Common use of Negative Covenants of the Company Clause in Contracts

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from the date hereof until the Effective Time, the Company shall not, and shall cause each of its subsidiaries not to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practice); (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practice; (j) take any action that would or could reasonably be expected to result in any of its representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or (k) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or as set forth on Schedule 6.2 or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure ScheduleParent, from the date hereof until the Effective Time, Time the Company shall not, and shall cause each of its subsidiaries not toCompany Subsidiary to not, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, employees except (A) for increases in salary, wages wages, bonuses or bonuses commissions payable or to become payable pursuant to existing contracts or increases payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedulebusiness; (ii) grant any severance or termination pay (other than pursuant to existing severance agreements and arrangements or policies or in the ordinary course of business) to, or enter into any new employment (other than the hiring of at will employees in the ordinary course of business) or severance agreement (or amend or modify any employment or severance agreement such existing agreement) with, any of its directors, officers or employees; (iii) adopt any new employee benefit plan, benefit arrangement or other pension, profit sharing, deferred compensation or similar policy, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; applicable Law or (iiiiv) adopt or amend enter into any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable lawcollective bargaining agreement; (b) declare, set aside declare or pay any dividend on, or make any other distribution in respect of, any outstanding shares of its capital stock (other than for ordinary quarterly cash except dividends declared and distributions by the Company with respect Subsidiaries to the Company Common Stock in an amount not exceeding $.04 per share and with respect or to the another Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stockSubsidiary; (c) (i) redeem, repurchase or otherwise reacquire any share shares of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share shares of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise except for any repurchase of any Company Options and the delivery of Company Class B Common Stock in payment held by former employees of the exercise price thereofCompany or the Company Subsidiaries at or following the termination of employment of a Person holding such shares of Class B Common Stock); (ii) effect any dissolution, reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities), any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof)shares; or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsoutstanding rights the effect of which shall be to make such terms more favorable to the holders thereof; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a material portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets thereof of any other Person (other than (i) the purchase acquisition of receivables assets in the ordinary course of business and consistent with past practice), (ii) any ID Buyout and (iii) the acquisition of assets for an aggregate purchase price of up to $5,000,000; or make or commit to make any capital expenditures other than capital expenditures in the ordinary course of business; (f) sell, lease, exchange, transfer, license, mortgage, pledge, transfer pledge or impose a security interest on or otherwise dispose of, or agree to sell, lease, exchange, transfer, license, mortgage, pledge, transfer pledge or impose a security interest on or otherwise dispose of, of any of its assetsmaterial assets including, except for dispositions without limitation, any material Intellectual Property owned or used by the Company and the Company Subsidiaries; provided that the foregoing shall not be deemed to restrict the sale, lease, exchange, transfer, license or other disposition of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection business consistent with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant past practice at a price equal to a sale/leaseback transactionfair market value; (g) propose or adopt any amendments to its articles certificate of incorporation or, as to its bylaws or bylawslimited liability company agreement, as the case may be, any amendments that would have an adverse impact on the consummation of the transactions contemplated by this Agreement or would be adverse to Parent's interests; (i) change any of its methods of accounting in effect at December 31the Balance Sheet Date, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxesTaxes (except where the amount of such settlements or controversies, individually or in the aggregate, does not exceed $1,000,000), or change any of its methods of reporting income or deductions for Federal federal income tax Tax purposes from those employed in the preparation of the Federal federal income tax Tax returns for the taxable year ending December 31on the Balance Sheet Date, 1997or (iii) make, change or revoke any material tax election, except, in the case of clause clauses (i), (ii) or clause (ii)iii) above, as may be required by law Law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, Company Indebtedness whether or not evidenced by a note, bond, debenture or similar instrument, except amounts that can be borrowed pursuant to the Company Credit Documents and up to $2,000,000 in other than indebtedness for borrowed money; (ij) indebtedness incurred enter into, or become obligated under, any individual contract, agreement, arrangement or commitment involving consideration in the ordinary course excess of business under the existing loan agreements described $250,000 at any time or during any year, or terminate or otherwise change, amend or modify in Item 5.2 any material respect any Material Contract; (k) enter into any contract with any Affiliate of the Company Disclosure Schedule or under amend or modify any refinancingsuch contract, renewal or refunding thereof, and (ii) trade payables incurred engage in any new transaction outside of the ordinary course of business consistent with past practicepractices or not on an arms-length basis with any Affiliate of the Company; (jl) make any capital expenditures or commitments for additions to plant, property or equipment constituting capital assets unless (i) such expenditures are paid in full (in cash) prior to the Closing Date or (ii) such expenditures or commitments would be included in Closing Working Capital or Closing Indebtedness; (m) enter into any contract or agreement that would require the consent of the other party thereto to consummate the transactions contemplated hereby; (n) take or agree to take any action that reasonably would or could reasonably be expected to result in cause any of its the representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions Company contained herein to the Merger set forth in Article VII not being satisfied no longer be true and correct in any material respect; or (ko) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except as expressly contemplated by Notwithstanding anything else in this Agreement or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedulecontrary, from the date hereof until between the Effective TimeDate and the Closing Date (the “Pre-Closing Period”), the Company shall not, not (and Sellers shall not permit or cause each of its subsidiaries not the Company to, ) do any of the followingfollowing acts without the prior written consent of Purchaser in its sole discretion: (a) enter into any debt financing or other loan transaction, whether as a debtor, creditor, guarantor or otherwise; (b) take any action that would result in the imposition of a Lien on any of the Company’s assets; (c) propose, authorize, enter into, ratify, amend or modify, any agreement, understanding, instrument, contract or proposed transaction, or any group or related agreements, understandings, instruments, contracts or proposed transactions, (i) increase the compensation payable to or to become payable with respect to any service provider or (ii) that involve (individually or in the aggregate, contingent or otherwise) obligations of, or payments to, the Company (x) in excess of its directors$10,000 annually or over the lifetime of such agreement, officers understanding, instrument, contract or employeesproposed transaction, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice(an “Ordinary Course Payment”); provided, that in the event the Company makes any Ordinary Course Payment, the Company shall provide notice to Purchaser of such Ordinary Course Payment or (By) payments under and pursuant to are outside the terms ordinary course of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable lawbusiness; (bd) declare, set aside or pay enter into any dividend on, or make any other distribution in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stockcannabis service provider contracts; (ie) redeem, repurchase or otherwise reacquire issue any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, membership interests in the Company (or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any including securities exercisable, exchangeable or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practicemembership interests); (f) sellalter or change the rights, lease, exchange, mortgage, pledge, transfer preferences or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any privileges of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction’s membership interests; (g) propose increase or adopt decrease the number of authorized securities of the Company; (h) redeem or repurchase any amendments to its articles of incorporation or bylawsmembership interests; (i) change any amend the Company’s Articles of its methods of accounting in effect at December 31, 1997, Organization or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practiceoperating agreement; (j) take any action that would restrict, inhibit or could reasonably adversely affect the ability of the Company to: (i) conduct its business as presently conducted or presently proposed to be expected to result in conducted, or (ii) perform all of its duties and obligations under this Agreement, or (iii) truthfully make any of its the representations and warranties set forth in this Agreement being untrue Section 2 as of the Closing; (k) approve or cause the Company to engage in any material respect consolidation, exchange or in merger of the Company with or into any other Person, or any other corporate reorganization; (l) sell, lease or otherwise dispose of any of the conditions assets of the Company, other than inventory in the ordinary course of business; (m) make or agree to make any capital expenditures or incur any Liabilities that (i) exceed $10,000 in the aggregate, except in the ordinary course of business (an “Ordinary Course Expenditure or Liability”); provided, that in the event the Company makes or incurs any Ordinary Course Expenditure or Liability, the Company shall provide notice to Purchaser of such Ordinary Course Expenditure or Liability, or (ii) are outside the ordinary course of business; (n) approve, file, consent to or acquiesce in the filing of any bankruptcy or bankruptcy action by the Company, or any assignment for the benefit of the Company’s creditors; (o) authorize or enter into any agreement, transaction or other arrangement between the Company, on one hand, and any member, manager, officer, or Affiliate of the Company, or any family member or Affiliate of any of the foregoing Persons, on the other hand; (p) declare or make any distributions to the Merger set forth members of the Company, except in Article VII not being satisfied in accordance with Section 2.17(n); (q) enter into, approve or amend any employment or consulting agreements; (r) make any material respectchange to its accounting methods, principals, or practices, except as required by GAAP; (s) change the Company’s ordinary course of cash management practices with respect to the collection of Receivables and payment of payables and other current Liabilities; (t) adopt any Employee Benefit Plan; (u) except for normal and customary wages and salaries in the ordinary course of business, pay or approve any compensation or reimbursements payable to any members, managers, Affiliates or officers of the Company; (v) authorize or grant any profits interests or other equity compensation to any Person; (w) change the number of managers of the Company; (x) approve a name change or conversion of the Company’s corporate status; (y) make or change any material Tax election, adopt or change any Tax accounting method, enter into any closing agreement in respect of Taxes, settle any Tax claim or assessment, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment, or amend any Tax Return unless a copy of such amendment has been made available for review a reasonable time prior to filing and Purchaser has approved such amendment; (z) take any action that would restrict, inhibit or adversely affect the Company’s ability to maintain in good standing the Surety Bonds, irrevocable letter of credit payable, or cash set aside on behalf of Company in connection with the Licenses as required by and pursuant to Law; (aa) approve or permit Sellers to sell or otherwise transfer, directly or indirectly, any of its membership interests in the Company, or recognize any such sale or transfer as valid, or recognize any transferee in such sale or transfer as a member of the Company; (bb) require or accept, directly or indirectly, any capital contributions from the members or any other Person; (cc) dissolve; (dd) form any subsidiary or joint venture of the Company; or (kee) agree in writing or otherwise to do any request the approval of the foregoingDepartment or Xxxxx County for any amendments or modifications to its current license and previously approved license application, key personnel, or any other amendment or modification to its grant of cultivation authority, including contracts or licenses for products, services or assistance with the cultivation, processing and/or dispensing of marijuana.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or as previously disclosed to Parent in writing on SCHEDULE 5.02, or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure ScheduleParent, from the date hereof of this Agreement until the Effective Time, the Company shall not, directly or indirectly through any Affiliate or otherwise (and the Stockholders shall not and shall not cause each of its subsidiaries the Company to), and shall not topermit any Affiliate to directly or indirectly, do any of the following: (a) (i) increase the compensation payable to to, or to become payable to to, any of its directorsemployee, officers director or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Scheduleexecutive officer; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directorsdirector, officers officer or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgmentemployee; or (iii) adopt establish, adopt, enter into, amend, modify or amend terminate any employee benefit plan Employee Benefit Plan or arrangement, except as may be required by any settlement of pending litigation or arrangement except as may be required by applicable lawLaw; or (iv) hire any salaried person; (b) declare, set aside declare or pay any dividend on, on or make any other distribution in respect of, any outstanding shares of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase purchase or otherwise reacquire acquire any share shares of its or any of its Subsidiaries' capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share shares of its or its Subsidiaries' capital stock, or any options, warrants or conversion or other rights to acquire any shares of its or its Subsidiaries' capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof)obligations; (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its or its Subsidiaries' capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its or its Subsidiaries' capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale (including the grant of any Security Interests, Liens, claims, pledges, limitations in voting rights, charges or other Encumbrances) of, any shares of any class of its or its Subsidiaries' capital stock (including shares held in treasury) or other equity securities), any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such other shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof)shares; or and (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsoptions the effect of which shall be to make such terms more favorable to the holders thereof; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in in, all or a portion of the assets Assets of, or by any other manner, any business or any corporation, partnership, association or other business business, organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets any Assets of any other Person (other than the purchase of receivables Assets from suppliers or vendors in the ordinary course Ordinary Course of business and consistent with past practice);Business) ***; THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT REQUESTED (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions *** Assets or any *** Assets of assets in the ordinary course any of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transactionits Subsidiaries; (g) initiate, solicit or encourage (including by way of furnishing information or assistance), respond to, or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into discussions or negotiate with any person or entity in furtherance of such inquiries to obtain a Competing Transaction, or enter into an agreement with respect to any Competing Transaction or agree to or endorse any Competing Transaction, or authorize or permit any of the officers, directors or employees of the Company or any of its Subsidiaries or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company or any of its Subsidiaries to take any such action, and the Company shall promptly notify Parent of all relevant terms of any such inquiries and proposals received by the Company or any of its Subsidiaries or by any such officer, director, employee, investment banker, financial advisor or attorney, and if such inquiry or proposal is in writing, the Company shall deliver or cause to be delivered to Parent a copy of such inquiry or proposal. (h) propose or adopt any amendments to its articles Articles of incorporation Incorporation or bylawsits By-Laws; (iA) change any of its methods of accounting in effect at December 31, 1997, or (iiB) make or rescind any express or deemed material election relating to taxesTaxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, Taxes or change in any material respect any of its methods of reporting income or deductions for Federal federal income tax Tax purposes from those employed in the preparation of the Federal federal income tax returns Tax Return for the taxable year ending ended December 31, 1997, except, in the case of clause (iA) or clause (iiB), as may be required by law Law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practice; (j) enter into any Contract outside the Ordinary Course of Business; (k) create, or permit the creation of, any Lien upon any Assets outside the Ordinary Course of Business; (l) enter into any employment Contract or collective bargaining agreement, or modify the terms of any existing such Contract or agreement; THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT REQUESTED (m) sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, any Assets whether tangible or intangible; (n) make any capital expenditures other than in the Ordinary Course of Business; (o) amend or renew, or enter into any Contract involving operations outside of the United States; (p) take or agree to take any action that would or could is reasonably be expected likely to result in any of its the Company's representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respectsatisfied; or (kq) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except with the prior written consent of Compass or as expressly contemplated otherwise specifically permitted by this Agreement Agreement, the Company will not and will use its best efforts not to permit the Bank, or otherwise consented to in writing by Parent or as set forth in Item 5.2 any other Subsidiary of the Company Disclosure ScheduleCompany, to, from the date hereof until of this Agreement to the Effective Time, the Company shall not, and shall cause each of its subsidiaries not to, do any of the followingClosing: (a) make any amendment to its articles of incorporation or association or bylaws; (ib) increase the compensation payable to or to become payable to make any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable change in the ordinary course of business methods used in allocating and consistent with past practicecharging costs, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law, regulation or GAAP and after notice to Compass; (bc) declare, set aside or pay make any dividend onchange in the number of shares of the capital stock issued and outstanding, or make any other distribution in respect ofissue, any reserve for issuance, grant, sell or authorize the issuance of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities subscriptions, options, warrants, calls, rights or obligations (other than in connection with the exercise commitments of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose kind relating to the issuance or sale of any other securities in respect of, in lieu of, or in substitution for, conversion into shares of its capital stock; (d) contract to create any obligation or liability (iabsolute, accrued, contingent or otherwise) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practice)prudent banking practices; (fe) sell, lease, exchange, contract to create any mortgage, pledge, transfer lien, security interest or otherwise dispose ofencumbrances, restrictions, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, charge of any of its assetskind (other than statutory liens for which the obligations secured thereby shall not become delinquent), except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under and consistent with prudent banking practices; (f) cancel any debts, waive any claims or rights of value or sell, transfer, or otherwise dispose of any of its material properties or assets, except in the existing loan agreements described in Item 5.2 ordinary course of business and consistent with prudent banking practices; (g) sell any real estate owned as of the date of this Agreement or acquired thereafter, which real estate qualifies as "other real estate owned" under accounting principles applicable to it, except in the ordinary course of business and consistent with prudent banking practices and applicable banking laws and regulations; (h) dispose of or permit to lapse any rights to the use of any material trademark, service mark, xxade name or copyright, or dispose of or disclose to any person other than its employees any material trade secret not theretofore a matter of public knowledge; (i) except as set forth on Schedule 3.10 and except for regular salary increases granted in the ordinary course of business within the Company Disclosure Schedule or under its Subsidiaries' 1999 budgets and consistent with prior practices, grant any refinancingincrease in compensation or directors' fees, renewal or refunding thereofpay or agree to pay or accrue any bonus or like benefit to or for the credit of any director, and officer, employee or other person or enter into any employment, consulting or severance agreement or other agreement with any director, officer or employee, or adopt, amend or terminate any Employee Benefit Plan or change or modify the period of vesting or retirement age for any participant of such a plan; (iij) trade payables incurred declare, pay or set aside for payment any dividend or other distribution or payment in respect of shares of its capital stock, except for dividends from the Bank to the Company; (k) except through settlement of indebtedness, foreclosure, the exercise of creditors' remedies or in a fiduciary capacity, acquire the capital stock or other equity securities or interest of any person; (l) make any capital expenditure or a series of expenditures of a similar nature in excess of $100,000 in the aggregate; (m) make any income tax or franchise tax election or settle or compromise any federal, state, local or foreign income tax or franchise tax liability, or, except in the ordinary course of business consistent with past practiceprudent banking practices, make any other tax election or settle or compromise any other federal, state, local or foreign tax liability; (jn) except for negotiations and discussions between the parties hereto relating to the transactions contemplated by this Agreement or as otherwise permitted hereunder, enter into any transaction, or enter into, modify or amend any contract or commitment other than in the ordinary course of business and consistent with prudent banking practices; (o) except as contemplated by this Agreement, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization, or other reorganization or business combination of the Company or any of its Subsidiaries; (p) issue any certificates of deposit except in the ordinary course of business and in accordance with prudent banking practices; (q) make any investments except in the ordinary course of business and in accordance with prudent banking practices; (r) modify, amend, waive or extend either the Company Loan Documents or any rights under such agreements; (s) modify any outstanding loan, make any new loan, or acquire any loan participation, unless such modification, new loan, or participation is made in the ordinary course of business and in accordance with prudent banking practices; (t) sell or contract to sell any part of the Company's or its Subsidiaries' premises; (u) change any fiscal year or the length thereof; (v) take or agree to take any action that would or could reasonably prevent Compass from accounting for the business combination to be expected to result effected by the Merger as a pooling of interests, including, without limitation, any action inconsistent with the provisions of Exhibit C hereto; (w) prepay in any of its representations and warranties set forth in this Agreement being untrue in any material respect whole or in part the Company Indebtedness; (x) commence operations or acquire any of assets into the conditions to the Merger set forth in Article VII not being satisfied in any material respectReal Estate Subsidiaries; or (ky) agree enter into any agreement, understanding or commitment, written or oral, with any other person which is in writing or otherwise to do any manner inconsistent with the obligations of the foregoingCompany and its directors and its Subsidiaries under this Agreement or any related written agreement. Nothing contained in this Section 5.2 or in Section 5.1 is intended to influence the general management or overall operations of the Company or its Subsidiaries in a manner not permitted by applicable law and the provisions thereof shall automatically be reduced in compliance therewith.

Negative Covenants of the Company. Except as expressly contemplated by During the period from the date of this Agreement or otherwise consented to in writing by Parent or the Effective Time, except (i) as set forth in Item 5.2 on Section 4.2 of the Company Disclosure ScheduleSchedule or as otherwise expressly required or contemplated by this Agreement, from (ii) as required by Law or (iii) to the date hereof until the Effective Timeextent that Parent shall otherwise consent in writing (which shall not be unreasonably withheld or delayed), the Company shall not, and shall cause each not permit any of its subsidiaries not Subsidiaries to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend dividends on, or make any other distribution distributions (whether in cash, stock or property) in respect of, any capital stock or other equity interests of the Company or any of its capital stock Subsidiaries (other than for ordinary quarterly cash dividends declared and distributions by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary Subsidiary of the Company from declaring, setting aside or paying any dividend onto the equity holders of such Subsidiary on a pro rata basis in the ordinary course of business), or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock or issue other equity interests of the Company or any of its Subsidiaries, or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, any capital stock or other equity interests of the Company or any of its Subsidiaries, or (iii) except (A) as required pursuant to Material Contracts existing as of the date hereof to which the Company or any of its Subsidiaries is a party or (B) the purchase or redemption of equity interests of the Company’s Subsidiaries in the ordinary course of business consistent with past practice, purchase, redeem or otherwise acquire any capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or other equity interests of the Company or any of its Subsidiaries, or set aside funds therefor (except for the acquisition of shares of its capital stockCompany Common Stock tendered by employees or former employees in connection with a cashless exercise of Company Stock Options or in order to pay taxes in connection with the exercise of Company Stock Options or the lapse of restrictions in respect of Restricted Shares or the settlement of Company RSUs, in each case, pursuant to and to the extent permitted by Company Plans); (db) Except for (A) the issuance of shares of Company Common Stock upon the exercise of Company Stock Options, the settlement of Company RSUs or in connection with other stock-based awards outstanding as of the date hereof, in each case in accordance with the terms of any Company Plan or the Company ESPP, (B) issuances in accordance with the Rights Plan, (C) as required pursuant to Material Contracts existing as of the date hereof to which the Company or any of its Subsidiaries is a party, (D) in connection with the hiring of any new employees at the Company, any Subsidiary of the Company or any Company Managed Facility consistent with past practices, (E) issuances of equity interests in Subsidiaries of the Company to physician investors in the ordinary course of business consistent with past practice, or (F) the issuances of Rabbi Trust Shares pursuant to the terms of the Company’s Deferred Compensation Plan, (i) issue, deliver, awardhypothecate, grant pledge, sell or sell, or authorize or propose the issuance, delivery, award, grant or sale of, otherwise encumber any shares of any class of its capital stock (including shares held in treasury) or other equity securitiesstock, any other voting securities or obligations any securities directly or indirectly convertible into into, or exercisable or exchangeable for any such sharesfor, capital stock or other voting securities, or any rights (including“phantom” stock, without limitation“phantom” stock rights, stock appreciation rights or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); based performance units or (ii) amend or otherwise modify the terms of any such securitiesoutstanding debt or equity security (including any Company Stock Option, obligations, rights, warrants Restricted Share or optionsCompany RSU) or any Company Plan other than as required pursuant to Section 2.3 hereunder; (ec) acquire amend or agree propose to acquire, by merging amend its certificate or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practice); (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; bylaws (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (iiother organizational documents), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, except for amendments to any such organizational documents of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 Subsidiaries of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred that are entered into in the ordinary course of business consistent with past practice; (d) (i) merge or consolidate with, or acquire any interest in, any Person or division or unit thereof, other than (A) for acquisitions, pursuant to Material Contracts existing as of the date hereof, of interests in Subsidiaries, Company Managed Facilities or any other Person in which the Company or any of its Subsidiaries or any joint ventures to which either is a party and has an interest as of the date hereof, (B) for acquisitions of inventory, equipment and raw materials in the ordinary course of business and consistent with past practice or as required by Material Contracts existing as of the date hereof or (C) for acquisitions having a value of less than $20,000,000 in the aggregate, (ii) make any loan, advance or capital contribution to, or otherwise make any investment in, any Person other than (A) loans or advances to, or investments in, Subsidiaries of the Company, Company Managed Facilities or any other Person in which the Company or any of its Subsidiaries or any joint ventures to which either is a party existing on the date of this Agreement in the ordinary course of business consistent with past practice or pursuant to Material Contracts with any such Person in effect as of the date hereof or (B) extensions of credit from the Company to its Subsidiaries on arms’ length terms in the ordinary course of business consistent with past practice, or (iii) consummate any acquisitions contemplated by the Master Purchase Agreement entered into as of December 30, 2005, by and among the Company and the other parties thereto; (e) sell, lease, license, encumber or otherwise dispose of, or subject to any Lien (other than Permitted Liens), any of its assets, other than (A) sales of inventory and other assets in the ordinary course of business consistent with past practice or as required by Material Contracts existing as of the date hereof, (B) sales of equity interests in Persons in which the Company or its Subsidiaries own an equity interest to health systems or other joint venture partners in the ordinary course of business consistent with past practice, or (C) other dispositions so long as the aggregate value of all assets so disposed does not exceed $20,000,000; (f) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution (other than with respect to immaterial Subsidiaries of the Company); (g) except for increases in the compensation of employees (other than employees who are directors or executive officers) made in the ordinary course of business and consistent with past practice, and except as may be required by applicable Law or pursuant to any Company Plan existing on the date of this Agreement, (i) grant to any current or former director, officer, key employee or consultant any increase in compensation, severance, termination pay or fringe or other benefits, (ii) enter into any new, or amend (including by accelerating rights or benefits under) any existing employment, consulting, indemnification, change of control, severance or termination agreement with any current or former director, officer, employee or consultant (provided, however, that the Company or any of its Subsidiaries may enter into severance agreements with employees (other than employees who are directors or officers or key employees of the Company or any of its Subsidiaries) in the ordinary course of business consistent with past practice) or (iii) establish, adopt or become obligated under any new Company Plan or collective bargaining agreement or amend (including by accelerating rights or benefits under) any such Company Plan or arrangement in existence on the date hereof; (h) (i) assume, incur, endorse or guarantee any indebtedness for borrowed money, other than (A) in connection with drawdowns in the ordinary course of business with respect to existing credit facilities that are Material Contracts existing as of the date hereof, (B) in connection with the refinancing of indebtedness of Subsidiaries of the Company outstanding under instruments existing on the date hereof on terms no less favorable to the Company than the terms of such indebtedness being refinanced (provided that the amount of indebtedness outstanding under such instruments following such refinancing shall not be greater than the amount of outstanding indebtedness being so refinanced), (C) in respect of indebtedness between the Company and one of its Subsidiaries, on the one hand, and any of its other Subsidiaries, on the other hand, or (D) indebtedness not in excess of $10,000,000 in the aggregate, (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities, (iii) endorse or guarantee any other obligations of any other Person, except as required pursuant to Material Contracts existing as of the date hereof or (iv) enter into any “keep well” or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect; (i) other than as required by SEC guidelines or GAAP, revalue any material assets or make any material changes with respect to accounting policies, procedures and practices or to change its fiscal year; (j) take settle or compromise any action pending or threatened claims, litigations, arbitrations or other proceedings (A) involving potential payments by the Company or any of its Subsidiaries (not otherwise covered by insurance) of more than $1,000,000 in the aggregate, (B) that admit liability or consent to non-monetary relief such as to prohibit or materially prevent the Company and its Subsidiaries from operating their business as they have historically, or (C) the settlement or compromise of which would or could reasonably be expected to result in any of its representations and warranties set forth in this Agreement being untrue in any material respect have, individually or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or (k) agree in writing or otherwise to do any of the foregoing.aggregate, a Company Material Adverse Effect;

Negative Covenants of the Company. Except with the prior written consent of the Buyer (which consent with respect to subsections (l) and (m) shall not be unreasonably withheld or delayed) or as expressly contemplated otherwise specifically permitted by this Agreement Agreement, the Company will not and will not permit the Bank, or otherwise consented to in writing by Parent or as set forth in Item 5.2 any other Subsidiary of the Company Disclosure ScheduleCompany, from the date hereof until of this Agreement to the Effective Time, the Company shall not, and shall cause each of its subsidiaries not to, do any of the following: : (a) make any amendment to its Certificate or Articles of Incorporation, Federal Thrift Charter or Bylaws; (ib) increase make any change in the compensation payable methods used in allocating and charging costs, except as may be required by applicable law, regulation or GAAP and after notice to the Buyer; 29 Next Page (c) make any change in the number of shares of the capital stock issued and outstanding, or to become payable to issue, reserve for issuance, grant, sell or authorize the issuance of any shares of its directorscapital stock or subscriptions, officers options, warrants, calls, rights or employeescommitments of any kind relating to the issuance or sale of or conversion into shares of its capital stock except for the exercise of stock options outstanding on the date hereof to purchase Shares and the acceptance of Shares for the payment of the exercise of such stock options; (d) contract to create any obligation or liability (absolute, accrued, contingent or otherwise) except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practicesafe and sound banking practices; (e) contract to create any mortgage, pledge, lien, security interest or encumbrances, restrictions, or charge of any kind (Bother than statutory liens for which the obligations secured thereby shall not become delinquent) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 on any property of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employeesSubsidiaries, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practice); safe and sound banking practices; (f) cancel any debts, waive any claims or rights of value or sell, leasetransfer, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, of any of its material properties or assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 and consistent with safe and sound banking practices; (g) sell any real estate owned as of the Company Disclosure Schedule date of this Agreement or acquired thereafter, except for (i) real estate which qualifies as "other real estate owned" under any refinancing, renewal or refunding thereofbanking principles applicable to it, and (ii) trade payables incurred then only in the ordinary course of business and consistent with past practice; safe and sound banking practices and applicable banking laws and regulations and (ii) the sale of the former headquarters facility pursuant to that certain purchase agreement included in Schedule 3.16; (h) dispose of or permit to lapse any rights to the use of any material trademark, service xxxx, trade name or copyright, or dispose of or disclose to any person other than its employees any material trade secret not theretofore a matter of public knowledge; (i) except as set forth on Schedule 3.10 and except for regular salary increases granted in the ordinary course of business and consistent with prior practices, grant any increase in compensation or directors' fees, or pay or agree to pay or accrue any bonus or like benefit to or for the credit of any director, officer, employee or other person or enter into any employment, consulting or severance agreement or other agreement with any director, officer or employee, or adopt, amend or terminate any employee benefit plan or change or modify the period of vesting or retirement age for any participant of such a plan; (j) take declare, pay or set aside for payment any action that would dividend or could reasonably be expected to result other distribution or payment in respect of shares of its capital stock; provided (i) if the Closing has not occurred by April 1, 2004 and (ii) the Company is not then in default or breach of any of 30 Next Page its covenants, obligations or representations and warranties set forth in under this Agreement being untrue and the Company has continually used its best efforts to timely satisfy its obligations hereunder, then the Company shall be permitted to declare and pay a one-time cash dividend in any material respect or in any the amount of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or ten cents (k$0.10) agree in writing or otherwise to do any of the foregoing.per Share;

Negative Covenants of the Company. Except During the period from the date of this Agreement and continuing until the Effective Time except as expressly contemplated or permitted by this Agreement or to the extent that Newco shall otherwise consented to consent in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from the date hereof until the Effective Time, writing: (a) the Company shall not, and shall cause each of its subsidiaries not to, do any of the following: (a) (i) increase the compensation payable to or to become payable to permit any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay Subsidiaries to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (bi) declare, set aside or pay any dividend on, dividends on or make any other distribution distributions in respect of, of any of its capital stock (other than except for ordinary quarterly cash dividends declared by the Company with respect paid to the Company Common Stock in an amount not exceeding $.04 per share and its wholly-owned Subsidiaries with respect regard to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereofCompany's Subsidiaries' capital stock); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock stock, or issue or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any shares of its capital stock, except as required by the terms of its securities outstanding or any Plan in effect on the date hereof, or set aside funds therefor; (db) other than in accordance with the Rights Agreement, the Company shall not, and shall not permit any of its Subsidiaries to, (i) grant any options, warrants or other rights to purchase shares of capital stock, (ii) amend the terms of or reprice any Company Stock Option outstanding on the date of this Agreement or amend the terms of any Stock Option Plan, or (iii) except for shares issuable pursuant to Company Stock Options outstanding on the date of this Agreement, shares issuable upon conversion of the Company's 6% Convertible Subordinated Notes due 2001 and 4.5% Convertible Subordinated Notes due 2003 and issuances of capital stock of the Company's Subsidiaries to the Company or to a wholly-owned Subsidiary of the Company, issue, deliver, awardpledge, grant sell or sell, or authorize or propose the issuance, delivery, award, grant or sale of, otherwise encumber any shares of any class of its capital stock (including shares held in treasury) or other equity securitiesstock, any securities Company Debt or obligations directly or indirectly convertible into or exercisable or exchangeable for any such sharesSubsidiary Debt, or any rights (includingsecurities convertible into, without limitation, stock appreciation or stock depreciation any rights), warrants or options to acquire, any such shares shares, Company Debt or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsSubsidiary Debt; (ec) acquire the Company shall not, and shall not permit any of its Subsidiaries to, amend or agree propose to acquireamend its certificate of incorporation or bylaws (or other organizational documents); (d) the Company shall not, by merging and shall not permit any of its Subsidiaries to, (i) merge or consolidating consolidate with, by purchasing an or acquire any equity interest in or a portion of the assets ofin, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereoforganization, or otherwise acquire enter into an agreement with respect thereto, except for (A) a merger of a wholly-owned Subsidiary of the Company with or agree to acquire all into the Company or substantially all assets another wholly-owned Subsidiary of any other Person the Company, (other than B) the purchase creation of receivables a wholly-owned Subsidiary of the Company in the ordinary course of business or (C) investments in joint ventures not in excess of $5,000,000 in the aggregate, (ii) acquire or agree to acquire any material assets, except for (A) acquisitions involving the payment of consideration by the Company not in excess of $10,000,000 in the aggregate and consistent with past practice(B) those acquisitions described on SCHEDULE 4.2(d), or (iii) make any loan or advance to, or otherwise make any investment in, any persons in excess of $5,000,000 in the aggregate, other than loans or advances to, or investments in, a wholly-owned Subsidiary of the Company existing on the date of this Agreement; (fe) the Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, exchange, mortgage, pledge, transfer encumber or otherwise dispose of, or agree to sell, lease (whether such lease is an operating or capital lease), exchange, mortgage, pledge, transfer encumber or otherwise dispose of, any of its assetsmaterial assets (including, except for dispositions of assets without limitation, any capital stock or other ownership interest in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale any Subsidiary of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule sales or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred leases in the ordinary course of business consistent with past practice; (jf) take any action that would or could reasonably be expected to result in the Company shall not, and shall not permit any of its representations Subsidiaries (other than wholly-owned Subsidiaries acquired by the Company) to, authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation (including, without limitation, salary, bonus and warranties set forth other benefits) of employees of the Company or its Subsidiaries (other than directors or executive officers) made in this Agreement being untrue in the ordinary course of business and consistent with past practice, the Company shall not, and shall not permit any material respect of its Subsidiaries to, except as may be required by applicable Law or in pursuant to any of the conditions Plans existing on the date of this Agreement, (i) enter into any new, or materially amend any existing, employment or severance or termination agreement with any director, officer or key employee or (ii) become obligated under any new Plan, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder; (h) the Company shall not, and shall not permit any of its Subsidiaries to, (i) assume or incur any indebtedness for borrowed money (except for lease obligations incurred in the ordinary course of business and consistent with the past practice or drawdowns by the Company under its existing revolving credit facility, if any, made in the ordinary course of business consistent with past practice), (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities or (iii) guarantee any debt obligations of any other Person (except obligations of wholly-owned Subsidiaries of the Company); (i) the Company shall not, and shall not permit any of its Subsidiaries to, other than as required by the SEC, applicable Law or GAAP, make any material changes with respect to accounting policies, procedures and practices; (j) the Company shall not, and shall not permit any of its Subsidiaries to, settle or compromise any claims or litigation involving payments by the Company or any of its Subsidiaries of more than $500,000 in any single instance or related instances, or that otherwise are material to the Merger set forth in Article VII not being satisfied in any material respect; orCompany and its Subsidiaries, taken as a whole; (k) agree in writing or otherwise to do the Company shall not, and shall not permit any of its Subsidiaries to, make any tax election, or take any tax position, except in the foregoing.ordinary and usual course of business consistent with past practices; (l) the Company shall not, and shall not permit any of its Subsidiaries to, enter into any license with respect to Intellectual Property unless such license is non-exclusive and entered into in the ordinary course consistent with past practice or in accordance with existing contracts or other agreements;

Negative Covenants of the Company. Except During the period from the date of this Agreement to the Effective Time, except (i) as set forth on Schedule 4.2 or as otherwise expressly contemplated by this Agreement or (ii) to the extent that Parent shall otherwise consented to consent in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from the date hereof until the Effective Timewriting, the Company shall not, and shall cause each not permit any of its subsidiaries not Subsidiaries to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend dividends on, or make any other distribution distributions (whether in cash, stock or property) in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared and distributions by Subsidiaries of the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly or a wholly-owned (directly or indirectly) subsidiary Subsidiary of the Company from declaring, setting aside or paying any dividend onCompany), or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock stock, or issue or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, any capital stock or (iii) purchase, redeem or otherwise acquire any capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock, or set aside funds therefore (except upon the exercise of Company Stock Options outstanding on the date of this Agreement as set forth on Schedule 3.1(b) to the extent cashless exercises are provided for in the Stock Plan governing such Company Stock Option); (i) except for shares of its Company Common Stock issuable pursuant to Company Stock Options outstanding on the date of this Agreement in accordance with the current terms thereof, issue, deliver, hypothecate, pledge, sell or otherwise encumber any shares of capital stock, any other voting securities or any securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or other voting securities, or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units or (ii) amend the terms of any outstanding debt or equity security (including any Company Stock Option) or any Stock Plan; (c) amend or propose to amend its certificate or articles of incorporation or bylaws (or other organizational documents); (d) (i) issue, deliver, award, grant merge or sellconsolidate with, or authorize or propose the issuance, delivery, award, grant or sale ofacquire any interest in, any shares of any class of its capital stock (including shares held in treasury) Person or other equity securitiesdivision or unit thereof, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquireacquire any assets, by merging or consolidating withexcept for acquisitions of inventory, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables equipment and raw materials in the ordinary course of business and consistent with past practice); practice or (fiii) sellmake any loan, leaseadvance or capital contribution to, exchange, mortgage, pledge, transfer or otherwise dispose ofmake any investment in, any Person other than loans or advances to, or agree to sellinvestments in, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its longwholly-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 owned Subsidiaries of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred Company Managed Practices existing on the date of this Agreement in the ordinary course of business consistent with past practice; (e) sell, lease, license, encumber or otherwise dispose of, or subject to any Lien, any of its assets, other than (i) sales of inventory in the ordinary course of business consistent with past practice and (ii) other dispositions in the ordinary course of business so long as the aggregate value of all assets so disposed does not exceed $500,000; (f) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation of employees (other than employees who are directors or executive officers) made in the ordinary course of business and consistent with past practice, and except as may be required by applicable Law or pursuant to any Plan existing on the date of this Agreement, (i) grant to any current or former director, officer, employee or consultant any increase in compensation, severance, termination pay or fringe or other benefits, (ii) enter into any new, or amend (including by accelerating rights or benefits under) any existing, employment, consulting, indemnification, change of control, severance or termination agreement with any current or former director, officer, employee or consultant or (iii) establish, adopt or become obligated under any new Plan or collective bargaining agreement or amend (including by accelerating rights or benefits under) any such Plan or arrangement in existence on the date hereof; (h) (i) assume, incur or guarantee any Indebtedness, (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities, (iii) guarantee any other obligations of any other Person (other than those of wholly-owned Subsidiaries of the Company) or (iv) enter into any “keep well” or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect; (i) other than as required by SEC guidelines or GAAP, revalue any material assets or make any changes with respect to accounting policies, procedures and practices or to change its fiscal year; (j) settle or compromise any pending or threatened claims, litigations, arbitrations or other proceedings (A) involving potential payments by or to the Company or any of its Subsidiaries of more than $500,000 in the aggregate (other than pending or threatened claims, litigations, arbitrations or other proceedings involving, in the aggregate, payments of $1,000,000 or less which are settled for amounts not greater than applicable reserves therefor that were reflected in the financial statements included in 2003 10-K), (B) that admit liability or consent to non-monetary relief, or (C) that otherwise are or could reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole; (i) other than with respect to the Debt Offer (as hereinafter defined), pay, discharge or satisfy any other claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business and consistent with past practice, (ii) cancel any Indebtedness, (iii) waive or assign any claims or rights of substantial value or (iv) waive any benefits of, or agree to modify in any respect, or fail to enforce, or consent to any matter with respect to which consent is required under, any confidentiality, standstill or similar agreement to which the Company or any of its Subsidiaries is a party; (l) (i) make or rescind any tax election, (ii) take any action tax position or settle or compromise any claim, action, suit, arbitration, investigation, audit, examination, litigation, proceeding (whether judicial or administrative) or matter in controversy relating to taxes (A) involving potential payments by or to the Company or any of its Subsidiaries of more than $500,000 in the aggregate (other than such items involving, in the aggregate, payments of $1,000,000 or less which are settled for amounts not greater than applicable reserves therefor that would were reflected in the financial statements included in 2003 10-K), (B) that admit liability or consent to non-monetary relief, or (C) that otherwise are or could reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or (iii) make any change to its method of reporting income, deductions or other tax items for tax purposes; (m) enter into any material license with respect to Company Intellectual Property unless such license is non-exclusive and entered into in the ordinary course of business consistent with past practice; (n) enter into any new line of business; (o) make any capital expenditures, except for any capital expenditure or series of related capital expenditures which, together with all other capital expenditures made after the date hereof, collectively, is less than $500,000, and except for specific capital expenditures in the amounts set forth in the Company’s 2004 Budget as made available to Parent and Acquisition prior to the date of this Agreement; (p) enter into any contracts, agreements or arrangements of the type described in Section 3.1(u)(vi); (q) modify, amend, cancel or terminate any material contracts, agreements or arrangements to which the Company or any of its Subsidiaries is a party; (r) enter into any contract, agreement or arrangement to the extent consummation of the transactions contemplated by this Agreement or compliance by the Company with the provisions of this Agreement could reasonably be expected to result in a Violation of such contract, agreement or arrangement; (s) enter into, modify, amend, cancel or terminate any of its representations and warranties set forth in this Agreement being untrue contract, agreement or arrangement which if so entered into, modified, amended or terminated could reasonably be expected to (i) have a Company Material Adverse Effect, (ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or (iii) prevent or materially delay the consummation of the transactions contemplated by this Agreement; (t) alter (through merger, liquidation, reorganization, restructuring or any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries; (u) (i) except to the extent that the Board of Directors of the Company deems necessary in connection with the entering into of a Permitted Alternative Agreement (as hereinafter defined) in compliance with the provisions of this Agreement, redeem the Rights, or amend or modify or terminate the Rights Agreement other than to delay the Distribution Date (as defined in the Rights Agreement) with respect to, or to render the Rights inapplicable to, the execution, delivery and performance of this Agreement and the transactions contemplated hereby, (ii) permit the Rights to become nonredeemable at the redemption price currently in effect, or (iii) take any action which would allow any Person other than Parent or Acquisition or any of their affiliates to become the Beneficial Owner (as defined in the Rights Agreement) of 15% or more of the Company Common Stock without causing a Distribution Date (as defined in the Rights Agreement) or a Shares Acquisition Date (as defined in the Rights Agreement) to occur or otherwise take any action which would render the Rights Agreement inapplicable to any transaction contemplated by such Person; (v) knowingly or intentionally take any action that results or is reasonably likely to result in any of the conditions to representations or warranties of the Merger set forth in Article VII not Company hereunder being satisfied untrue in any material respect; or (kw) agree to or make any commitment, whether orally or in writing or otherwise writing, to do take any of the foregoingactions prohibited by this Agreement.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or as previously disclosed to Parent in writing on SCHEDULE 5.02, or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure ScheduleParent, from the date hereof of this Agreement until the Effective Time, the Company shall not, directly or indirectly through any Affiliate or otherwise (and the Stockholders shall not and shall not cause each of its subsidiaries the Company to), and shall not topermit any Affiliate to directly or indirectly, do any of the following: (a) (i) increase the compensation payable to to, or to become payable to to, any of its directorsemployee, officers director or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Scheduleexecutive officer; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directorsdirector, officers officer or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgmentemployee; or (iii) adopt establish, adopt, enter into, amend, modify or amend terminate any employee benefit plan Employee Benefit Plan or arrangement, except as may be required by any settlement of pending litigation or arrangement except as may be required by applicable lawLaw; or (iv) hire any salaried person earning annual compensation, including salary, cash bonuses and commissions, in excess of ***; (b) declare, set aside declare or pay any dividend on, on or make any other distribution in respect of, any outstanding shares of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase purchase or otherwise reacquire acquire any share shares of its or any of its Subsidiaries' capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share shares of its or its Subsidiaries' capital stock, or any options, warrants or conversion or other rights to acquire any shares of its or its Subsidiaries' capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof)obligations; (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its or its Subsidiaries' capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its or its Subsidiaries' capital stock;; THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale (including the grant of any Security Interests, Liens, claims, pledges, limitations in voting rights, charges or other Encumbrances) of, any shares of any class of its or its Subsidiaries' capital stock (including shares held in treasury) or other equity securities), any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such other shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof)shares; or and (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsoptions the effect of which shall be to make such terms more favorable to the holders thereof; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in in, all or a portion of the assets Assets of, or by any other manner, any business or any corporation, partnership, association or other business business, organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets any Assets of any other Person (other than the purchase of receivables Assets from suppliers or vendors in the ordinary course Ordinary Course of business and consistent with past practice)Business) which are material, individually or in the aggregate, to the Company; (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions material Assets or any material Assets of assets in the ordinary course any of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transactionits Subsidiaries; (g) initiate, solicit or encourage (including by way of furnishing information or assistance), respond to, or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into discussions or negotiate with any person or entity in furtherance of such inquiries to obtain a Competing Transaction, or enter into an agreement with respect to any Competing Transaction or agree to or endorse any Competing Transaction, or authorize or permit any of the officers, directors or employees of the Company or any of its Subsidiaries or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company or any of its Subsidiaries to take any such action, and the Company shall promptly notify Parent of all relevant terms of any such inquiries and proposals received by the Company or any of its Subsidiaries or by any such officer, director, employee, investment banker, financial advisor or attorney, and if such inquiry or proposal is in writing, the Company shall deliver or cause to be delivered to Parent a copy of such inquiry or proposal. (h) propose or adopt any amendments to its articles Certificate of incorporation Incorporation or bylawsits By-Laws; (i) (A) change any of its methods of accounting in effect at December 31, 1997, or (iiB) make or rescind any express or deemed material election relating to taxesTaxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxesTaxes (except where the amount of such settlements or controversies, individually or in the aggregate, does not exceed ***), or change in any material respect any of its methods of reporting income or deductions for Federal federal income tax Tax purposes from those employed in the preparation of the Federal federal THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. income tax returns Tax Return for the taxable year ending ended December 31, 1997, except, in the case of clause (iA) or clause (iiB), as may be required by law Law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practice; (j) enter into any Contract outside the Ordinary Course of Business; (k) create, or permit the creation of, any Lien upon any Assets outside the Ordinary Course of Business; (l) enter into any employment Contract or collective bargaining agreement, or modify the terms of any existing such Contract or agreement; (m) sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of *** or more, or Assets with an aggregate Fair Market Value of *** or more, in each case tangible or intangible; (n) make any capital expenditures other than in the Ordinary Course of Business, or make any capital expenditures in the aggregate in excess of ***; (o) amend or renew, or enter into any Contract involving operations outside of the United States; (p) take or agree to take any action that would or could is reasonably be expected likely to result in any of its the Company's representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respectsatisfied; or (kq) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except During the period from the date of this Agreement and continuing until the Effective Time except as expressly contemplated or permitted by this Agreement or to the extent that Newco shall otherwise consented to consent in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from the date hereof until the Effective Time, writing: (a) the Company shall not, and shall cause each of its subsidiaries not to, do any of the following: (a) (i) increase the compensation payable to or to become payable to permit any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay Subsidiaries to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (bi) declare, set aside or pay any dividend on, dividends on or make any other distribution distributions in respect of, of any of its capital stock (other than except for ordinary quarterly cash dividends declared by the Company with respect paid to the Company Common Stock in an amount not exceeding $.04 per share and its wholly-owned Subsidiaries with respect regard to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereofCompany's Subsidiaries' capital stock); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock stock, or issue or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any shares of its capital stock, except as required by the terms of its securities outstanding or any Plan in effect on the date hereof, or set aside funds therefor; (db) other than in accordance with the Rights Agreement, the Company shall not, and shall not permit any of its Subsidiaries to, (i) grant any options, warrants or other rights to purchase shares of capital stock, (ii) amend the terms of or reprice any Company Stock Option outstanding on the date of this Agreement or amend the terms of any Stock Option Plan, or (iii) except for shares issuable pursuant to Company Stock Options outstanding on the date of this Agreement, shares issuable upon conversion of the Company's 6% Convertible Subordinated Notes due 2001 and 4.5% Convertible Subordinated Notes due 2003 and issuances of capital stock of the Company's Subsidiaries to the Company or to a wholly-owned Subsidiary of the Company, issue, deliver, awardpledge, grant sell or sell, or authorize or propose the issuance, delivery, award, grant or sale of, otherwise encumber any shares of any class of its capital stock (including shares held in treasury) or other equity securitiesstock, any securities Company Debt or obligations directly or indirectly convertible into or exercisable or exchangeable for any such sharesSubsidiary Debt, or any rights (includingsecurities convertible into, without limitation, stock appreciation or stock depreciation any rights), warrants or options to acquire, any such shares shares, Company Debt or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsSubsidiary Debt; (ec) acquire the Company shall not, and shall not permit any of its Subsidiaries to, amend or agree propose to acquireamend its certificate of incorporation or bylaws (or other organizational documents); (d) the Company shall not, by merging and shall not permit any of its Subsidiaries to, (i) merge or consolidating consolidate with, by purchasing an or acquire any equity interest in or a portion of the assets ofin, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereoforganization, or otherwise acquire enter into an agreement with respect thereto, except for (A) a merger of a wholly-owned Subsidiary of the Company with or agree to acquire all into the Company or substantially all assets another wholly-owned Subsidiary of any other Person (other than the purchase Company,(B) the creation of receivables a wholly-owned Subsidiary of the Company in the ordinary course of business or (C) investments in joint ventures not in excess of $5,000,000 in the aggregate, (ii) acquire or agree to acquire any material assets, except for (A) acquisitions involving the payment of consideration by the Company not in excess of $10,000,000 in the aggregate and consistent with past practice(B) those acquisitions described on SCHEDULE 4.2(d), or (iii) make any loan or advance to, or otherwise make any investment in, any persons in excess of $5,000,000 in the aggregate, other than loans or advances to, or investments in, a wholly-owned Subsidiary of the Company existing on the date of this Agreement; (fe) the Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, exchange, mortgage, pledge, transfer encumber or otherwise dispose of, or agree to sell, lease (whether such lease is an operating or capital lease), exchange, mortgage, pledge, transfer encumber or otherwise dispose of, any of its assetsmaterial assets (including, except for dispositions of assets without limitation, any capital stock or other ownership interest in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale any Subsidiary of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule sales or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred leases in the ordinary course of business consistent with past practice; (jf) take any action that would or could reasonably be expected to result in the Company shall not, and shall not permit any of its representations Subsidiaries (other than wholly-owned Subsidiaries acquired by the Company) to, authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation (including, without limitation, salary, bonus and warranties set forth other benefits) of employees of the Company or its Subsidiaries (other than directors or executive officers) made in this Agreement being untrue in the ordinary course of business and consistent with past practice, the Company shall not, and shall not permit any material respect of its Subsidiaries to, except as may be required by applicable Law or in pursuant to any of the conditions Plans existing on the date of this Agreement, (i) enter into any new, or materially amend any existing, employment or severance or termination agreement with any director, officer or key employee or (ii) become obligated under any new Plan, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder; (h) the Company shall not, and shall not permit any of its Subsidiaries to, (i) assume or incur any indebtedness for borrowed money (except for lease obligations incurred in the ordinary course of business and consistent with the past practice or drawdowns by the Company under its existing revolving credit facility, if any, made in the ordinary course of business consistent with past practice), (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities or (iii) guarantee any debt obligations of any other Person (except obligations of wholly-owned Subsidiaries of the Company); (i) the Company shall not, and shall not permit any of its Subsidiaries to, other than as required by the SEC, applicable Law or GAAP, make any material changes with respect to accounting policies, procedures and practices; (j) the Company shall not, and shall not permit any of its Subsidiaries to, settle or compromise any claims or litigation involving payments by the Company or any of its Subsidiaries of more than $500,000 in any single instance or related instances, or that otherwise are material to the Merger set forth in Article VII not being satisfied in any material respect; orCompany and its Subsidiaries, taken as a whole; (k) agree in writing or otherwise to do the Company shall not, and shall not permit any of its Subsidiaries to, make any tax election, or take any tax position, except in the foregoing.ordinary and usual course of business consistent with past practices; (l) the Company shall not, and shall not permit any of its Subsidiaries to, enter into any license with respect to Intellectual Property unless such license is non-exclusive and entered into in the ordinary course consistent with past practice or in accordance with existing contracts or other agreements;

Negative Covenants of the Company. Except During the period from the date of this Agreement to the Effective Time, except (i) as set forth on Schedule 4.2 or as otherwise expressly contemplated by this Agreement or (ii) to the extent that Parent shall otherwise consented to consent in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from the date hereof until the Effective Timewriting, the Company shall not, and shall cause each not permit any of its subsidiaries not Subsidiaries to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend dividends on, or make any other distribution distributions (whether in cash, stock, property or otherwise) in respect of, any of its capital stock (other than for ordinary (A) cash dividends and distributions by Subsidiaries of the Company to the Company or a wholly-owned Subsidiary of the Company and (B) regular quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to on the Company Preferred Stock in an amount not exceeding the amount required by accordance with the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend onarticles of incorporation of the Company), or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock stock, or issue or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, any capital stock or (iii) purchase, redeem or otherwise acquire any capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock, or set aside funds therefore (except upon the exercise of Company Stock Options outstanding on the date of this Agreement as set forth on Schedule 3.1(b)(v) to the extent cashless exercises are provided for in the Stock Plan governing such Company Stock Options); (b) (i) except for shares of Company Common Stock issuable pursuant to Company Stock Options or Warrants or upon conversion of shares of Company Preferred Stock, in each case outstanding on the date of this Agreement in accordance with the current terms thereof, issue, deliver, hypothecate, pledge, sell, grant, dispose of or otherwise encumber any shares of capital stock of the Company or any of its Subsidiaries, or subscriptions, options, warrants, calls, any other voting securities or any securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or other voting securities, or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units, or other similar rights, agreements, commitments or Contracts of any kind to acquire any shares of the Company’s or any of its Subsidiaries’ capital stock or (ii) amend the terms of any outstanding Indebtedness or equity security (including any Company Stock Option, Company Restricted Stock or Warrant) or any Stock Plan; (c) amend or propose to amend its articles or certificates of incorporation or bylaws (or other organizational documents); (d) (i) issue, deliver, award, grant merge or sellconsolidate with, or authorize or propose the issuance, delivery, award, grant or sale ofacquire any interest in, any shares of any class of its capital stock (including shares held in treasury) Person or other equity securitiesdivision or unit thereof, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquireacquire any assets, by merging or consolidating withexcept for acquisitions of inventory, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables equipment and raw materials in the ordinary course of business and consistent with past practice); practice or (fiii) sellmake any loan, leaseadvance or capital contribution to, exchange, mortgage, pledge, transfer or otherwise dispose ofmake any investment in, any Person other than loans or advances to, or agree to sellinvestments in, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its longwholly-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 owned Subsidiaries of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred existing on the date of this Agreement in the ordinary course of business consistent with past practice; (e) sell, lease, license, encumber or otherwise dispose of, or subject to any Lien, any of its assets, other than (i) sales of inventory in the ordinary course of business consistent with past practice and (ii) other dispositions in the ordinary course of business so long as the aggregate value of all assets so disposed does not exceed $150,000; (f) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation of employees (other than employees who are directors or executive officers) made in the ordinary course of business and consistent with past practice, and except as may be required by applicable Law or pursuant to any Plan existing on the date of this Agreement, (i) grant to any current or former director, officer, employee or consultant any increase in compensation, severance, termination pay or fringe or other benefits, (ii) enter into any new, or amend (including by accelerating rights or benefits under) any existing, employment, consulting, indemnification, change of control, severance or termination agreement with any current or former director, officer, employee or consultant or (iii) establish, adopt or become obligated under any new Plan or collective bargaining agreement or amend (including by accelerating rights or benefits under) any such Plan or arrangement in existence on the date hereof; (h) (i) assume, incur or guarantee any Indebtedness other than borrowings in the ordinary course of business consistent with past practice under Section 2(a) of the Loan Agreement (provided that such Indebtedness so incurred is voluntarily prepayable without premium, penalties or other costs in excess of $100,000 in the aggregate), (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities, (iii) guarantee any other obligations of any other Person (other than those of wholly-owned Subsidiaries of the Company) or (iv) enter into any “keep well” or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect; (i) other than as required by SEC guidelines or GAAP, revalue any material assets or make any changes with respect to accounting policies, procedures and practices or to change its fiscal year; (j) settle or compromise any pending or threatened Actions (A) involving potential payments by or to the Company or any of its Subsidiaries of more than $100,000 in the aggregate, (B) that admit liability or consent to non-monetary relief, or (C) that otherwise are or could reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole; (k) (i) pay, discharge or satisfy any other claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business and consistent with past practice, (ii) cancel any Indebtedness, or (iii) waive or assign any claims or rights of substantial value; (l) (i) make or rescind any tax election, (ii) take any action tax position or settle or compromise any claim, action, suit, arbitration, investigation, audit, examination, litigation, proceeding (whether judicial or administrative) or matter in controversy relating to taxes (A) involving potential payments by or to the Company or any of its Subsidiaries of more than $100,000 in the aggregate, (B) that admit liability or consent to non-monetary relief, or (C) that otherwise are or could reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or (iii) make any change to its method of reporting income, deductions or other tax items for tax purposes; (m) enter into any material license with respect to Company Intellectual Property unless such license is non-exclusive and entered into in the ordinary course of business consistent with past practice; (n) enter into any new line of business; (o) make or commit to make any capital expenditures, except for any capital expenditure or series of related capital expenditures which, together with all other capital expenditures made after the date hereof, collectively, is less than $250,000, and except for specific capital expenditures in the amounts set forth in the Company’s 2010 Budget as made available to Parent and Acquisition prior to the date of this Agreement and set forth on Schedule 4.2(o); (p) enter into any Contract of the type described in Section 3.1(w)(vi); (i) modify, amend, cancel, terminate or waive any rights under any Material Contract or (ii) enter into any Contract that would be a Material Contract, in each case, other than in the ordinary course of business consistent with past practice; (r) enter into any Contract to the extent consummation of the transactions contemplated by this Agreement or compliance by the Company with the provisions of this Agreement could reasonably be expected to result in a Violation of such Contract; (s) enter into, modify, amend, cancel or terminate any Contract which if so entered into, modified, amended or terminated could reasonably be expected to (i) have a Company Material Adverse Effect, (ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or (iii) prevent or materially delay the consummation of the transactions contemplated by this Agreement; (t) alter (through merger, liquidation, reorganization, restructuring or any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries; (u) intentionally take any action that results or is reasonably likely to result in any of the representations and or warranties set forth in this Agreement of the Company hereunder being untrue in any material respect respect; (v) make any material change to its methods of accounting in effect at December 31, 2009, except (i) as required by GAAP (or any authoritative interpretation thereof), (ii) as required by a change in applicable Law or (iii) as disclosed in the Company SEC Documents filed prior to the date hereof; (w) intentionally take any action that results or is reasonably likely to result in the lapse of any of the conditions Company Permits; (x) intentionally take any action that results or is reasonably likely to result in the lapse of any insurance policy of the Company and its Subsidiaries, fail to maintain any self-insurance or fail to cause any carriers who have underwritten insurance policies of the Company which provide insurance coverage to the Merger set forth business and operations of the Company and any of its Subsidiaries to continue to make such coverage available to the Company and such Subsidiaries following the Closing Date for claims arising out of occurrences prior to the Closing Date; (y) fail to use reasonable best efforts to maintain the listing of the Company Common Stock on NASDAQ and to continue to satisfy any and all listing qualifications and criteria related thereto; (z) modify any arrangements or agreements with any Transaction Advisor, including modifying the amount of any fees owed to any Transaction Advisor by the Company and its Subsidiaries in Article VII not being satisfied connection with the transactions contemplated hereby or the Company’s sale process in general; (aa) fail to use reasonable best efforts to maintain or cause to be maintained the assets of the Company and its Subsidiaries in adequate condition and repair for their current use in the ordinary course of business consistent with past practice, ordinary wear and tear excepted; (bb) agree to or make any material respectcommitment, whether orally or in writing, to take any actions prohibited by this Agreement; or (kcc) agree in writing authorize or otherwise enter into any agreement or make any commitment to do any of the foregoing.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or as previously disclosed to Parent in writing on SCHEDULE 5.02, or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure ScheduleParent, from the date hereof of this Agreement until the Effective Time, the Company shall not, directly or indirectly through any Affiliate or otherwise (and the Stockholders shall not and shall not cause each of its subsidiaries the Company to), and shall not topermit any Affiliate to directly or indirectly, do any of the following: (a) (i) increase the compensation payable to to, or to become payable to to, any of its directorsemployee, officers director or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Scheduleexecutive officer; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directorsdirector, officers officer or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgmentemployee; or (iii) adopt establish, adopt, enter into, amend, modify or amend terminate any employee benefit plan Employee Benefit Plan or arrangement, except as may be required by any settlement of pending litigation or arrangement except as may be required by applicable lawLaw; or (iv) hire any salaried person earning annual compensation, including salary, cash bonuses and commissions, in excess of ***; (b) declare, set aside declare or pay any dividend on, on or make any other distribution in respect of, any outstanding shares of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase purchase or otherwise reacquire acquire any share shares of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share shares of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof)obligations; (ii) effect any reorganization or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. in respect of, in lieu of, of or in substitution for, shares of its capital stock; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale (including the grant of any Security Interests, Liens, claims, pledges, limitations in voting rights, charges or other Encumbrances) of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities), any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such other shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof)shares; or and (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or optionsoptions the effect of which shall be to make such terms more favorable to the holders thereof; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in in, all or a portion of the assets Assets of, or by any other manner, any business or any corporation, partnership, association or other business business, organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets any Assets of any other Person (other than the purchase of receivables Assets from suppliers or vendors in the ordinary course Ordinary Course of business and consistent with past practice)Business) which are material, individually or in the aggregate, to the Company; (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transactionmaterial Assets; (g) initiate, solicit or encourage (including by way of furnishing information or assistance), respond to, or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into discussions or negotiate with any person or entity in furtherance of such inquiries to obtain a Competing Transaction, or enter into an agreement with respect to any Competing Transaction or agree to or endorse any Competing Transaction, or authorize or permit any of the officers, directors or employees of the Company or any investment banker, financial advisor, attorney, accountant or other representative retained by the Company to take any such action, and the Company shall promptly notify Parent of all relevant terms of any such inquiries and proposals received by the Company or by any such officer, director, employee, investment banker, financial advisor or attorney, and if such inquiry or proposal is in writing, the Company shall deliver or cause to be delivered to Parent a copy of such inquiry or proposal. (h) propose or adopt any amendments to its articles Articles of incorporation Incorporation or bylawsits By-Laws; (i) (A) change any of its methods of accounting in effect at December 31, 1997, or (iiB) make or rescind any express or deemed material election relating to taxesTaxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxesTaxes (except where the amount of such settlements or controversies, individually or in the aggregate, does not exceed ***), or change in any material respect any of its methods of reporting income or deductions for Federal federal income tax Tax purposes from those employed in the preparation of the Federal federal THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. income tax returns Tax Return for the taxable year ending ended December 31, 1997, except, in the case of clause (iA) or clause (iiB), as may be required by law Law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practice; (j) enter into any Contract outside the Ordinary Course of Business; (k) create, or permit the creation of, any Lien upon any Assets outside the Ordinary Course of Business; (l) enter into any employment Contract or collective bargaining agreement, or modify the terms of any existing such Contract or agreement; (m) sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of *** or more, or Assets with an aggregate Fair Market Value of *** or more, in each case tangible or intangible; (n) make any capital expenditures other than in the Ordinary Course of Business, or make any capital expenditures in the aggregate in excess of ***; (o) amend or renew, or enter into any Contract involving operations outside of the United States; (p) take or agree to take any action that would or could is reasonably be expected likely to result in any of its the Company's representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respectsatisfied; or (kq) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure Schedule, from From the date hereof until the Effective Timeand thereafter (unless otherwise indicated), the Company shall agrees that it will not, and shall will cause each of its subsidiaries Subsidiaries not to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) except for increases a sale of Common Stock pursuant to an underwritten public offering registered pursuant to the Securities Act, issue or sell or otherwise transfer for consideration (an "ISSUANCE") Stock of the Company unless, at least 30 days and not more than 60 days prior to such Issuance, the Company notifies SPLN in salarywriting of the Issuance (including the price, wages the purchaser(s) thereof and the other terms thereof) and grants to SPLN the right (the "RIGHT") to subscribe for and purchase such additional shares or bonuses payable or to become payable other securities so issued at the same price and on the same terms (except as set forth in the ordinary course of business and consistent with past practice, or paragraph (B) payments under below) as issued in the Issuance such that, after giving effect to the Issuance and exercise of the Right, the Securities owned by SPLN (after giving effect to the conversion or exercise thereof) shall represent the same percentage of the outstanding Common Stock (including, for purposes of this calculation, all Common Stock and assuming the issuance of Common Stock upon conversion, exchange or exercise of any security so convertible, exchangeable or exercisable issued in the Issuance or subject to the Right) as was owned by SPLN prior to the Issuance, or such lesser amount designated by SPLN. The Right may be exercised by SPLN at any time by written notice to the Company received by the Company within 20 days after receipt of notice by SPLN from the Company of the Issuance. The closing of the purchase and sale pursuant to the terms exercise of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 Right shall occur at least 5 days after the Company receives notice of the Company Disclosure Schedule; exercise of the Right and concurrently with the closing of the Issuance. Notwithstanding the foregoing, the Right shall not apply to (iii) grant any severance issuances of Common Stock (or termination pay tosecurities convertible into or exchangeable for, or enter into or modify any employment or severance agreement withoptions to purchase, any Common Stock), pro rata to all holders of its directorsCommon Stock, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any a dividend on, subdivision of, or make any other distribution in respect of, any the Common Stock, (ii) issuances of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly upon exercise or indirectly) subsidiary conversion of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or and other rights to acquire any shares Common Stock outstanding on the date hereof, in each case issued in accordance with the terms thereof as in effect on the date hereof, and (iii) issuances of its capital stock or any such securities or obligations (other than Common Stock pursuant to the terms approved by a Super Majority Board Vote in connection with the exercise acquisition of any Company Options and the delivery of Company Common Stock interests in payment of the exercise price thereof); (ii) effect any reorganization another company or recapitalization; or (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; business as contemplated by paragraph (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (iih) amend or otherwise modify the terms below (irrespective of any whether such securities, obligations, rights, warrants or options; paragraph (eh) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or would require a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practiceSuper Majority Board Vote); (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred in the ordinary course of business consistent with past practice; (j) take any action that would or could reasonably be expected to result in any of its representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or (k) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except as expressly contemplated by this Agreement or otherwise consented to in writing by Parent or as set forth in Item 5.2 of the Company Disclosure ScheduleParent, from the date hereof of this Agreement until the Effective Time, the Company shall not, and shall cause each of its subsidiaries will not to, do any of the following: (a) (i) increase the compensation payable to amend or to become payable to otherwise modify any of its directorsthe Material Contracts or Company Permits in a manner that is material to the Company, officers individually or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly owned (directly or indirectly) subsidiary of the Company from declaring, setting aside or paying any dividend on, or making any distribution in respect of, its capital stockaggregate; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; (ii) issue any capital stock or any option, warrant or similar agreement with respect to its capital stock; (iii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its capital stock; or (iv) adopt or propose to adopt any amendments to its Articles of Incorporation or bylaws; (d) (i) issue, deliver, award, grant or sell, or authorize or propose the issuance, delivery, award, grant or sale of, any shares of any class of its capital stock (including shares held in treasury) or other equity securities, any securities or obligations directly or indirectly convertible into or exercisable or exchangeable for any such shares, or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants or options; (e) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire all or substantially all assets of any other Person (other than the purchase of receivables in the ordinary course of business and consistent with past practice); (fc) sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its assets, except for dispositions of inventories and of assets in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection business and consistent with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transactionpast practice; (gd) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating controversy; (e) knowingly take (and will use reasonable best efforts to taxesprevent any affiliate of the Company from taking) any action that, in the written judgment of KPMG Peat Marwick would cause the Merger not to be treated as a Pooling Transaction for financial accounting purposes; (f) take any action that would result in a material breach (as of the Closing) of any of the representations and warranties of the Company set forth in SECTION 3.08; (g) pay or agree to pay any dividend, distribution, or change other payment to any of its methods Stockholders; PROVIDED, HOWEVER, that notwithstanding any contrary provision of reporting income or deductions for Federal income tax purposes from those employed in this Agreement, the preparation of Company may distribute to the Federal income tax returns for the taxable year ending December 31, 1997, exceptStockholders, in accordance with past practice, any income earned by the case of clause Company prior to the Closing (i) or clause (iito the extent not previously distributed), up to a maximum of $90,000, provided that the Company has at least $200,000 of working capital at the Closing; for such purposes, "working capital" is defined as may be required by law current assets minus current liabilities, in each case calculated in accordance with generally accepted accounting principles, applied in a manner consistent with that used in preparing the Latest Balance Sheet; (h) pay or GAAPagree to pay any bonus, consistently appliedincentive compensation, or similar payment to any of its employees or increase the compensation of any Stockholder or other employee; (i) prepay, before the scheduled maturity thereof, make any of its long-term debt, material expenditure or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrument, other than (i) indebtedness incurred in the ordinary course of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred commitment except in the ordinary course of business consistent with past practice; (j) take any action that would or could reasonably be expected to result in any of its representations and warranties set forth in this Agreement being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or (kj) agree in writing or otherwise to do any of the foregoing.

Negative Covenants of the Company. Except During the period from the date of this Agreement to the Effective Time, except (i) as set forth on SCHEDULE 4.2, (ii) as expressly contemplated or permitted by this Agreement or (iii) to the extent that Parent shall otherwise consented consent in writing, such consent not to be unreasonably withheld (it being understood, without excluding any other reason, that it shall not be unreasonable for Parent to withhold such consent if Parent in writing its reasonable judgment shall have determined that any proposed action would increase the aggregate amounts payable by Parent under Article II or as set forth in Item 5.2 of adversely affect the Company Disclosure Schedule, from the date hereof until the Effective TimeFinancing), the Company shall not, and shall cause each not permit any of its subsidiaries not Subsidiaries to, do any of the following: (a) (i) increase the compensation payable to or to become payable to any of its directors, officers or employees, except (A) for increases in salary, wages or bonuses payable or to become payable in the ordinary course of business and consistent with past practice, or (B) payments under and pursuant to the terms of the Company's 1998 Performance Bonus Plan in an aggregate amount not to exceed an amount set forth in Item 5.2 of the Company Disclosure Schedule; (ii) grant any severance or termination pay to, or enter into or modify any employment or severance agreement with, any of its directors, officers or employees, except as may be required by any settlement of pending litigation and except for the execution of an employment agreement with Randy Robertson, the terms of which shall be acceptable to Parexx xx its reasonable judgment; or (iii) adopt or amend any employee benefit plan or arrangement, except as may be required by any settlement of pending litigation or except as may be required by applicable law; (b) declare, set aside or pay any dividend dividends on, or make any other distribution distributions in respect of, any of its capital stock (other than for ordinary quarterly cash dividends declared and distributions by the Company with respect to the Company Common Stock in an amount not exceeding $.04 per share and with respect to the Company Preferred Stock in an amount not exceeding the amount required by the terms thereof); PROVIDED, HOWEVER, that this Section 5.2(b) shall not prohibit any wholly wholly-owned (directly or indirectly) subsidiary Subsidiaries of the Company from declaring, setting aside or paying any dividend onCompany), or making any distribution in respect ofset aside funds therefor, its capital stock; (i) redeem, repurchase or otherwise reacquire any share of its capital stock or any securities or obligations convertible into or exercisable or exchangeable for any share of its capital stock, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or any such securities or obligations (other than in connection with the exercise of any Company Options and the delivery of Company Common Stock in payment of the exercise price thereof); (ii) effect any reorganization or recapitalization; or (iii) adjust, split, combine or reclassify any of its capital stock stock, or issue or issue, authorize or propose the issuance of any other securities in respect of, in lieu of, of or in substitution for, shares of its any capital stock or (iii) repurchase, redeem or otherwise acquire any capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock, or set aside funds therefor, except for cashless exercises to the extent permitted under a Company Stock Option; (db) (i) except for shares of Company Common Stock (and associated Rights) issuable pursuant to Company Stock Options or Company Warrants outstanding on the date of this Agreement in accordance with the current terms thereof, issue, deliver, awardpledge, grant sell or sell, or authorize or propose the issuance, delivery, award, grant or sale of, otherwise encumber any shares of any class of its capital stock (including shares held in treasury) or other equity securitiesstock, any other voting securities or obligations any securities directly or indirectly convertible into into, or exercisable or exchangeable for any such sharesfor, capital stock or any rights (including, without limitation, stock appreciation or stock depreciation rights), warrants or options to acquire, any such shares or other voting securities or any rights, warrants or options directly or indirectly to acquire any such shares or securities (except for the issuance of shares upon the exercise of Company Options outstanding as of the date hereof); or (ii) amend or otherwise modify the terms of any such securities, obligations, rights, warrants outstanding debt or optionsequity security of the Company (including any Company Stock Option or Company Warrant) or any Stock Plan; (ec) acquire amend or agree propose to acquire, by merging amend its certificate or consolidating articles of incorporation or bylaws (or other organizational documents); (i) merge or consolidate with, by purchasing an equity or acquire any interest in or a portion of the assets ofin, or by any other manner, any business or any corporation, partnership, limited liability company, association or other business organization or division thereofthereof except for the creation of a wholly-owned Subsidiary of the Company in the ordinary course of business, or otherwise (ii) acquire or agree to acquire all or substantially all assets any material assets, except for acquisitions of any other Person (other than the purchase of receivables inventory, equipment and raw materials in the ordinary course of business and consistent with past practice)practice or (iii) make any loan or advance to, or otherwise make any investment in, any Persons other than loans or advances to, or investments in, Subsidiaries of the Company or Company Managed Practices existing on the date of this Agreement consistent with past practices; (fe) sell, lease, exchange, mortgage, pledge, transfer encumber or otherwise dispose of, or agree subject to sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose ofany Lien, any assets having a fair market or book value in excess of its assets, except for dispositions of assets $2,000,000 in the ordinary course of business, sales of receivables in the ordinary course of business, the grant of security interests in receivables in connection with warehouse borrowing and similar borrowing arrangements and the sale of the Company's Sacramento headquarters pursuant to a sale/leaseback transaction; (g) propose or adopt any amendments to its articles of incorporation or bylaws; (i) change any of its methods of accounting in effect at December 31, 1997, or (ii) make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for Federal income tax purposes from those employed in the preparation of the Federal income tax returns for the taxable year ending December 31, 1997, except, in the case of clause (i) or clause (ii), as may be required by law or GAAP, consistently applied; (i) prepay, before the scheduled maturity thereof, any of its long-term debt, or incur any obligation for borrowed money, whether or not evidenced by a note, bond, debenture or similar instrumentaggregate, other than (i) indebtedness incurred in the ordinary course sales of business under the existing loan agreements described in Item 5.2 of the Company Disclosure Schedule or under any refinancing, renewal or refunding thereof, and (ii) trade payables incurred inventory in the ordinary course of business consistent with past practice; (f) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation of employees (other than employees that are directors or executive officers) made in the ordinary course of business and consistent with past practice, and except as may be required by applicable Law or pursuant to any Plan existing on the date of this Agreement, (i) grant to any director, officer, employee or consultant any increase in compensation, severance or termination pay, (ii) enter into any new, or amend (including by accelerating rights or benefits under) any existing, employment, consulting, indemnification, severance or termination agreement with any director, officer, employee or consultant or (iii) establish, adopt or become obligated under any new Plan or collective bargaining agreement or amend (including by accelerating rights or benefits under) any such Plan or arrangement in existence on the date hereof; (h) (i) assume, incur or guarantee any Indebtedness except for drawdowns under the Company's existing senior credit facility (subject to the total commitment of the lenders thereunder as in effect on the date hereof) made in the ordinary course of business consistent with past practice, (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities, (iii) guarantee any other obligations of any other Person or (iv) enter into any "keep well" or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect; (i) other than as required by SEC guidelines or GAAP, make any changes with respect to accounting policies, procedures and practices or to change its fiscal year; (j) settle or compromise any claims or litigation involving potential payments by or to the Company or any of its Subsidiaries of more than $2,000,000 in the aggregate, or that admit liability or consent to non-monetary relief, or that otherwise are or would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole; (k) pay, discharge or satisfy any other material, claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business and consistent with past practice; (l) make or rescind any material tax election, or take any material tax position or settle or compromise any material audit, examination, litigation, proceeding (whether judicial or administrative) or matter in controversy relating to taxes, or make any change to its method of reporting income, deductions or other tax items for tax purposes; (m) enter into any license with respect to Company Intellectual Property unless such license is non-exclusive and entered into in the ordinary course consistent with past practice; (n) enter into any new Line of business; (o) make any capital expenditures, except for any capital expenditure or series of related capital expenditures reflected in the Approved Capital Report, a copy of which is attached as SCHEDULE 4.2(o), or any capital expenditure or series of capital expenditures which are not reflected in such Approved Capital Report but which are collectively less than $1,000,000; (p) enter into any contracts, agreements or arrangements of the type described in Section 3.1 (v)(ix); (q) alter (through merger, liquidation, reorganization, restructuring or any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries; (r) (i) redeem the Rights, or amend or modify or terminate the Rights Agreement other than to delay the Distribution Date (as defined in the Rights Agreement) with respect to, or to render the Rights inapplicable to, the execution, delivery and performance of this Agreement and the transactions contemplated hereby, (ii) permit the Rights to become non-redeemable at the redemption price currently in effect, except by reason of clause (iii) below, or (iii) take any action which would allow any Person other than Parent or Acquisition or any of their affiliates to become the Beneficial Owner (as defined in the Rights Agreement) of 15% or more of the Company Common Stock without causing a Distribution Date (as defined in the Rights Agreement) or a Stock Acquisition Date (as defined in the Rights Agreement) to occur or otherwise take any action which would render the Rights Agreement inapplicable to any transaction contemplated by such Person; (s) unless such terms as waived, modified or consented to are no more favorable to the other party than those set forth in the Confidentiality Agreement (as defined below), waive any benefits of, or agree to modify in any respect, or fail to enforce, or consent to any matter with respect to which consent is required under, any standstill or similar agreement to which the Company or any of its Subsidiaries is a party or waive any material benefits of, or agree to modify in any material respect, or fail to enforce in any material respect, or consent to any matter with respect to which consent is required under, any material confidentiality or similar agreement to which the Company or any of its Subsidiaries is a party; (t) knowingly or intentionally take any action that would or could is reasonably be expected likely to result in any of its the representations and or warranties set forth in this Agreement of the Company hereunder being untrue in any material respect or in any of the conditions to the Merger set forth in Article VII not being satisfied in any material respect; or (ku) agree to or make any commitment to, whether orally or in writing or otherwise to do writing, take any of the foregoing.actions prohibited by this Agreement. 37 ARTICLE V