EXHIBIT 10.1

 

GROWLIFE, INC.

COMMON STOCK PURCHASE AGREEMENT

 

This Common Stock Purchase Agreement (this “Agreement”) is made and entered into
as of March 20, 2018 (the “Agreement Date”), by and between Growlife, Inc., a
Delaware corporation (the “Company”), and St. George Investments LLC, a Utah
limited liability company (the “Purchaser”).

 

Recitals

 

Whereas, the Company desires to issue and sell common stock of the Company, par
value $0.0001 (the “Common Stock”), on the terms and conditions set forth
herein, and has authorized such sale and issuance; and

 

Whereas, the Purchaser desires to purchase such Common Stock on the terms and
conditions set forth herein.

 

Agreement

 

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

 

1.         Agreement To Sell And Purchase.

 

The Purchaser hereby agrees to purchase, and the Company hereby agrees to sell
and issue to the Purchaser, 6,410,256 shares (the “Shares”) of newly issued
restricted Common Stock of the Company at a purchase price of $0.0156 per share
(the “Purchase Price”).  In the event of any stock split, stock combination,
recapitalization, stock dividend, or similar transaction that occurs prior to
the Company’s delivery of any Shares pursuant to the terms hereof, the number of
Shares shall be adjusted accordingly based on such stock split, stock
combination, recapitalization, stock dividend, or similar transaction.

 

2.         Closing, Delivery And Payment.

 

The closing of the sale and purchase of the Shares under this Agreement (the
“Closing”) will take place simultaneously with the execution of this Agreement
or at such other time as the parties may otherwise agree.  At the Closing, the
Purchaser will pay the entire Purchase Price for all of the Shares by wire
transfer of immediately available funds to such account as may be designated by
the Company. Notwithstanding the foregoing, the Company will not issue or
otherwise put in the Purchaser’s name any Shares until the satisfaction of each
of the following conditions (the “Share Delivery Conditions”): (a) no Shares
shall be delivered prior to the date

 

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that is six (6) months from the date hereof; (b) the Purchaser shall have
delivered to the Company written notice specifying the number of Shares to be
delivered (a “Share Delivery Notice”); and (c) such delivery of Shares will not
be in violation of the ownership limitation set forth in Section 6 below. Upon
satisfaction of the Share Delivery Conditions, the Company will deliver the
number of Shares specified in the applicable Share Delivery Notice within three
(3) days of the Purchaser’s delivery of the applicable Share Delivery Notice.
Upon execution of this Agreement, the Company will cause to be executed and
delivered to the Purchaser a fully executed secretary’s certificate and written
consent of directors evidencing the Company’s approval of this Agreement
substantially in the forms attached hereto as Exhibit A.

 

3.         Representations, Warranties And Covenants Of The Company.

 

The Company hereby represents, warrants and covenants to the Purchaser that as
of the Closing and each date Shares are delivered to the Purchaser pursuant to
the terms hereof:

 

(a)  The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary corporate
power and authority to (i) own, operate and occupy its properties and to carry
on its business as presently conducted, and (ii) enter into this Agreement and
the other agreements, instruments and documents contemplated hereby, and to
consummate the transactions contemplated hereby and thereby.  The Company is
qualified to do business and is in good standing in each jurisdiction in which
the failure to so qualify would have a material adverse effect.

 

(b)  All necessary corporate proceedings, votes, resolutions and approvals
relating to the issuance and sale of the Shares will have been completed by the
Company.  Upon execution, this Agreement will constitute a valid and legally
binding obligation of the Company, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.

 

(c)  The Shares purchased pursuant to this Agreement will be, upon issuance and
payment by the Purchaser in accordance with this Agreement, duly authorized,
validly issued, fully paid, non-assessable, and free of all liens, claims and
encumbrances.

 

(d)  In order to allow for, as of the relevant date of determination, the
purchase of all of the Shares to be purchased hereunder, the Company shall take
all action necessary from time to time to reserve for the benefit of the
Purchaser the number of authorized but unissued shares of Common Stock equal to
the number of Shares set forth in Section 1 above (such calculated amount is
referred to as the “Share Reserve”). If at any time the Share Reserve is less
than required herein, the Company shall immediately increase the Share Reserve
in an amount equal to no less than the deficiency. If the Company does not have
sufficient authorized and unissued shares of Common Stock available to increase
the Share Reserve, the Company shall call a special meeting of the stockholders
as soon

 

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as practicable after such occurrence, but in no event later than thirty (30)
calendar days after such occurrence, and hold such meeting as soon as
practicable thereafter, but in no event later than sixty (60) calendar days
after such occurrence, for the sole purpose of increasing the number of
authorized shares of Common Stock. The Company’s management shall recommend to
the Company’s stockholders to vote in favor of increasing the number of
authorized shares of Common Stock.  Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common Stock. The
Company shall use its best efforts to cause such additional shares of Common
Stock to be authorized so as to comply with the requirements of this subsection.

 

4.         Representations And Warranties Of The Purchaser.

 

The Purchaser hereby represents and warrants to the Company that as of the
Closing hereunder:

 

(a)  The Purchaser has full power and authority to enter into this Agreement.
 Upon execution, this Agreement will constitute a valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

 

(b)  The Shares will be acquired for investment for the Purchaser’s own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and the Purchaser has no present intention of selling,
granting any participation in or otherwise distributing the same except in
compliance with applicable U.S. securities laws.

 

(c)  The Purchaser is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
“Securities Act”).

 

(d)  The Purchaser is an experienced investor in securities of companies in the
development stage, can bear the economic risk of its investment, including a
total loss, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares.  The Purchaser has conducted its own due diligence review of the
Company and received copies or originals of all documents it has requested from
the Company.

 

(e)  The Purchaser understands that the issuance of the Shares has not been, and
will not be, registered under the Securities Act, by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser’s representations as expressed herein.  The Purchaser
understands that the Shares are characterized as “restricted securities” under
applicable U.S. federal and state securities

 

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laws and that, pursuant to these laws, the Purchaser must hold the Shares
indefinitely unless subsequently registered for resale with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available.

 

5.         Legends.

 

The parties understand and agree that the Shares will not be registered at the
time of issuance, and the certificates evidencing the Shares may bear the
following legends (or a substantially similar legend) and such other legends as
may be required by applicable laws of any state or foreign jurisdiction:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES UNDER THE ACT OR UNLESS SUCH TRANSACTION IS EXEMPT FROM REGISTRATION
UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.”

 

6.         Ownership Limitation.

 

Notwithstanding anything to the contrary contained in this Agreement, if at any
time the Purchaser shall or would be issued shares of Common Stock hereunder,
but such issuance would cause the Purchaser (together with its affiliates) to
own a number of shares exceeding 9.99% of the number of shares of Common Stock
outstanding on such date (the “Maximum Percentage”), the Company must not issue
to the Purchaser shares of the Common Stock which would exceed the Maximum
Percentage. The shares of Common Stock issuable to the Purchaser that would
cause the Maximum Percentage to be exceeded are referred to herein as the
“Ownership Limitation Shares”. The Company will reserve the Ownership Limitation
Shares for the exclusive benefit of the Purchaser. From time to time, the
Purchaser may notify the Company in writing of the number of the Ownership
Limitation Shares that may be issued to the Purchaser without causing the
Purchaser to exceed the Maximum Percentage. Upon receipt of such notice, the
Company shall be unconditionally obligated to immediately issue such designated
shares to the Purchaser, with a corresponding reduction in the number of the
Ownership Limitation Shares.

 

7.         Miscellaneous.

 

7.1       Arbitration.  By its execution of this Agreement, each party agrees to
be bound by the Arbitration Provisions set forth as Exhibit B to this Agreement
(the “Arbitration Provisions”) and the parties agree to submit all Claims (as
defined in the Arbitration Provisions) arising under this Agreement or any of
the other Transaction Documents or other agreement between the parties and their
affiliates to binding arbitration pursuant to the Arbitration Provisions.

 

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7.2       Governing Law; Venue.  This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Utah without regard to
the principles of conflict of laws. Each party consents to and expressly agrees
that the exclusive venue for arbitration of any dispute arising out of or
relating to this Agreement or any Transaction Document or the relationship of
the parties or their affiliates shall be in Salt Lake County, Utah. Without
modifying the parties’ obligations to resolve disputes hereunder or under any
Transaction Document pursuant to the Arbitration Provisions, each party hereto
submits to the exclusive jurisdiction of any state or federal court sitting in
Salt Lake County, Utah in any proceeding arising out of or relating to this
Agreement and agrees that all Claims in respect of the proceeding may only be
heard and determined in any such court and hereby expressly submits to the
exclusive personal jurisdiction and venue of such court for the purposes hereof
and expressly waives any claim of improper venue and any claim that such courts
are an inconvenient forum.

 

7.3       Entire Agreement; Amendments.  This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.  Except as otherwise expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the Company and the
Purchaser.  

 

7.4       Notices.  Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to be effective upon delivery when delivered (a)
personally; (b) by facsimile, provided a positive transmission report is
received and a copy is mailed no later than the next business day through a
nationally recognized overnight delivery service; (c) by overnight delivery with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses and facsimile numbers
for such communications will be,

 

in the case of the Purchaser:

 

St. George Investments LLC

Attention: John Fife

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

jfife@chicagoventure.com

 

with a copy to (which copy shall not constitute notice):

 

Hansen Black Anderson Ashcraft PLLC

Attention: Jon Hansen

3051 West Maple Loop Drive

Suite 325

Lehi, Utah 84043

jhansen@hbaalaw.com

 

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and in the case of the Company:

 

Growlife, Inc.

Attn: Marco Hegyi

5400 Carillon Point

Kirkland, Washington 98033

 

or at such other address and facsimile number as the receiving party will have
furnished to the sending party in writing.

 

7.5       Survival.  The representations, warranties, covenants and agreements
made and incorporated by reference herein will survive any investigation made by
or on behalf of the Purchaser or the Company, and will survive until the date
that is two (2) years following the date of the final Closing that occurs
hereunder.

 

7.6       Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the respective successors, assigns, heirs, executors and administrators of the
parties hereto.  The Purchaser may transfer or assign all or any portion of its
rights under this Agreement to any person or entity permitted under applicable
securities laws.

 

7.7       Interpretations.  All pronouns and any variations thereof will be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or persons or entity or entities may require.  All
references to “$” or dollars herein will be construed to refer to United States
dollars. The titles of the Sections and subsections of this Agreement are for
convenience or reference only and are not to be considered in construing this
Agreement.  All references to “including” shall be deemed to mean “including,
without limitation.”

 

7.8       Severability.  In case any provision of this Agreement is determined
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.

 

7.9       Attorneys’ Fees.  In the event of any action at law or in equity to
enforce or interpret the terms of this Agreement or collect any amounts owed
hereunder, the parties agree that the party who is awarded the most money shall
be deemed the prevailing party for all purposes and shall therefore be entitled
to an additional award of the full amount of the attorneys’ fees and expenses
paid by such prevailing party in connection with the litigation, collection
and/or dispute without reduction or apportionment based upon the individual
claims or defenses giving rise to the fees and expenses.  Nothing herein shall
restrict or impair a court’s power to award fees and expenses for frivolous or
bad faith pleading.

 

7.10     Counterparts.  This Agreement may be executed in counterparts, each of
which when so executed and delivered will constitute a complete and original
instrument but all of which together will constitute one and the same agreement,
and it will not be necessary when making proof of this Agreement or any
counterpart thereof to account for any counterpart other than the counterpart of
the party against whom enforcement is sought.

 

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7.11     No Reliance.  The Company acknowledges and agrees that neither the
Purchaser nor any of its officers, directors, members, managers, representatives
or agents has made any representations or warranties to the Company or any of
its officers, directors, representatives, agents or employees except as
expressly set forth in this Agreement and, in making its decision to enter into
the transactions contemplated by this Agreement, the Company is not relying on
any representation, warranty, covenant or promise of the Purchaser or its
officers, directors, members, managers, agents or representatives other than as
set forth in this Agreement.

 

7.12     Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES
ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE
RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY
AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY
APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO
ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S
RIGHT TO DEMAND TRIAL BY JURY.

 

7.13     Voluntary Agreement.  The Company has carefully read this Agreement and
has asked any questions needed for the Company to understand the terms,
consequences and binding effect of this Agreement. The Company has had the
opportunity to seek the advice of an attorney of the Company’s choosing and is
executing this Agreement voluntarily and without any duress or undue influence
by the Purchaser or anyone else.

 

[Signatures On Following Page]

 

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In Witness Whereof, the parties hereto have executed this Common Stock Purchase
Agreement as of the date set forth in the first paragraph hereof.

 

 

COMPANY:

 

GROWLIFE, INC.

 

 

By:  /s/ Marco Hegyi

       Marco Hegyi, CEO

 

 

 

PURCHASER:

 

ST. GEORGE INVESTMENTS LLC

 

 

By:  /s/ John. M. Fife

       John M. Fife, President

 

 

[Signature page to Common Stock Purchase Agreement]

 

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Exhibit A

 

SECRETARY’S CERTIFICATE

 

GROWLIFE, INC.

SECRETARY’S CERTIFICATE

 

e.

I, Mark E. Scott hereby certify that I am the duly elected, qualified and acting
Secretary of Growlife, Inc., a Delaware corporation (the “Company”), and am
authorized to execute this Secretary’s Certificate (this “Certificate”) on
behalf of the Company.  This Certificate is delivered in connection with that
certain Common Stock Purchase Agreement dated March 20, 2018 (the “Purchase
Agreement”), by and between the Company and St. George Investments LLC, a Utah
limited liability company. All capitalized terms used but not defined in this
Certificate shall have the meanings set forth in the Purchase Agreement.

 

Solely in my capacity as Secretary, I certify that Schedule 1 attached hereto is
a true, accurate and complete copy of all of the resolutions adopted by the
Board of Directors of the Company (the “Resolutions”) approving and authorizing
the execution, delivery and performance of the Purchase Agreement and related
documents to which the Company is a party on the date hereof, and the
transactions contemplated thereby.  Such Resolutions have not been amended,
rescinded or modified since their adoption and remain in effect as of the date
hereof.

 

IN WITNESS WHEREOF, I have executed this Secretary’s Certificate as of March 20,
2018.

 

Growlife, Inc.

 

 

/s/ Mark E. Scott

 

Printed Name: Mark E. Scott

Title: Secretary

 

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Exhibit B

ARBITRATION PROVISIONS

1.    Dispute Resolution. For purposes of this Exhibit B the term “Claims” means
any disputes, claims, demands, causes of action, requests for injunctive relief,
requests for specific performance, liabilities, damages, losses, or
controversies whatsoever arising from, related to, or connected with the
transactions contemplated in the Transaction Documents and any communications
between the parties related thereto, including without limitation any claims of
mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure
of consideration, promissory estoppel, unconscionability, failure of condition
precedent, rescission, and any statutory claims, tort claims, contract claims,
or claims to void, invalidate or terminate the Agreement (or these Arbitration
Provisions (defined below)) or any of the other Transaction Documents. The term
“Claims” specifically excludes a dispute over Calculations. The parties to the
Agreement (the “parties”) hereby agree that the arbitration provisions set forth
in this Exhibit B (“Arbitration Provisions”) are binding on each of them. As a
result, any attempt to rescind the Agreement (or these Arbitration Provisions)
or declare the Agreement (or these Arbitration Provisions) or any other
Transaction Document invalid or unenforceable for any reason is subject to these
Arbitration Provisions. These Arbitration Provisions shall also survive any
termination or expiration of the Agreement. Any capitalized term not defined in
these Arbitration Provisions shall have the meaning set forth in the Agreement.

2.    Arbitration. Except as otherwise provided herein, all Claims must be
submitted to arbitration (“Arbitration”) to be conducted exclusively in Salt
Lake County, Utah and pursuant to the terms set forth in these Arbitration
Provisions. Subject to the arbitration appeal right provided for in Paragraph 5
below (the “Appeal Right”), the parties agree that the award of the arbitrator
rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a)
final and binding upon the parties, (b) the sole and exclusive remedy between
them regarding any Claims, counterclaims, issues, or accountings presented or
pleaded to the arbitrator, and (c) promptly payable in United States dollars
free of any tax, deduction or offset (with respect to monetary awards). Subject
to the Appeal Right, any costs or fees, including without limitation attorneys’
fees, incurred in connection with or incident to enforcing the Arbitration Award
shall, to the maximum extent permitted by law, be charged against the party
resisting such enforcement. The Arbitration Award shall include default interest
(as defined or otherwise provided for in the Note (“Default Interest”)) (with
respect to monetary awards) at the rate specified in the Note for Default
Interest both before and after the Arbitration Award. Judgment upon the
Arbitration Award will be entered and enforced by any state or federal court
sitting in Salt Lake County, Utah.

3.    The Arbitration Act. The parties hereby incorporate herein the provisions
and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. §
78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration
Act”). Notwithstanding the foregoing, pursuant to, and to the maximum extent
permitted by, Section 105 of the Arbitration Act, in the event of conflict or
variation between the terms of these Arbitration Provisions and the provisions
of the Arbitration Act, the terms of these Arbitration Provisions shall control
and the parties hereby waive or otherwise agree to vary the effect of all
requirements of the Arbitration Act that may conflict with or vary from these
Arbitration Provisions.

4.    Arbitration Proceedings. Arbitration between the parties will be subject
to the following:

4.1     Initiation of Arbitration. Pursuant to Section 110 of the Arbitration
Act, the parties agree that a party may initiate Arbitration by giving written
notice to the other party (“Arbitration Notice”) in the same manner that notice
is permitted under Section 7.4 of the Agreement; provided, however, that the
Arbitration Notice may not be given by email or fax. Arbitration will be deemed
initiated as of the date that the Arbitration Notice is deemed delivered to such
other party under Section 7.4 of the Agreement (the “Service Date”). After the
Service Date, information may be delivered, and notices may be given, by email
or fax pursuant to Section 7.4 of the Agreement or any other method permitted
thereunder. The Arbitration Notice must describe the nature of the controversy,
the remedies sought, and the election to commence Arbitration proceedings. All
Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules
of Civil Procedure.

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4.2     Selection and Payment of Arbitrator.

(a) Within ten (10) calendar days after the Service Date, the Purchaser shall
select and submit to the Company the names of three (3) arbitrators that are
designated as “neutrals” or qualified arbitrators by Utah ADR Services
(http://www.utahadrservices.com) (such three (3) designated persons hereunder
are referred to herein as the “Proposed Arbitrators”). For the avoidance of
doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR
Services. Within five (5) calendar days after the Purchaser has submitted to the
Company the names of the Proposed Arbitrators, the Company must select, by
written notice to the Purchaser, one (1) of the Proposed Arbitrators to act as
the arbitrator for the parties under these Arbitration Provisions. If the
Company fails to select one of the Proposed Arbitrators in writing within such
5-day period, then the Purchaser may select the arbitrator from the Proposed
Arbitrators by providing written notice of such selection to the Company.

(b) If the Purchaser fails to submit to the Company the Proposed Arbitrators
within ten (10) calendar days after the Service Date pursuant to subparagraph
(a) above, then the Company may at any time prior to the Purchaser so
designating the Proposed Arbitrators, identify the names of three (3)
arbitrators that are designated as “neutrals” or qualified arbitrators by Utah
ADR Service by written notice to the Purchaser. The Purchaser may then, within
five (5) calendar days after the Company has submitted notice of its Proposed
Arbitrators to the Purchaser, select, by written notice to the Company, one (1)
of the Proposed Arbitrators to act as the arbitrator for the parties under these
Arbitration Provisions. If the Purchaser fails to select in writing and within
such 5-day period one (1) of the three (3) Proposed Arbitrators selected by the
Company, then the Company may select the arbitrator from its three (3)
previously selected Proposed Arbitrators by providing written notice of such
selection to the Purchaser.

(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is
otherwise unable to serve as arbitrator, then the party that selected such
Proposed Arbitrator may select one (1) of the other three (3) Proposed
Arbitrators within three (3) calendar days of the date the chosen Proposed
Arbitrator declines or notifies the parties he or she is unable to serve as
arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise
unable to serve as arbitrator, then the arbitrator selection process shall begin
again in accordance with this Paragraph 4.2.

(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph
4.2 agrees in writing (including via email) delivered to both parties to serve
as the arbitrator hereunder is referred to herein as the “Arbitration
Commencement Date”.  If an arbitrator resigns or is unable to act during the
Arbitration, a replacement arbitrator shall be chosen in accordance with this
Paragraph 4.2 to continue the Arbitration.  If Utah ADR Services ceases to exist
or to provide a list of neutrals, then the arbitrator shall be selected under
the then prevailing rules of the American Arbitration Association.

(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid
equally by both parties. Subject to Paragraph 4.10 below, if one party refuses
or fails to pay its portion of the arbitrator fee, then the other party can
advance such unpaid amount (subject to the accrual of Default Interest
thereupon), with such amount being added to or subtracted from, as applicable,
the Arbitration Award.

4.3     Applicability of Certain Utah Rules. The parties agree that the
Arbitration shall be conducted generally in accordance with the Utah Rules of
Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah
Rules of Civil Procedure shall apply, without limitation, to the filing of any
pleadings, motions or memoranda, the conducting of discovery, and the taking of
any depositions. The Utah Rules of Evidence shall apply to any hearings, whether
telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event
supersede these Arbitration Provisions. In the event of any conflict between the
Utah Rules of Civil Procedure or the Utah Rules of Evidence and these
Arbitration Provisions, these Arbitration Provisions shall control.

4.4     Answer and Default. An answer and any counterclaims to the Arbitration
Notice shall be required to be delivered to the party initiating the Arbitration
within twenty (20) calendar days after the Arbitration Commencement Date. If an
answer is not delivered by the required deadline, the arbitrator must provide
written notice to the defaulting party stating that the arbitrator will enter a
default award against such party if such party does not file an answer within
five (5) calendar days of receipt of such notice. If an answer is not filed
within the five (5) day extension period, the arbitrator must render a default
award, consistent with the relief requested in the Arbitration Notice, against a
party that fails to submit an answer within such time period.

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4.5     Related Litigation. The party that delivers the Arbitration Notice to
the other party shall have the option to also commence concurrent legal
proceedings with any state or federal court sitting in Salt Lake County, Utah
(“Litigation Proceedings”), subject to the following: (a) the complaint in the
Litigation Proceedings is to be substantially similar to the claims set forth in
the Arbitration Notice, provided that an additional cause of action to compel
arbitration will also be included therein, (b) so long as the other party files
an answer to the complaint in the Litigation Proceedings and an answer to the
Arbitration Notice, the Litigation Proceedings will be stayed pending an
Arbitration Award (or Appeal Panel Award (defined below), as applicable)
hereunder, (c) if the other party fails to file an answer in the Litigation
Proceedings or an answer in the Arbitration proceedings, then the party
initiating Arbitration shall be entitled to a default judgment consistent with
the relief requested, to be entered in the Litigation Proceedings, and (d) any
legal or procedural issue arising under the Arbitration Act that requires a
decision of a court of competent jurisdiction may be determined in the
Litigation Proceedings. Any award of the arbitrator (or of the Appeal Panel
(defined below)) may be entered in such Litigation Proceedings pursuant to the
Arbitration Act.

4.6     Discovery. Pursuant to Section 118(8) of the Arbitration Act, the
parties agree that discovery shall be conducted as follows:

(a) Written discovery will only be allowed if the likely benefits of the
proposed written discovery outweigh the burden or expense thereof, and the
written discovery sought is likely to reveal information that will satisfy a
specific element of a claim or defense already pleaded in the Arbitration. The
party seeking written discovery shall always have the burden of showing that all
of the standards and limitations set forth in these Arbitration Provisions are
satisfied. The scope of discovery in the Arbitration proceedings shall also be
limited as follows:

(i)   To facts directly connected with the transactions contemplated by the
Agreement.

(ii)  To facts and information that cannot be obtained from another source or in
another manner that is more convenient, less burdensome or less expensive than
in the manner requested.

(b) No party shall be allowed (i) more than fifteen (15) interrogatories
(including discrete subparts), (ii) more than fifteen (15) requests for
admission (including discrete subparts), (iii) more than ten (10) document
requests (including discrete subparts), or (iv) more than three (3) depositions
(excluding expert depositions) for a maximum of seven (7) hours per deposition.
The costs associated with depositions will be borne by the party taking the
deposition. The party defending the deposition will submit a notice to the party
taking the deposition of the estimated attorneys’ fees that such party expects
to incur in connection with defending the deposition. If the party defending the
deposition fails to submit an estimate of attorneys’ fees within five (5)
calendar days of its receipt of a deposition notice, then such party shall be
deemed to have waived its right to the estimated attorneys’ fees.  The party
taking the deposition must pay the party defending the deposition the estimated
attorneys’ fees prior to taking the deposition, unless such obligation is deemed
to be waived as set forth in the immediately preceding sentence. If the party
taking the deposition believes that the estimated attorneys’ fees are
unreasonable, such party may submit the issue to the arbitrator for a decision.
 All depositions will be taken in Utah.

(c) All discovery requests (including document production requests included in
deposition notices) must be submitted in writing to the arbitrator and the other
party. The party submitting the written discovery requests must include with
such discovery requests a detailed explanation of how the proposed discovery
requests satisfy the requirements of these Arbitration Provisions and the Utah
Rules of Civil Procedure. The receiving party will then be allowed, within five
(5) calendar days of receiving the proposed discovery requests, to submit to the
arbitrator an estimate of the attorneys’ fees and costs associated with
responding to such written discovery requests and a written challenge to each
applicable discovery request. After receipt of an estimate of attorneys’ fees
and costs and/or challenge(s) to one or more discovery requests, consistent with
subparagraph (c) above, the arbitrator will within three (3) calendar days make
a finding as to the likely attorneys’ fees and costs associated with responding
to the discovery requests and issue an order that (i) requires the requesting
party to prepay the attorneys’ fees and costs associated with responding to the
discovery requests, and (ii) requires the responding party to respond to the
discovery requests as limited by the arbitrator within twenty-five (25) calendar
days of the arbitrator’s finding with respect to such discovery requests. If a
party entitled to submit an estimate of attorneys’ fees and costs and/or a
challenge to discovery requests fails to do so within such 5-day period, the
arbitrator will make a finding that (A) there are no attorneys’ fees or costs
associated with responding to such discovery requests,

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and (B) the responding party must respond to such discovery requests (as may be
limited by the arbitrator) within twenty-five (25) calendar days of the
arbitrator’s finding with respect to such discovery requests. Any party
submitting any written discovery requests, including without limitation
interrogatories, requests for production subpoenas to a party or a third party,
or requests for admissions, must prepay the estimated attorneys’ fees and costs,
before the responding party has any obligation to produce or respond to the
same, unless such obligation is deemed waived as set forth above.

(d) In order to allow a written discovery request, the arbitrator must find that
the discovery request satisfies the standards set forth in these Arbitration
Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly
enforce these standards. If a discovery request does not satisfy any of the
standards set forth in these Arbitration Provisions or the Utah Rules of Civil
Procedure, the arbitrator may modify such discovery request to satisfy the
applicable standards, or strike such discovery request in whole or in part.

(e) Each party may submit expert reports (and rebuttals thereto), provided that
such reports must be submitted within sixty (60) days of the Arbitration
Commencement Date. Each party will be allowed a maximum of two (2) experts.
Expert reports must contain the following: (i) a complete statement of all
opinions the expert will offer at trial and the basis and reasons for them; (ii)
the expert’s name and qualifications, including a list of all the expert’s
publications within the preceding ten (10) years, and a list of any other cases
in which the expert has testified at trial or in a deposition or prepared a
report within the preceding ten (10) years; and (iii) the compensation to be
paid for the expert’s report and testimony. The parties are entitled to depose
any other party’s expert witness one (1) time for no more than four (4) hours.
An expert may not testify in a party’s case-in-chief concerning any matter not
fairly disclosed in the expert report.

4.6     Dispositive Motions.  Each party shall have the right to submit
dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil
Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion
may, but is not required to, deliver to the arbitrator and to the other party a
memorandum in support (the “Memorandum in Support”) of the Dispositive Motion.
Within seven (7) calendar days of delivery of the Memorandum in Support, the
other party shall deliver to the arbitrator and to the other party a memorandum
in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as
applicable, the party that submitted the Memorandum in Support shall deliver to
the arbitrator and to the other party a reply memorandum to the Memorandum in
Opposition (“Reply Memorandum”). If the applicable party shall fail to deliver
the Memorandum in Opposition as required above, or if the other party fails to
deliver the Reply Memorandum as required above, then the applicable party shall
lose its right to so deliver the same, and the Dispositive Motion shall proceed
regardless.

4.7     Confidentiality. All information disclosed by either party (or such
party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined
below)) shall be considered confidential in nature. Each party agrees not to
disclose any confidential information received from the other party (or its
agents) during the Arbitration process (including without limitation during the
discovery process or any Appeal) unless (a) prior to or after the time of
disclosure such information becomes public knowledge or part of the public
domain, not as a result of any inaction or action of the receiving party or its
agents, (b) such information is required by a court order, subpoena or similar
legal duress to be disclosed if such receiving party has notified the other
party thereof in writing and given it a reasonable opportunity to obtain a
protective order from a court of competent jurisdiction prior to disclosure, or
(c) such information is disclosed to the receiving party’s agents,
representatives and legal counsel on a need to know basis who each agree in
writing not to disclose such information to any third party. Pursuant to Section
118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed
to issue a protective order to prevent the disclosure of privileged information
and confidential information upon the written request of either party.

4.8     Authorization; Timing; Scheduling Order. Subject to all other portions
of these Arbitration Provisions, the parties hereby authorize and direct the
arbitrator to take such actions and make such rulings as may be necessary to
carry out the parties’ intent for the Arbitration proceedings to be efficient
and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties
hereby agree that an Arbitration Award must be made within one hundred twenty
(120) calendar days after the Arbitration Commencement Date. The arbitrator is
hereby authorized and directed to hold a scheduling conference within ten (10)
calendar days after the Arbitration Commencement Date in order to establish a
scheduling order with various binding deadlines for discovery, expert testimony,
and the submission of documents by the parties to enable the arbitrator to
render a decision prior to the end of such 120-day period.

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4.9     Relief. The arbitrator shall have the right to award or include in the
Arbitration Award (or in a preliminary ruling) any relief which the arbitrator
deems proper under the circumstances, including, without limitation, specific
performance and injunctive relief, provided that the arbitrator may not award
exemplary or punitive damages.

4.10     Fees and Costs. As part of the Arbitration Award, the arbitrator is
hereby directed to require the losing party (the party being awarded the least
amount of money by the arbitrator, which, for the avoidance of doubt, shall be
determined without regard to any statutory fines, penalties, fees, or other
charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration, and (b) reimburse the prevailing party for all
reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other
discovery costs, and other expenses, costs or fees paid or otherwise incurred by
the prevailing party in connection with the Arbitration.

4.11     Subsequent Arbitration. In the event an Arbitration is commenced
between the parties and an Arbitration Award is entered and then a subsequent
dispute arises between the parties, then such subsequent dispute shall be heard
by the Arbitrator chosen to conduct the initial Arbitration and the the
subsequent Arbitration shall be deemed a continuance of the original
Arbitration.

5.    Arbitration Appeal.

5.1     Initiation of Appeal.  Following the entry of the Arbitration Award,
either party (the “Appellant”) shall have a period of thirty (30) calendar days
in which to notify the other party (the “Appellee”), in writing, that the
Appellant elects to appeal (the “Appeal”) the Arbitration Award (such notice, an
“Appeal Notice”) to a panel of arbitrators as provided in Paragraph 5.2 below.
 The date the Appellant delivers an Appeal Notice to the Appellee is referred to
herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee
in accordance with the provisions of Paragraph 4.1 above with respect to
delivery of an Arbitration Notice.  In addition, together with delivery of the
Appeal Notice to the Appellee, the Appellant must also pay for (and provide
proof of such payment to the Appellee together with delivery of the Appeal
Notice) a bond in the amount of 110% of the sum the Appellant owes to the
Appellee as a result of the Arbitration Award the Appellant is appealing.  In
the event an Appellant delivers an Appeal Notice to the Appellee (together with
proof of payment of the applicable bond) in compliance with the provisions of
this Paragraph 5.1, the Appeal will occur as a matter of right and, except as
specifically set forth herein, will not be further conditioned.  In the event a
party does not deliver an Appeal Notice (along with proof of payment of the
applicable bond) to the other party within the deadline prescribed in this
Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award.
 If no party delivers an Appeal Notice (along with proof of payment of the
applicable bond) to the other party within the deadline described in this
Paragraph 5.1, the Arbitration Award shall be final.  The parties acknowledge
and agree that any Appeal shall be deemed part of the parties’ agreement to
arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.

5.2     Selection and Payment of Appeal Panel.  In the event an Appellant
delivers an Appeal Notice to the Appellee (together with proof of payment of the
applicable bond) in compliance with the provisions of Paragraph 5.1 above, the
Appeal will be heard by a three (3) person arbitration panel (the “Appeal
Panel”).

(a)      Within ten (10) calendar days after the Appeal Date, the Appellee shall
select and submit to the Appellant the names of five (5) arbitrators that are
designated as “neutrals” or qualified arbitrators by Utah ADR Services
(http://www.utahadrservices.com) (such five (5) designated persons hereunder are
referred to herein as the “Proposed Appeal Arbitrators”). For the avoidance of
doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with
Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration
Award being appealed (the “Original Arbitrator”). Within five (5) calendar days
after the Appellee has submitted to the Appellant the names of the Proposed
Appeal Arbitrators, the Appellant must select, by written notice to the
Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of
the Appeal Panel. If the Appellant fails to select three (3) of the Proposed
Appeal Arbitrators in writing within such 5-day period, then the Appellee may
select such three (3) arbitrators from the Proposed Appeal Arbitrators by
providing written notice of such selection to the Appellant.

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(b)      If the Appellee fails to submit to the Appellant the names of the
Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date
pursuant to subparagraph (a) above, then the Appellant may at any time prior to
the Appellee so designating the Proposed Appeal Arbitrators, identify the names
of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by
written notice to the Appellee.  The Appellee may then, within five (5) calendar
days after the Appellant has submitted notice of its selected arbitrators to the
Appellee, select, by written notice to the Appellant, three (3) of such selected
arbitrators to serve on the Appeal Panel. If the Appellee fails to select in
writing within such 5-day period three (3) of the arbitrators selected by the
Appellant to serve as the members of the Appeal Panel, then the Appellant may
select the three (3) members of the Appeal Panel from the Appellant’s list of
five (5) arbitrators by providing written notice of such selection to the
Appellee.

(c)      If a selected Proposed Appeal Arbitrator declines or is otherwise
unable to serve, then the party that selected such Proposed Appeal Arbitrator
may select one (1) of the other five (5) designated Proposed Appeal Arbitrators
within three (3) calendar days of the date a chosen Proposed Appeal Arbitrator
declines or notifies the parties he or she is unable to serve as an arbitrator.
If at least three (3) of the five (5) designated Proposed Appeal Arbitrators
decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator
selection process shall begin again in accordance with this Paragraph 5.2;
provided, however, that any Proposed Appeal Arbitrators who have already agreed
to serve shall remain on the Appeal Panel.

(d)      The date that all three (3) Proposed Appeal Arbitrators selected
pursuant to this Paragraph 5.2 agree in writing (including via email) delivered
to both the Appellant and the Appellee to serve as members of the Appeal Panel
hereunder is referred to herein as the “Appeal Commencement Date”.  No later
than five (5) calendar days after the Appeal Commencement Date, the Appellee
shall designate in writing (including via email) to the Appellant and the Appeal
Panel the name of one (1) of the three (3) members of the Appeal Panel to serve
as the lead arbitrator in the Appeal proceedings. Each member of the Appeal
Panel shall be deemed an arbitrator for purposes of these Arbitration Provisions
and the Arbitration Act, provided that, in conducting the Appeal, the Appeal
Panel may only act or make determinations upon the approval or vote of no less
than the majority vote of its members, as announced or communicated by the lead
arbitrator on the Appeal Panel.  If an arbitrator on the Appeal Panel ceases or
is unable to act during the Appeal proceedings, a replacement arbitrator shall
be chosen in accordance with Paragraph 5.2 above to continue the Appeal as a
member of the Appeal Panel.  If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrators for the Appeal Panel shall be selected
under the then prevailing rules of the American Arbitration Association.

(d)      Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be
paid entirely by the Appellant.

5.3     Appeal Procedure.  The Appeal will be deemed an appeal of the entire
Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de
novo review of all Claims described or otherwise set forth in the Arbitration
Notice.  Subject to the foregoing and all other provisions of this Paragraph 5,
the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers
appropriate for a fair and expeditious disposition of the Appeal, may hold one
or more hearings and permit oral argument, and may review all previous evidence
and discovery, together with all briefs, pleadings and other documents filed
with the Original Arbitrator (as well as any documents filed with the Appeal
Panel pursuant to Paragraph 5.4(a) below).  Notwithstanding the foregoing, in
connection with the Appeal, the Appeal Panel shall not permit the parties to
conduct any additional discovery or raise any new Claims to be arbitrated, shall
not permit new witnesses or affidavits, and shall not base any of its findings
or determinations on the Original Arbitrator’s findings or the Arbitration
Award.

5.4     Timing.

(a)      Within seven (7) calendar days of the Appeal Commencement Date, the
Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies
of the Appeal Notice, all discovery conducted in connection with the
Arbitration, and all briefs, pleadings and other documents filed with the
Original Arbitrator (which material Appellee shall have the right to review and
supplement if necessary), and (ii) may, but is not required to, deliver to the
Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s
arguments concerning or position with respect to all Claims, counterclaims,
issues, or accountings presented or pleaded in the Arbitration. Within seven (7)
calendar days of the Appellant’s delivery of the Memorandum in Support, as
applicable, the Appellee shall deliver to the Appeal Panel and to the Appellant
a Memorandum in Opposition to the Memorandum in Support. Within seven (7)
calendar days of the Appellee’s delivery of the Memorandum in Opposition, as
applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee
a Reply Memorandum to the

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Memorandum in Opposition. If the Appellant shall fail to substantially comply
with the requirements of clause (i) of this subparagraph (a), the Appellant
shall lose its right to appeal the Arbitration Award, and the Arbitration Award
shall be final.  If the Appellee shall fail to deliver the Memorandum in
Opposition as required above, or if the Appellant shall fail to deliver the
Reply Memorandum as required above, then the Appellee or the Appellant, as the
case may be, shall lose its right to so deliver the same, and the Appeal shall
proceed regardless.

(b)      Subject to subparagraph (a) above, the parties hereby agree that the
Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the
Appeal Commencement Date, and that the Appeal Panel must render its decision
within thirty (30) calendar days after the Appeal is heard (and in no event
later than sixty (60) calendar days after the Appeal Commencement Date).

5.5     Appeal Panel Award.  The Appeal Panel shall issue its decision (the
“Appeal Panel Award”) through the lead arbitrator on the Appeal Panel.
 Notwithstanding any other provision contained herein, the Appeal Panel Award
shall (a) supersede in its entirety and make of no further force or effect the
Arbitration Award (provided that any protective orders issued by the Original
Arbitrator shall remain in full force and effect), (b) be final and binding upon
the parties, with no further rights of appeal, (c) be the sole and exclusive
remedy between the parties regarding any Claims, counterclaims, issues, or
accountings presented or pleaded in the Arbitration, and (d) be promptly payable
in United States dollars free of any tax, deduction or offset (with respect to
monetary awards).  Any costs or fees, including without limitation attorneys’
fees, incurred in connection with or incident to enforcing the Appeal Panel
Award shall, to the maximum extent permitted by law, be charged against the
party resisting such enforcement. The Appeal Panel Award shall include Default
Interest (with respect to monetary awards) at the rate specified in the Note for
Default Interest both before and after the Arbitration Award. Judgment upon the
Appeal Panel Award will be entered and enforced by a state or federal court
sitting in Salt Lake County, Utah.

5.6     Relief.  The Appeal Panel shall have the right to award or include in
the Appeal Panel Award any relief which the Appeal Panel deems proper under the
circumstances, including, without limitation, specific performance and
injunctive relief, provided that the Appeal Panel may not award exemplary or
punitive damages.

5.7     Fees and Costs.  As part of the Appeal Panel Award, the Appeal Panel is
hereby directed to require the losing party (the party being awarded the least
amount of money by the arbitrator, which, for the avoidance of doubt, shall be
determined without regard to any statutory fines, penalties, fees, or other
charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing
party (the party being awarded the most amount of money by the Appeal Panel,
 which, for the avoidance of doubt, shall be determined without regard to any
statutory fines, penalties, fees, or other charges awarded to any part) the
reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid
or otherwise incurred by the prevailing party in connection with the Arbitration
(including without limitation in connection with the Appeal).

6.    Miscellaneous.

6.1     Severability. If any part of these Arbitration Provisions is found to
violate or be illegal under applicable law, then such provision shall be
modified to the minimum extent necessary to make such provision enforceable
under applicable law, and the remainder of the Arbitration Provisions shall
remain unaffected and in full force and effect.

6.2     Governing Law.  These Arbitration Provisions shall be governed by the
laws of the State of Utah without regard to the conflict of laws principles
therein.

6.3     Interpretation.  The headings of these Arbitration Provisions are for
convenience of reference only and shall not form part of, or affect the
interpretation of, these Arbitration Provisions.

6.4     Waiver. No waiver of any provision of these Arbitration Provisions shall
be effective unless it is in the form of a writing signed by the party granting
the waiver.

6.5     Time is of the Essence. Time is expressly made of the essence with
respect to each and every provision of these Arbitration Provisions.

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