Exhibit 10.1
TRANSITION SERVICES AGREEMENT
Transition
Services Agreement (this “ Agreement ”) dated as
of this 1st day of October, 2007, among MPC PRO, LLC, a Delaware
limited liability company (“ Buyer ”) and
GATEWAY, INC., a Delaware corporation (“ Seller
”) (together, the “ Parties ”).
RECITALS
WHEREAS , Purchaser
and Seller are parties to an Asset Purchase Agreement dated as of
September 4, 2007 (the “ Purchase Agreement ”),
pursuant to which Buyer is purchasing from Seller certain assets
and liabilities associated with Seller’s “Professional
Division” and that portion of its “Consumer
Direct” division that provides business-related products
(collectively, the “ Business ”);
WHEREAS , in
connection with and as a condition precedent to the closing of the
transactions contemplated by the Purchase Agreement, Seller has
agreed to provide certain transition services to Buyer on the terms
and conditions hereinafter set forth, all as contemplated by the
Purchase Agreement;
NOW, THEREFORE ,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1 .
Services Provided.
(a)
Commencing on the Closing Date and during the term of this
Agreement, Seller shall provide to Buyer the services described in
the Schedules attached hereto (collectively, the “
Services ”) for the time period and to the extent
specified with respect to each such Service in the applicable
Schedule and upon the other terms and conditions set forth in this
Agreement for the time period and to the extent specified with
respect to each such service in the applicable Schedule and upon
the terms and conditions set forth in the Agreement. All time
periods specified in the Schedules commence on the Closing Date.
For the avoidance of doubt, the Services set forth in the Schedules
attached hereto shall be the only services of any kind that Seller
shall be obligated to provide to Buyer pursuant to this Agreement.
Notwithstanding the foregoing, under no circumstances shall Seller
be obligated to (i) provide, or cause to be provided, any Services
in a manner inconsistent with the manner in which such Services
were provided to the Business prior to the Closing Date, except to
the extent explicitly provided in an exhibit or (ii) increase, or
cause to be increased, the amount or scope of such Services beyond
the levels that were provided to the Business prior to the Closing
Date, except to the extent explicitly provided in an
exhibit.
(b)
Seller agrees to undertake certain buy/sell activity of components
on behalf of Buyer in the course of providing the Services, which
shall include the
procuring of components
from component suppliers and the selling of such components to
Original Design Manufacturers (“ ODMs ”), in
connection with and in support of the manufacture at such ODMs of
finished goods that are being ordered from such ODMs by Seller for
subsequent sale to Buyer (“ Buy/Sell Activity
”). The Buy/Sell Activity shall be conducted in a manner
consistent with Seller’s buy/sell activities for the Business
prior to the Closing Date.
(c)
Each of Seller and Buyer shall appoint a person to act as its
project manager (each, a “ Project Manager ”) to
deal with issues arising out of the performance of this Agreement
and to discuss such issues with the other Party’s Project
Manager as often as reasonably necessary or desirable in order to
facilitate the orderly provision of the Services. The names of the
Project Managers initially designated by the Parties are set forth
on Exhibit 1. In the event that any of the individuals listed on
Exhibit 1 (or such individual’s successor) shall cease for
any reason to continue as a Project Manager, the Party for whom
such individual served as Project Manager shall promptly, but in
any event within 10 business days following the day such project
manager ceased to serve as such, appoint a replacement Project
Manager, and provide notice to the other Parties hereto of such
individual’s name and appointment.
(d)
Seller shall have the right to retain third parties selected by
Seller to provide Services on its behalf from time to time. The use
or selection by Seller of any such third party shall be in
Seller’s sole and absolute discretion and shall not be
subject to approval by Buyer; provided that if requested by
Buyer, Seller shall keep Buyer reasonably informed from time to
time regarding any significant use of such third parties. Seller
shall remain responsible, in accordance with the terms of this
Agreement, for the performance of any Service it causes to be so
provided by a third party.
(e)
Notwithstanding any other provision of this Agreement, in providing
the Services, Seller shall not be obligated to: (i) hire any
additional employees; (ii) maintain the employment of any specific
employee; (iii) purchase, lease or license any additional equipment
or software; or (iv) pay any costs related to the transfer or
conversion of data to Buyer or any alternate supplier of
services.
(f)
If Seller reasonably believes it is unable (i) to provide any of
the Services because the provision thereof would result in a
significant disruption of Seller’s operations or (ii) in the
case of data systems, to support the function which the data system
relates because of a failure to obtain necessary consents,
licenses, sublicenses or approvals, the Parties shall cooperate in
good faith to determine the best alternative approach. Until such
alternative approach is found or the problem otherwise resolved to
the mutual satisfaction of the parties, Seller shall use
commercially reasonable efforts to (1) continue providing the
Service or (2) in the case of data systems, support the function to
which the data system relates or permit Buyer to have access to the
data system so that Buyer can support the function itself. To the
extent an agreed-upon written alternative approach requires payment
above and beyond that which is included in
Seller’s
charge for the Service
in question, Buyer shall be responsible for such payment as a
result of such alternative approach.
(g)
Notwithstanding any other provision of this Agreement, if a Buyer
Default occurs and is continuing, Seller shall have no obligation
to, and may in its sole discretion refuse to, provide Services
and/or engage in Buy/Sell Activity. For purposes of this Agreement
a “ Buyer Default ” shall be deemed to have
occurred upon (i) the occurrence of any Event of Default under the
Note (as such term is defined in the Purchase Agreement) or (ii)
any failure by Buyer (or the Wells Fargo Business Credit operating
division of Wells Fargo Bank, National Association, on behalf on
Buyer) to pay any amounts due pursuant to any Invoice under this
Agreement by the date that is five (5) Business Days after the date
on which such payment is due, subject to the procedures regarding
Invoice Objections set forth in Section 2(e) hereof. Whenever in
this Agreement any Party is permitted or required to make a
determination in its “sole discretion”, such Party
shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting any other Party or person.
Section 2 .
Fees.
(a)
In consideration for the Services to be provided by Seller
hereunder, Buyer shall pay to Seller a total fee of $6,150,000,
payable as follows: (i) eight bi-weekly installments of $723,530
due on the second, fourth, sixth, eighth, tenth, twelfth,
fourteenth and sixteenth Friday after the Closing Date and (ii) one
payment of $361,760 due on the seventeeth Friday after the Closing
Date.
(b)
If any Extended Services are provided by Seller pursuant to Section
3(a), Buyer shall pay to Seller $606,000 for each week or part
thereof that Seller performs such Extended Services, payable on the
Friday of every week during which such Extended Services are being
performed.
(c)
Buyer shall reimburse Seller for all software license fees paid by
Seller in the course of providing the Services that would not have
been incurred by Seller but for the provision of Services to Buyer
pursuant to this Agreement (“ Incremental Software License
Fees ”). Prior to providing the Services, Seller shall
provide Buyer with written notice setting forth the expected
Incremental Software License Fees associated with providing such
Services to Buyer. If Buyer provides written or verbal approval of
such expected Incremental Software License Fees, Buyer shall pay
the actual Incremental Software License Fees on the Friday
following receipt by Buyer of a notice from Seller setting forth
the amounts actually paid by Seller and amounts owed by Buyer
hereunder. If Buyer does not approve of an expected Incremental
Software License Fee, Seller may decline to provide any Services
that Seller reasonably believes requires a software license for
which Buyer has not agreed to pay the applicable Incremental
Software License Fees.
(d)
Buyer shall reimburse Seller for all Buy/Sell Activity undertaken
by Seller in the course of providing the Services, as specified
below:
(i)
Buyer shall reimburse Seller for all components, accessories and
finished goods purchased by Seller on behalf of Buyer in the course
of providing the Services, subject to a percentage markup over
amounts paid by Seller for such items. Such percentage markup shall
be (i) one-half percent (0.5%) during the first eight-week period
following the Closing Date, (ii) one percent (1%) during the second
eight-week period following the Closing Date and (iii) two percent
(2%) thereafter. At the end of each Invoice Period, Seller shall
estimate Buyer’s portion of the total purchased components,
accessories and finished goods based on Buyer’s proportion of
total product production being produced on behalf of Seller and
Buyer by ODMs, with any product production that is in support of
orders from Buyer deemed to be product that is produced for Buyer.
Seller shall then apply the appropriate percentage markup to such
estimated Buyer’s portion of the total purchased components,
accessories and finished goods to determine an estimate of the
total amount owed by Buyer to Seller for Buy/Sell Activity during
such Invoice Period (the “ Estimated Buy/Sell Total
”). If the actual amount of purchased components, accessories
and finished goods attributable to Buyer for an Invoice Period
after applying the appropriate percentage markup to such amount
(the “ Actual Buy/Sell Total ”) is less than the
corresponding Estimated Buy/Sell Total, Seller will reimburse such
difference to Buyer within 15 days after the date of the Invoice
for the related Invoice Period. If the Actual Buy/Sell Total
is greater than the corresponding Estimated Buy/Sell Total, Buyer
will reimburse such difference to Seller within 15 days after the
date of the Invoice for the related Invoice Period.
(ii)
Buyer shall reimburse Seller for its portion of ODM layering
charges, which shall be allocated to Buyer in proportion to its
portion of the total product production produced on behalf of
Seller and Buyer by ODMs. In the event that such ODM layering
charges result in a credit to Buyer, such credit shall be reflected
on the Invoice for the Invoice Period in which it is determined
that a credit is due.
(iii)
Buyer shall reimburse Seller for its portion of ODM charges for
excess and obsolete components, which shall be allocated to Buyer
where such excess and obsolete components were ordered for
Buyer’s product production (taking into consideration any
production decommits from Buyer).
(iv)
Buyer will reimburse Seller for its portion of those charges
associated with the movement and storage of components, accessories
and finished goods, including but not limited to transportation,
warehousing and handling cost. Buyer’s portion of such
charges shall be allocated to Buyer in proportion to Buyer’s
proportion of the total product production
produced on behalf of
Seller and Buyer by ODMs, with any product production that is in
support of orders from Buyer deemed to be product that is produced
for Buyer.
On the fifth
business day following the Closing Date, and at the end of each
week thereafter for so long as Seller performs Services for Buyer
under this Agreement (each, an “ Invoice Period
”), Seller will provide a statement to Buyer, listing in
reasonable detail the buy/sell activity undertaken by Seller
hereunder and listing the amounts paid by Seller and amounts owed
by Buyer hereunder (each, an “ Invoice
”).
(e)
If Buyer disagrees with the amount set forth on an Invoice, Buyer
shall send to Seller a reasonably detailed written notice of such
disagreement (the “ Invoice Objection ”) no
later than the 10th day after the date of the Invoice, in the case
of an Invoice for freight costs or service costs and no later than
the 25th day after the date of the Invoice, in the case of any
other Invoice. Notwithstanding any Invoice Objection made by Buyer,
Buyer shall in any event pay any portion of the amount set forth on
the Invoice with which it agrees no later than the 15th day after
the date of the Invoice, in the case of an Invoice for freight
costs or service costs, and no later than the 30th day after the
date of the Invoice, in the case of any other Invoice, to the
extent that such amount is not paid in accordance with the terms of
the Intercreditor Agreement referenced in Section 10.09 of the
Purchase Agreement (the “ Intercreditor Agreement
”). If no Invoice Objection is received by Seller by the
applicable date set forth in the first sentence of this Section
2(e), such Invoice shall be deemed final and conclusive and agreed
to by Buyer, and Buyer shall pay the full amount of such Invoice by
the applicable date set forth in the second sentence of this
Section 2(e). Buyer and Seller shall resolve any Invoice Objection
and any other disputes or disagreements relating to Invoices in
accordance with the procedures provided for in Section
7.
(f)
The Applicable Gateway Weekly Payoff Amount (as defined in the
Intercreditor Agreement) that Seller shall provide in the
applicable weekly statement to Wells Fargo, National Association
(“ Wells Fargo ”) under the Intercreditor
Agreement shall be the amount specified as payable by Buyer on the
Invoice for the related week; provided that Seller may, in
its sole discretion, increase the Applicable Gateway Weekly Payoff
Amount to be included in any applicable weekly statement provided
to Wells Fargo pursuant to the Intercreditor Agreement by any
amount payable by Buyer to Seller in respect of Services, Extended
Services or Incremental Software License Fees that is not paid when
due under this Agreement (in each case without duplication in any
subsequent weekly statement provided to Wells Fargo).
(g)
If on any date there exist amounts that would otherwise be payable
by Buyer to Seller in respect of Services, Extended Services,
Incremental Software License Fees or any Invoice, on the one hand,
and amounts under any agreement that would otherwise be payable by
Seller to Buyer, on the other hand,
then, on such date,
either party may elect to set-off such amounts by written notice to
the other party, upon which each party’s obligation to make
payment of such amounts will be automatically satisfied, discharged
and replaced by an obligation upon the party by which the larger
aggregate amount would have been payable to pay to the other party
the excess of the larger amount over the smaller aggregate
amount.
(h)
Late payments shall bear interest at a rate of 8% per annum,
compounded monthly.
(i)
If the total value of (x) the value of the Net Inventory Minus
Liabilities, as determined on the Final Net Inventory/Liability
Statement plus (y) $[•] (representing the amount paid by
Gateway Computers, Inc. to Quanta Computers Inc. (“
Quanta ”) to purchase the 40% membership interest in
Gateway Pro Partners, LLC owned by Quanta) minus (z) the total
amount of Customer Prepayments as of the Closing Date in respect of
which Buyer is assuming Liabilities to deliver Products or perform
services pursuant to Section 2.01(g) of the Purchase Agreement is
less than $21,800,000, then Seller shall credit the difference
between $21,800,000 and such total value against Buyer’s
payment obligations hereunder.
Section 3 .
Term.
(a)
This Agreement shall continue in effect until the latest expiration
date specified for a Service in any Schedule hereto (or such other
date as may be agreed to in writing by the Parties) (the “
Expiration Date ”), unless earlier terminated in
accordance with Section 3(b) or Section 3(c) below; provided
that if Buyer desires a continuation of the term of this Agreement
beyond the Expiration Date (or such other applicable expiration
date specified for a Service in a Schedule hereto) and Buyer
notifies Seller within 30 days prior to the Expiration Date (or
within 30 days prior to the expiration date specified in the
relevant Schedule), Seller agrees to negotiate with Buyer in good
faith regarding an extension of the term of the Services, provided
that Seller shall be under no obligation to provide any extension
under this Section 3(a) and may extend or not extend the term of
the Services in its sole discretion. If the Parties agree to extend
the term of this Agreement beyond the Expiration Date, regardless
of the cause, Buyer shall pay Seller for such services (the “
Extended Services ”) such amounts as determined in
accordance with Section 2(b).
(b)
Beginning on the date that is 17 weeks after the Closing Date,
Buyer may terminate this Agreement or any Service to be provided
hereunder for any reason at any time upon at least 30 days’
prior written notice to Seller. For the avoidance of doubt, prior
to the date that is 17 weeks after the Closing Date, Buyer shall
not be permitted to terminate this Agreement except pursuant to
Section 3(c) below. Notwithstanding termination of this Agreement
or any Service by Buyer pursuant to this Section 3(b), Buyer shall
remain liable for all fees outstanding pursuant to Section 2
hereof.
(c)
Notwithstanding anything to the contrary contained herein, (i)
Buyer may terminate this Agreement in whole or in part at any time
in the event of any material breach or default by Seller of any of
Seller’s obligations under this Agreement and the failure of
Seller to cure, or to take substantial steps towards the curing of,
such breach or default within 30 days after receipt of written
notice from Buyer requesting such breach or default to be cured;
and (ii) Seller may terminate this Agreement in whole or in part at
any time in the event of any material breach or default by Buyer of
any of Buyer’s obligations under this Agreement and the
failure of Buyer to cure such breach or default within 30 days
after receipt of notice from Seller requesting such breach or
default to be cured.
(d)
Upon termination of this Agreement or upon the Expiration Date, if
such date has not been extended, Seller shall retain all books and
records, or copies thereof, pertaining to the business of Buyer
used or generated in the course of the provision of Services
hereunder. Thereafter, Seller will have the right to dispose of
such books and records, but will not do so within two years of
expiration or termination of this Agreement unless it has given
Buyer at least 30 days’ prior notice of such disposition and
the reasonable opportunity, to the extent practicable, to have such
books and records copied or delivered to Buyer at Buyer’s
expense. If requested by Buyer and subject to Section 6 of this
Agreement, Seller will afford Buyer reasonable access to such books
and records during normal business hours at Buyer’s expense
and will permit Buyer at its expense to copy or to take original
copies of such books and records to the extent such books and
records pertain solely to Buyer’s businesses and to copy such
books and records to the extent such books and records pertain to
Buyer’s businesses only in part.
Section 4 .
Indemnification.
(a)
Seller shall indemnify and hold harmless Buyer, its successors and
Affiliates, and their respective officers, directors, employees,
shareholders and agents from and against all damages, losses,
liabilities and expenses (including reasonable attorneys’
fees) in connection with any action, suit or proceeding involving a
third party claim (“ Damages ”) directly arising
from the willful misconduct of Seller in connection with the
provision of Services by Seller to Buyer; provided, however,
that in the event that Damages arise out of the willful misconduct
of both Seller and Buyer, Seller shall not be required to indemnify
or hold harmless Buyer to the extent that the Damages are caused by
the willful misconduct of Buyer. Seller’s liability under
this Section 4(a) shall be subject to the provisions of Section
4(c) and shall not, in the aggregate, exceed the aggregate amount
of fees received by Seller under this Agreement.
(b)
Buyer shall indemnify and hold harmless Seller, its successors and
Affiliates, and their respective directors, employees,
shareholders, and agents from and against any and all Damages
directly arising from the willful misconduct of Buyer in connection
with the provision of Services by Seller to Buyer; provided,
however, that in the event that Damages arise out of the
willful
misconduct of both
Seller and Buyer, Buyer shall not be required to indemnify or hold
harmless Seller to the extent that the Damages are caused by the
willful misconduct of Seller. The liability of Buyer under this
Section 4(b) shall be subject to the provisions of Section
4(c).
(c)
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, IN NO EVENT SHALL ANY PARTY BE LIABLE FOR INCIDENTAL,
INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS OR LOST REVENUES) OF THE OTHER PARTY, ITS
SUCCESSORS, ASSIGNS OR THEIR RESPECTIVE AFFILIATES, AS A RESULT OF
OR ARISING FROM THIS AGREEMENT, REGARDLESS OF WHETHER SUCH
LIABILITY ARISES IN TORT, CONTRACT, BREACH OF WARRANTY,
INDEMNIFICATION OR OTHERWISE.
(d)
Seller shall not be responsible for the correction of any erroneous
data provided by Seller in the course of providing the Services
unless Buyer requests in writing the correction of such data within
90 calendar days of the provision by Seller to Buyer of such
data.
(e)
In the event any liability arises from the performance of Services
hereunder by a third party contractor, Buyer shall be subrogated to
such rights, if any, as Seller may have against such third party
contractor with respect to the Services provided by such third
party contractor to or on behalf of Seller.
(f)
The procedures, but none of the monetary thresholds or limitations,
contained in Section 11.05 of the Purchase Agreement shall govern
indemnification under this Section 4.
Section 5 .
Independent Contractor; No Partnership.
(a)
Seller shall, in its sole discretion, select the Seller employees
to provide services hereunder on a basis consistent with
Seller’s past practice, and such individuals shall not be
deemed to be employees of Buyer. All work performed hereunder by
Seller shall be performed by Seller as an independent
contractor.
(b)
Notwithstanding anything herein to the contrary, no partnership or
joint venture has been, or under any circumstances shall have been
deemed, created in or by this Agreement or as a result of the
provision of Services hereunder.
(c)
Except as specifically set forth in this Agreement or as otherwise
explicitly provided in a writing signed by the Parties, none of the
Parties shall have any authority or authorization, of any nature
whatsoever, to speak for or bind the other.
Section 6 . Use
of Information, Confidentiality. As a result of the provision
of Services to Buyer hereunder or any access to books and records
contemplated by this Agreement or otherwise after the performance
of this Agreement, the Parties hereto and their respective
Affiliates may receive, have access to or obtain Confidential
Information relating to any other Party. Each of the Parties shall,
and shall cause each of its Affiliates to, (i) keep confidential
any such Confidential Information, except to the extent such
information (a) is or becomes public, except through the disclosure
of such information by any Party or any of its Affiliates; (b)
becomes available to any Party or any of its Affiliates from a
third party that is not, to the knowledge of such Party, required
to keep such information confidential; or (c) is required to be
disclosed by any Party or any of its Affiliates pursuant to any
law, rule, regulation or court order; provided that, to the
extent consistent with that law, rule, regulation or court order,
such Party or the relevant Affiliate shall give the other Party or
Parties prior notice of that impending disclosure and the
opportunity to object to or minimize that disclosure; (ii)
distribute any such Confidential Information only to those of its
own employees and officers and agents who have a reasonable need
for it; and (iii) not use such Confidential Information in any
manner except for the purpose provided.
“
Confidential Information ” means any information
concerning the businesses and affairs of a Party or any of its
Affiliates, regardless of whether such information is specifically
identified as “confidential”, including but not limited
to all trade secrets and other proprietary and confidential
information relating to such Party or any of its Affiliates or
their businesses, including products, formulas, processes, designs,
computer data or programs, know-how, data, data systems and related
procedures and documentation, existing and prospective customer,
vendor and supplier lists and files, agreements and contracts,
documents, methods of conducting business, financial and accounting
statements and records, business plans, budgets and projections,
prospective customer proposals, technical information, marketing
materials and concepts, methods for developing and maintaining
business relationships with customers and prospective customers,
and any information otherwise designated as Confidential
Information by such Party or any of its Affiliates.
Section 7 .
Dispute Resolution Procedure.
(a)
In the event of a dispute or a disagreement under this Agreement or
any Schedule hereto, the Parties’ respective Project Managers
shall use reasonable efforts to resolve the matter through
conference calls, face-to-face meetings and/or other
communications. The entire escalation and resolution process shall
be completed in fewer than 20 calendar days; provided, however,
that the Project Managers shall have the discretion to agree in
writing to extend this time period. The written agreement to extend
the time period shall include a revised time period. If after 10
days the disagreement or dispute is not resolved to the
Parties’ mutual satisfaction, the disagreement or dispute
shall be escalated to the senior management of the Parties, which
shall have an additional 10 calendar days to resolve the matter,
subject in each case to extension as provided above.
(b)
If the senior management of the Parties are not able to resolve a
disagreement or dispute within 20 calendar days after initiation of
the procedures provided for in this Section (subject to extension
as provided above), either Party may pursue any remedy available to
it under this Agreement or as permitted by law.
Section 8 .
Assignment; Non-Exclusive.
(a)
This Agreement is not assignable by any Party without the express
prior written consent of the other Party hereto, and any such
unauthorized assignment or transfer will be void.
(b)
Without in any way limiting the obligations of the Parties under
this Agreement, Seller agrees that Buyer may enter into agreements
with other Parties for the provision of any Services provided by
Seller hereunder.
Section 9 .
Notices. All notices and other written communications hereunder
shall be in writing and shall be given as follows:
If to Seller,
to:
Gateway, Inc.
765
Irvine Center Drive
Irvine, CA 92618-2930
Attention: Chief Financial
Officer
Facsimile No.: (949) 471-7014
with a copy
to:
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, CA 94025
Attention: Mischa Travers
Facsimile No.: (650) 752-2111
If to Buyer,
to:
MPC
Corporation
906
East Karcher Road
Nampa, Idaho
Attention: Chief Financial Officer
Facsimile No.: (208) 893-7218
with a copy,
to:
Holland & Hart LLP
101
S. Capitol Blvd., Suite 1400
Boise, ID 83702
Attention: Brian T. Hansen
Facsimile No.: (208) 343-8869
or such other
address or facsimile number as such Party may hereafter specify for
the purpose by notice to the other party hereto. All such notices,
requests and other communications shall be deemed received on the
date of receipt by the recipient thereof if received prior to 5:00
p.m. in the place of receipt and such day is a Business Day in the
place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the
next succeeding Business Day in the place of receipt.
Section 10 .
Governing Law.
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