Section 2.8 of the Registration Rights Agreement may be limited by
applicable laws. The sale of the Shares and the 

3

 

subsequent
conversion of the Shares into Conversion Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. 

	3.5
	Financial Statements. The Company has made available to each Purchaser its audited balance sheet as at December 31, 2006 (the
"Statement Date") and audited statements of income and cash flows for the twelve months ended on the Statement Date (collectively, the "Financial Statements"), copies of which are attached hereto as  Exhibit E. The Financial Statements, together with the notes thereto, are complete and correct in all material respects, have been prepared in
accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as disclosed therein, and present fairly the financial condition and
position of the Company as of the Statement Date; provided, however, that the Financial Statements are subject to normal recurring year-end audit adjustments (which are not expected to
have a material adverse effect on the financial condition of the Company), and do not contain all footnotes required under generally accepted accounting principles.

	3.6
	Liabilities. The Company has no liabilities and, to the best of its knowledge, knows of no contingent liabilities not disclosed in the
Financial Statements, which would have a material adverse effect on the financial condition or operating results of the Company, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which have not had, either in any individual case or in the aggregate, a material adverse effect on the financial condition or operating results of the Company. 

3.7   Agreements; Action.  

	(a)
	Except for agreements explicitly contemplated hereby and agreements between the Company and its employees with respect to the sale of
the Company's Common Stock, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof.

	(b)
	There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to or by, the Company in excess of $100,000 (other than obligations
of, or payments to or by, the Company arising from purchase or sale agreements entered into in the ordinary course of business), or (ii) the transfer or license of any patent, copyright, trade
secret or other proprietary right to or from the Company (other than licenses arising from the purchase of "off the shelf" or other standard products), or (iii) provisions restricting the
development, manufacture or distribution of the Company's products or services, or (iv) borrowing of money, or (v) payment of broker's or finder's fees, or (vi) indemnification by
the Company with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase or sale or license agreements entered into in the ordinary course of
business), or (vii) any other material contract or any contract that if breached would have a material adverse effect. All such items, regardless of their monetary amount, are set forth in the
Schedule of Exceptions.

	(c)
	The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class
or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and
other obligations incurred in the ordinary course of business or as disclosed in the Financial Statements) individually in excess of $100,000 or, in the case of indebtedness and/or liabilities
individually less than $100,000, in excess of $200,000 in the aggregate, (iii) made any loans or advances to any person, other than ordinary advances 

4

 

for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. 

	(d)
	For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for
the purpose of meeting the individual minimum dollar amounts of such subsections.

 

	3.8
	Obligations to Related Parties. There are no obligations of the Company to officers, directors, shareholders, or employees of the
Company other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company). None of the officers,
directors or, to the best of the Company's knowledge, key employees or shareholders of the Company or any members of their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the
Company, other than passive investments in publicly traded companies (representing less than 1% of such company) which may compete with the Company. No officer, director or shareholder, or any member
of their immediate families, is, directly or indirectly, interested in any material contract with the Company (other than such contracts as relate to any such person's ownership of capital stock or
other securities of the Company). Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

	3.9
	Changes. Since the Statement Date, there has not been:

	(a)
	Any change in the assets, liabilities, financial condition, prospects or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had or is reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition, prospects or operations of the Company;

	(b)
	Any resignation or termination of any officer, key employee or group of employees of the Company; and the Company does not know of the
impending resignation or termination of employment of any such officer, key employee or group of employees;

	(c)
	Any material change, except in the ordinary course of business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;

	(d)
	Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;

	(e)
	Any waiver by the Company of a valuable right or of a material debt owed to it;

	(f)
	Any direct or indirect loans made by the Company to or for the benefit of any shareholder, employee, officer or director of the
Company, other than advances made in the ordinary course of business;

	(g)
	Any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder; 

5

  

	(h)
	Any declaration or payment of any dividend or other distribution of the assets of the Company, or any direct or indirect redemption,
purchase or other acquisition of any capital stock by the Company;

	(i)
	Any labor organization activity related to the Company;

	(j)
	Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;

	(k)
	Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

	(l)
	Any change in any material agreement to which the Company is a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of the Company;

	(m)
	Any other event or condition of any character that, either individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, prospects or operations of the Company;

	(n)
	Any mortgage, pledge, transfer of a security interest in, or lien created by the Company with respect to any of its properties or
assets; or

	(o)
	Any arrangement or commitment by the Company to do any of the acts described in subsections (a) through (n) above.

 

	3.10
	Title to Properties and Assets; Liens, Etc. The Company has good and marketable title to its properties and assets, including the
properties and assets reflected in the balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent, (b) minor liens and encumbrances which do not materially detract from the value of
the property subject thereto or materially impair the operations of the Company, and (c) those that have otherwise arisen in the ordinary course of business. The Company is in compliance with
all material terms of each lease to which it is a party or is otherwise bound.

	3.11
	Intellectual Property.  
	(a)
	The Company owns or possesses sufficient legal rights to its patents and, to the best of its knowledge, all of its patent applications, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and as presently proposed to be conducted
(each such item, "Company Intellectual Property"), without any infringement of the rights of others. The Schedule of Exceptions contains a complete list of the Company's patents and pending patent
applications. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products. No order, holding or judgment has been rendered by any governmental or
judicial authority that limits the Company's use of the Company Intellectual Property.

	(b)
	The Company has not received any communications alleging, nor does the Company have reason to believe, that the Company or any of its
employees, agents, consultants or contractors has violated or, by conducting its business as presently proposed to be conducted, would 

6

 

violate
any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. 

	(c)
	The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner, licensor of, or other claimant
to any patent, trademark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business, or otherwise.

	(d)
	The Company is not aware that any of its employees, agents, consultants or contractors is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the
Company or that would conflict with the Company's business as presently proposed to be conducted. Each employee, officer and consultant of the Company has executed a proprietary information and
inventions agreement in the form(s) as delivered to the Purchasers. No employee, officer or consultant of the Company has excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee, officer or consultant's proprietary information and inventions agreement. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company and which are disclosed in the Schedule of Exceptions.

	(e)
	Neither the execution nor delivery of this Agreement or the Related Agreements, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as presently proposed to be conducted, will, to the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee, agent, consultant or contractor is now obligated.

	(f)
	The Company is not aware of any violation or infringement by a third party of any Company Intellectual Property.

 

	3.12
	Compliance with Other Instruments. The Company is not in violation or default of any term of its Restated Articles or Bylaws, or of
any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order or writ. The execution, delivery
and performance of and compliance with this Agreement, and the Related Agreements, and the issuance (or reservation for issuance) and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Restated Articles, will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties.

	3.13
	Litigation. There is no action, suit, proceeding or investigation pending or, to the Company's knowledge, currently threatened against
the Company, or, to the Company's knowledge, pending or threatened against any of its officers, directors, shareholders, employees or consultants (or, to the Company's knowledge, any basis therefor or
threat thereof) before any court, arbiter or governmental agency. There is no action, suit, proceeding or investigation that questions the validity of this Agreement, the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby, or which would reasonably be expected to result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs or prospects of the Company, financially or 

7

 

otherwise,
or any change in the current equity ownership of the Company. The foregoing includes, without limitation, actions pending or, to the Company's knowledge, threatened involving the prior
employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. 

	3.14
	Taxes. The Company has timely filed all tax returns and reports (federal, state and local) as required by law, and such returns and
reports are true and correct in all material respects (as of the date thereof). The Company has paid, or accrued on the Financial Statements for, all federal, state, county, local and foreign income,
profits, franchise, sales, use, occupation, property, excise, payroll, withholding and other taxes (including interest and penalties) (each a "Tax" and collectively, "Taxes") due, except those
contested in good faith, which are listed in the Schedule of Exceptions. The provision for Taxes of the Company as shown in the Financial Statements is adequate for Taxes due or accrued as of the date
thereof. There are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment of any Tax or deficiency against the Company, and there are no
actions, suits, proceedings, investigations or claims now pending against the Company with respect to any Tax or assessment or any matters under discussion with any federal, state, local or foreign
authority relating to any Taxes or assessments, or any claims for additional taxes or assessments asserted by any such authority, and there is no basis for the assertion of any additional taxes or
assessments against the Company. The Company has not elected pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as an S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any other elections pursuant to the Code (other than elections that relate solely to methods of accounting,
depreciation or amortization) that would have a material effect on the business, properties, prospects or financial condition of the Company. The Company has never had any tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of limitations. The Company has never been audited by governmental authorities. The Company has withheld or collected from each
payment made by it to each of its employees the amount of all taxes, including but not limited to income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes required
to be withheld or collected therefrom, and has paid the same to the proper tax receiving officers or authorized depositaries. The Company's net operating losses for federal income tax purposes are in
the amount shown on its Financial Statements, and are not subject to any limitations imposed by Section 382 of the Code. The full amount of such net operating losses are available to offset the
taxable income of the Company for the current taxable year, and, to the extent not so used, succeeding years. The execution of the transactions contemplated by this Agreement or by any other agreement
or arrangement, understanding, or commitment (contingent or otherwise) to which the Company is a party or by which it is bound will not have the effect of limiting the Company's ability to use such
net operating losses in full to offset such taxable income. The Company has not made any material payments, is not obligated to make any material payments and is not a party to any agreement that
under certain circumstances could obligate it to make any material payments that will not be deductible under Section 280G of the Code. The Company is not a party to any tax allocation or
sharing agreement. The Company (i) has not been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which was the Company),
and (ii) does not have any liability for the Taxes of any entity (other than the Company) under Treasury Regulation § 1.502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise. 

8

 

3.15 Employees.  

	(a)
	The Company has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or,
to the Company's knowledge, threatened with respect to the Company. The Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed
by, or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such
violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the
Company. The Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company, nor does the Company have a present intention
to terminate the employment of any officer, key employee or group of employees.

	(b)
	The Company does not maintain, and has not maintained in the last four years, any pension plan, profit sharing plan, deferred
compensation plan, severance plan, stock option or stock bonus plans, savings plan, welfare plan, or other employee benefits or fringe benefits of any kind, written or oral, whether or not governed by
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), relating to or covering any employees of the Company. The Company has no liability to the Pension Benefit Guarantee
Corporation, and has never sponsored or maintained for its employees, or participated in, any multi-employer pension plan within the meaning of Section 3(37) of ERISA. The Company does not have
any "employee benefit plan" as defined in ERISA.

 

	3.16
	Registration Rights and Voting Rights. Except as required pursuant to the Registration Rights Agreement or the Amended and Restated
Investor Rights Agreement dated as of March 18, 2004, as amended (the "Investor Rights Agreement"), the Company is presently not under any obligation, and has not granted any rights, to
Register (as defined in Section 1.1 of the Investor Rights Agreement and/or the Registration Rights Agreement) any of the Company's presently outstanding securities or any of its securities
that may hereafter be issued. To the Company's knowledge, except as contemplated in the Voting Agreement and the Voting Agreement dated April 23, 2001 between Karl A. Kail, IV and James M.
Sweeney, in part for the benefit of the Company, no shareholder of the Company has entered into any agreement with respect to the voting of equity securities of the Company.

	3.17
	Compliance with Laws; Permits. To its knowledge, the Company is not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially
and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No governmental orders, permissions, qualifications, consents, approvals or
authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement and the issuance of the Shares
or the Conversion Shares, except such as has been duly and validly obtained or filed, or with respect to any filings that may be made after the Closing, as will be filed in a timely manner. The
Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the 

9

 

lack
of which could materially and adversely affect the business, properties, prospects or financial condition of the Company and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as presently proposed to be conducted. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar
authority. 

	3.18
	Environmental and Safety Laws. To its knowledge, the Company is not in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, and to its knowledge no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. No
Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or, to the Company's knowledge, by any other person or entity on any property now or previously
owned, leased or used by the Company. For the purposes of the preceding sentence, "Hazardous Materials" shall mean (a) materials which are listed or otherwise defined as "hazardous" or "toxic"
under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials, or (b) any petroleum products or nuclear materials.

	3.19
	Offering Valid. Assuming the accuracy of the representations and warranties of the Purchasers contained in Section 4.2 hereof,
the offer, sale and issuance of the Shares and the Conversion Shares will be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring
the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws. 

4.     REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.  

        Each Purchaser hereby represents and warrants to the Company as follows (such representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement): 

	4.1
	Requisite Power and Authority. Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and the
Related Agreements and to carry out their provisions. All action on Purchaser's part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with
their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights,
(b) as limited by laws relating to the availability of specific performance or injunctive relief and by general principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of Section 2.8 of the Registration Rights Agreement may be limited by applicable laws.

	4.2
	Investment Representations. Purchaser understands that neither the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement. Purchaser hereby represents and warrants as follows: 

10

  

	(a)
	Purchaser Bears Economic Risk. Purchaser has substantial experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser
must bear the economic risk of this investment indefinitely unless the Shares (or the Conversion Shares) are registered pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that the Company has no present intention of registering the Shares, the Conversion Shares or any shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Purchaser to transfer all or any portion of the
Shares or the Conversion Shares under the circumstances, in the amounts or at the times Purchaser might propose.

	(b)
	Acquisition for Own Account. Purchaser is acquiring the Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.

	(c)
	Purchaser Can Protect Its Interest. Purchaser represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions contemplated in the Agreement.

	(d)
	Accredited Investor. Purchaser represents that it is an accredited investor within the meaning of Rule 501 of
Regulation D under the Securities Act.

	(e)
	Company Information. Purchaser has received and read the Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company's operations and facilities. Purchaser has also had
the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment.

	(f)
	Rule 144. Purchaser acknowledges and agrees that the Shares, and, if issued, the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions,
including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number
of shares being sold during any three-month period not exceeding specified limitations.

	(g)
	Residence. If the Purchaser is an individual, then the Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at the address or addresses of the Purchaser set forth on  Exhibit A.

 

	4.3
	Transfer Restrictions. Each Purchaser acknowledges and agrees that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Related Agreements. 

11

 

5.     CONDITIONS TO CLOSING.  

	5.1
	Conditions to Purchasers' Obligations at the Closing. Purchasers' obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:

	(a)
	Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it on or prior to the Closing.

	(b)
	Legal Investment. On the Closing Date, the sale and issuance of the Shares and the proposed issuance of the Conversion Shares shall be
legally permitted by all laws and regulations to which Purchasers and the Company are subject.

	(c)
	Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to the Closing).

	(d)
	Filing of Restated Articles. The Restated Articles shall have been filed with the Secretary of State of the State of California and
shall continue to be in full force and effect as of the Closing Date.

	(e)
	Reservation of Conversion Shares. The Conversion Shares issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.

	(f)
	Compliance Certificate. The Company shall have delivered to Purchasers a Compliance Certificate, executed by the Chief Executive
Officer of the Company, dated the Closing Date, to the effect that the conditions specified in subsections 5.1(a) and (c) have been satisfied.

	(g)
	Secretary's Certificate. The Purchasers shall have received from the Company's Secretary, a certificate having attached thereto
(i) the Restated Articles as in effect at the time of the Closing, (ii) the Bylaws as in effect at the time of the Closing.

	(h)
	Registration Rights Agreement. The Registration Rights Agreement substantially in the form attached hereto as  Exhibit C shall have been executed and delivered by the parties thereto.

	(i)
	Legal Opinion. Purchasers shall have received from legal counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit F.

	(j)
	Amendment of Prior Agreements. The Amendment to Second Amended and Restated Investors Rights Agreement, Second Amended and Restated
Voting Agreement and Second Amended and Restated Right of First Refusal and Co-Sale Agreement substantially in the form attached hereto as  Exhibit G shall have been executed and delivered by the
parties thereto.

 

	5.2
	Conditions to Obligations of the Company. The Company's obligation to issue and sell the Shares at the Closing, is subject to the
satisfaction, on or prior to such Closing, of the following conditions:

	(a)
	Representations and Warranties True. The representations and warranties in Section 4 made by those Purchasers acquiring Shares
hereof shall be true and correct at the date of the Closing, with the same force and effect as if they had been made on and as of said date. 

12

 

	(b)
	Performance of Obligations. Such Purchasers shall have performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.

	(c)
	Filing of Restated Articles. The Restated Articles shall have been filed with the Secretary of State of the State of California.

	(d)
	Registration Rights Agreement. The Registration Rights Agreement substantially in the form attached hereto as  Exhibit C shall have been executed and delivered by the Purchasers.

	(e)
	Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to the Closing). 

6.     MISCELLANEOUS.  

	6.1
	Governing Law. This Agreement shall be governed in all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in California.

	6.2
	Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto
in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument.

	6.3
	Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares
from time to time.

	6.4
	Entire Agreement. This Agreement, the exhibits and schedules hereto, the Related Agreements and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set forth herein and therein.

	6.5
	Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

6.6   Amendment and Waiver.

	(a)
	This Agreement may be amended or modified only upon the written consent of the Company and holders of at least sixty-six
and two-thirds percent (662/3%) of the Shares (treated as if converted and including any Conversion Shares into which the Shares have been converted that have not been sold
to the public). Any amendment or modification so effected shall be binding upon the Company, each of the parties hereto, and any assignee of such party.

	(b)
	The obligations of the Company and the rights of the holders of the Shares and the Conversion Shares under the Agreement may be waived
only with the written consent of the holders of at least sixty-six and two-thirds percent (662/3%) of the Shares (treated as if converted and including any
Conversion Shares into which the Shares have been converted 

13

 

that
have not been sold to the public). Any waiver so effected shall be binding upon the Company, each of the parties hereto, and any assignee of such party. 

	6.7
	Delays or Omissions. It is agreed that no delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Registration Rights Agreement or the Restated Articles, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any Purchaser's part of any breach, default or noncompliance under
this Agreement, the Related Agreements or under the Restated Articles or any waiver on such party's part of any provisions or conditions of the Agreement, the Registration Rights Agreement, or the
Restated Articles must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Registration Rights Agreement, the
Restated Articles, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

	6.8
	Notices. All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address as set
forth on the signature page hereof and to each Purchaser at the address set forth on Exhibit A attached hereto or at such other address as the
Company or such Purchaser may designate by ten (10) days advance written notice to the other parties hereto.

	6.9
	Expenses. Each party shall pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of the Agreement.

	6.10
	Attorneys' Fees. In the event that any suit or action is instituted to enforce any
provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses
of appeals.

	6.11
	Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to
be considered in construing this Agreement.

	6.12
	Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.

	6.13
	Broker's Fees. With the exception fees to be paid by the Company to Citigroup and SunTrust Robinson Humphrey in connection with this
offering, each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to
any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for
any claims, losses or expenses incurred by such other party as a result of the representation in this Section 6.13 being untrue.

	6.14
	Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers,
directors, partners, agents or employees of any Purchaser 

14

 

shall
be liable to any other Purchaser for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Shares and Conversion Shares. 

	6.15
	Confidentiality. Each party hereto agrees that, except with the prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other parties to
which such party has been or shall become privy by reason of this Agreement or the Related Agreements, discussions or negotiations relating to this Agreement or the Related Agreements, the performance
of its obligations hereunder or the ownership of the Shares purchased hereunder. The provisions of this Section 6.15 shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto.

	6.16
	Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.

	6.17
	California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN
THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE.

	6.18
	Waiver of Conflicts. Each party to this Agreement acknowledges that Cooley Godward Kronish LLP ("Cooley
Godward"), outside general counsel to the Company, has in the past performed and is or may now or in the future represent one or more Purchasers or their affiliates in matters
unrelated to the transactions contemplated by this Agreement (the "Financing"), including representation of such Purchasers or their affiliates in
matters of a similar nature to the Financing. The applicable rules of professional conduct require that Cooley Godward inform the parties hereunder of this representation and obtain their consent.
Cooley Godward has served as outside general counsel to the Company and has negotiated the terms of the Financing solely on behalf of the Company. The Company and each Purchaser hereby
(a) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse
consequences of such representation; (b) acknowledge that with respect to the Financing, Cooley Godward has represented solely the Company, and not any Purchaser or any stockholder, director or
employee of the Company or any Purchaser; and (c) gives its informed consent to Cooley Godward's representation of the Company in the Financing. 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK] 

15

        IN WITNESS WHEREOF, the undersigned hereby executes the SUBSCRIPTION AGREEMENT effective
as of the date first set forth above. 

	Company:	 	 
	

CARDIONET, INC., a California

Corporation	
 	

 
	

By:	
 	

/s/  JAMES M. SWEENEY      
 James M. Sweeney

Chief Executive Officer	
 	

 
	

Address:	
 	

 
	

1010 2nd Avenue, Suite 700

San Diego, CA 9201	
 	

 
	Attn:	 	James M. Sweeney

Chief Executive Officer	 	 

 
 

COUNTERPART SIGNATURE PAGE TO
  SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS AGREEMENT    
    

        IN WITNESS WHEREOF, the undersigned hereby executes the SUBSCRIPTION
AGREEMENT and the REGISTRATION RIGHTS AGREEMENT with CARDIONET, INC., a
California corporation (the "Company") effective as of the date first set forth above and hereby authorizes this signature page to be attached to a counterpart of such documents executed by a duly
authorized officer of the Company. 

	Number of shares of Mandatorily Convertible Preferred Stock to be Purchased:
                        	 	

	 	 	Name of Purchaser/Initial Investor

(PLEASE TYPE OR PRINT)
	

U.S. Taxpayer ID No., if any:	
 	

 	
 	

 
	

 	
 	

 	
 	

 
	
	 	By:	 	

	 	 	Name (print):	 	

	 	 	Title:	 	

	 	 	Address:	 	

	

 	
 	

Please
set out below your registration requirements. If Shares are to be registered in the name of more than one entity, provide the information requested below for each
entity. (Please use multiple pages, one for each entity.)

	Name in which Shares

are to be registered:	 	 
	 	 	

	

Number of Shares to

be purchased:	
 	

 
	 	 	

	

Address of registered holder

(if different from above):	
 	

 
	 	 	

	

 	
 	

 
	 	 	

	

Contact name and telephone

number regarding settlement

and registration:	
 	

 
	 	 	

	 	 	Name
	 	 	

	 	 	Telephone Number

Certificate Delivery Instructions  

Exact address Certificates are to be physically delivered to:  

Contact at delivery address:                                        
        
 

Phone:                                        
         

  

 
 

SCHEDULE OF PURCHASERS    
    

	NAME AND ADDRESS
 
	 	CASH

INVESTMENT

AMOUNT
	 	PRINCIPAL AND

ACCRUED

INTEREST

TO BE

CONVERTED
	 	AGGREGATE

PURCHASE

PRICE
	 	SHARES OF

MANDATORILY

CONVERTIBLE

PREFERRED

STOCK TO BE

ISSUED

	Sanderling V Limited Partnership	 	 	—	 	$	191,000	 	$	191,000	 	191
	Sanderling V Beteilingungs GmbH & Co KG	 	 	—	 	$	170,000	 	$	170,000	 	170
	Sanderling V Biomedical Co-Investment Fund L.P.	 	 	—	 	$	707,000	 	$	707,000	 	707
	Sanderling Venture Partners V Co-Investment Fund, L.P.	 	 	—	 	$	1,165,000	 	$	1,165,000	 	1,165
	Sanderling Ventures Management V	 	 	—	 	$	23,000	 	$	23,000	 	23
	Sanderling Venture Partners VI Co-Investment, L.P.	 	$	4,749,000	 	 	—	 	$	4,749,000	 	4,749
	Sanderling VI Beteiligungs GmbH & Co KG	 	$	92,000	 	 	—	 	$	92,000	 	92
	Sanderling VI Limited Partnership	 	$	109,000	 	 	—	 	$	109,000	 	109
	Sanderling Ventures Management VI	 	$	50,000	 	 	—	 	$	50,000	 	50
	Foundation Medical Partners L.P.	 	$	500,000	 	$	564,000	 	$	1,064,000	 	1,064
	H&Q Healthcare Investors	 	$	590,000	 	$	338,000	 	$	928,000	 	928
	H&Q Life Science Investors	 	$	410,000	 	$	225,000	 	$	635,000	 	635
	Peter J. Callahan Revocable Trust dated 2/28/02	 	 	—	 	$	1,456,000	 	$	1,456,000	 	1,456
	Deutsche Bank AG	 	$	15,000,000	 	 	—	 	$	15,000,000	 	15,000
	Stanfield Offshore Leveraged Assets, Ltd.	 	$	15,000,000	 	 	—	 	$	15,000,000	 	15,000
	Tempo Master Fund LP	 	$	10,000,000	 	 	—	 	$	10,000,000	 	10,000
	Ore Hill Hub Fund Ltd.	 	$	10,000,000	 	 	—	 	$	10,000,000	 	10,000
	Basso Holdings Ltd.	 	$	5,840,000	 	 	—	 	$	5,840,000	 	5,840
	Basso Fund Ltd.	 	$	480,000	 	 	—	 	$	480,000	 	480
	Basso Multi-Strategy Holding Fund Ltd.	 	$	1,680,000	 	 	—	 	$	1,680,000	 	1,680
	KBC Diversified Fund, A Segregated Portfolio of KBC AIM Master Fund SPC	 	$	4,400,000	 	 	—	 	$	4,400,000	 	4,400
	KBC Convertibles MAC 28 Ltd.	 	$	2,000,000	 	 	—	 	$	2,000,000	 	2,000
	Rhythm Fund, Ltd.	 	$	1,600,000	 	 	—	 	$	1,600,000	 	1,600
	Linden Capital L.P.	 	$	5,000,000	 	 	—	 	$	5,000,000	 	5,000
	Old Lane HMA Master Fund, LP	 	$	845,000	 	 	—	 	$	845,000	 	845
	Old Lane US Master Fund, LP	 	$	1,175,000	 	 	—	 	$	1,175,000	 	1,175
	Old Lane Cayman Master Fund, LP	 	$	2,980,000	 	 	—	 	$	2,980,000	 	2,980
	UBS AG London Branch	 	$	5,000,000	 	 	—	 	$	5,000,000	 	5,000
	Silver Oak Capital, L.L.C.	 	$	4,000,000	 	 	—	 	$	4,000,000	 	4,000
	Argent Classic Convertible Arbitrage Fund Ltd.	 	$	3,000,000	 	 	—	 	$	3,000,000	 	3,000
	Argent Classic Convertible Arbitrage Fund L.P.	 	$	1,000,000	 	 	—	 	$	1,000,000	 	1,000
	SuttonBrook Capital Portfolio, L.P.	 	$	4,000,000	 	 	—	 	$	4,000,000	 	4,000
	Whitebox Convertible Arbitrage Partners, LP	 	$	4,000,000	 	 	—	 	$	4,000,000	 	4,000
	DRW Securities, LLC	 	$	3,500,000	 	 	—	 	$	3,500,000	 	3,500
	Credit Suisse Securities (USA) LLC	 	$	3,000,000	 	 	—	 	$	3,000,000	 	3,000
	Totals:	 	$	110,000,000	 	$	4,839,000	 	$	114,839,000	 	114,839

A-1

QuickLinks

Exhibit 10.27

CARDIONET, INC. SUBSCRIPTION AGREEMENT

RECITALS

AGREEMENT

COUNTERPART SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS AGREEMENT

SCHEDULE OF PURCHASERS

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