EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of August 31, 1998 between
PAYLESS CASHWAYS, INC., a Delaware corporation (the "Company"), and XXXXXXX X.
XXXXXX, President and Chief Executive Officer (the "Executive").
WHEREAS, the Company desires to employ the Executive in the capacity of
President and Chief Executive Officer, and the Executive desires to be employed
by the Company in such capacity and on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein made, it is hereby agreed:
1. Term of Agreement. The term of this Agreement shall be one year,
commencing August 31, 1998 and ending August 31, 1999, unless sooner terminated
as provided in Paragraph 6 of this Agreement; PROVIDED, however, that the
Agreement shall be automatically renewed for an additional term of one year, at
the end of the initial one-year term and of each succeeding one-year term,
unless either the Company or the Executive shall serve notice on the other at
least ninety (90) days prior to the expiration of the term, in accordance with
the procedures set out in Paragraph 12 of this Agreement, that the party giving
notice intends to end the Agreement at the conclusion of the then-current term.
The Company shall not be required to show Cause, and the Executive shall not be
required to show Good Reason, to require the expiration of the Agreement under
the terms of this Paragraph.
2. Employment and Duties. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment, to perform such duties
and responsibilities of President and Chief Executive Officer as are, from time
to time, assigned to the Executive by the Board of Directors or its designee.
The Executive agrees to devote full business time and effort to the diligent and
faithful performance of the Executive's duties under the direction of such
person as is designated by the Company's Board of Directors.
3. Compensation.
(a) Base Salary. As compensation for the Executive's services, the
Executive shall be paid a base salary at a minimum annual rate of $450,000
payable in equal bi-weekly installments, which salary shall be reviewed annually
and may be adjusted from time to time at the discretion of the Board of
Directors (the "Base Salary"); provided that the Base Salary shall not be less
than the amount stated in this Paragraph 3(a).
(b) Incentive Compensation. The Executive shall, in addition to the
Base Salary, also be eligible to receive incentive compensation under the
Company's Corporate
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Management Incentive Plan dated June 1998 (the "CMIP") or such other management
and executive incentive compensation program or plan for officers of the Company
as from time to time may be in effect, if any (the "Incentive Compensation").
The existence and terms of any such program or plan shall be determined solely
at the discretion of the Compensation Committee of the Board of Directors.
Notwithstanding the foregoing, the Executive's "Annual Incentive Target
Percentage of Base Compensation," as used in the CMIP, shall be sixty percent
(60%) of Base Salary, and neither the Company's percentage of budgeted EBITDA
attained nor the Executive's earned EBITDA award percentage under the CMIP shall
be subject to any cap or limitation. For the period ending December 31, 1998
only, the Executive shall be unconditionally entitled to receive Incentive
Compensation of not less than sixty percent (60%) of his Base Salary, prorated
to reflect Executive's period of 1998 employment beginning June 17, 1998.
(c) Other Benefits. The Executive shall be entitled to participate in
the Company's regular health, life, pension, vacation and disability plans in
accordance with their respective terms. The Company will also provide employee
benefits to the Executive in respect of the Executive's employment as the
Company customarily provides, from time to time, to its officers, as described
in Exhibit A attached to this Agreement. Nothing herein shall be construed to
limit the Company's discretion to amend, terminate or otherwise modify any such
plans or benefits, subject to the Executive's rights under Paragraph 6(c)(iii)
below.
4. Confidentiality, Non-Solicitation, and Non-Disparagement.
(a) Confidentiality of Proprietary Information. The Executive agrees
that, at all times, both during the Executive's employment with the Company and
after the expiration or termination thereof for any reason, the Executive shall
not divulge to any person, firm, corporation, or other entity, or in any way use
for the Executive's own benefit, except as required in the conduct of the
Company's business or as authorized in writing on behalf of the Company, any
trade secrets or confidential information (the "Proprietary Information")
obtained during the course of the Executive's employment with the Company. The
Proprietary Information includes, but is not limited to, customer or client
lists (including the names and/or positions of persons employed by such
customers or clients who play a role in the decisions of such customers or
clients concerning products or services of the type provided by the Company),
financial matters, inventory techniques and programs, Company records of
accounts, business projections, Company contracts, sales, merchandising or
marketing plans and strategies, pricing information and formulas, matters
contained in unpublished records and correspondence, planned expansion programs
(including areas of expansion and potential customer lists) and any and all
information concerning the business or affairs of the Company which is not known
by or generally available to the public. All papers and records of every kind
relating to the Proprietary Information, including any such papers and records
which shall at any time come into the possession of the Executive, shall be the
sole and exclusive property of the Company and shall be surrendered to the
Company upon termination of the Executive's employment for any reason or upon
request by the Company at any time either during or after the termination of
such employment. All information relating to or owned by customers of the
Company of which the Executive becomes
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aware or with which the Executive becomes familiar through the Executive's
employment with the Company shall be kept confidential and not disclosed to
others or used by the Executive directly or indirectly except in the course of
the Company's business. It is agreed that Proprietary Information as herein
described shall be protected from disclosure under the terms of this Agreement,
to the maximum extent permitted by law, whether or not entitled to protection as
a trade secret.
(b) Solicitation Prohibition. During the Executive's employment with
the Company and for a period of one (1) year after the expiration or termination
of this Agreement or of the Executive's employment with the Company for any
reason, the Executive shall not directly or indirectly, whether as an individual
for the Executive's own account, or on behalf of any other person, firm,
corporation, partnership, joint venture or entity whatsoever, solicit or
endeavor to entice away from the Company any employee who is employed by the
Company. Additionally, the Executive shall not, during the Executive's
employment with the Company or for a period of one (1) year after the expiration
or termination of this Agreement or of Executive's employment with the Company
for any reason, directly or indirectly through any other individual or entity,
solicit the business of any customer of the Company, or solicit, entice,
persuade or induce any individual or entity to terminate, reduce or refrain from
forming, renewing or extending its relationship, whether actual or prospective,
with the Company.
(c) Disparagement Prohibition. The Executive acknowledges and agrees
that as a result of his position with the Company, disparaging or critical
statements made by the Executive may be uniquely detrimental to the Company's
interests and well-being. Therefore, the Executive agrees to use his best
efforts to assist the Company in promoting and preserving the good will and
other business interests of the Company. To this end, the Executive agrees to
refrain at all times, both during the Executive's employment and after the
termination thereof for any reason, from making disparaging comments or remarks
about the Company or its officers, employees, or directors.
(d) Definition of "Company". For the purposes of Paragraph 4, the term
"Company" shall mean the Company and any of its direct or indirect parent or
subsidiary organizations.
5. Covenant Not to Compete. During the Executive's employment with the
Company and for a period of one year after the expiration or termination of this
Agreement or of the Executive's employment with the Company (the "Noncompetition
Period"), if such termination is as a result of the expiration of this Agreement
under Paragraph 6(h), a termination for Good Reason by the Executive under
Paragraph 6(c), or a termination by the Company without Cause under Paragraph
6(d), the Executive agrees not to act as an owner or operator, officer or
director, employee, consultant or agent of any other person, firm, corporation,
partnership, joint venture or other entity which is engaged in the business of
building materials retailing in any state in which the Company is so engaged, or
has plans to be so engaged during the Noncompetition Period. The foregoing
provisions shall not prohibit the Executive from investing in any securities of
any
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corporation whose securities, or any of them, are listed on a national
securities exchange or traded in the over-the-counter market if the Executive
shall own less than one percent 1% of the outstanding voting stock of such
corporation. The Executive agrees that a breach of the covenants contained
herein will result in irreparable and continuing damage to the Company for which
there will be no adequate remedy at law, and in the event of any breach of such
agreement, the Company shall be entitled to injunctive and such other and
further relief, including damages, attorneys' fees, and litigation costs, as may
be proper.
6. Termination.
(a) Death or Disability. In the event of the Executive's death or if
the Executive should become unable to perform the essential functions of the
position of President and Chief Executive Officer, with or without reasonable
accommodation by the Company, this Agreement, and the Company's obligation to
make further Base Salary payments under the Agreement, shall terminate, and
Executive shall not be entitled to receive severance benefits. Executive shall
be entitled to receive any Incentive Compensation which the Executive has
earned, if any, prorated to the date of the termination of the Executive's
employment by reason of death or the date of termination, due to disability, of
Executive's performance as President and Chief Executive Officer under this
Agreement. The Executive's rights to other compensation and benefits shall be
determined under the Company's benefit plans and policies applicable to
Executive then in effect.
(b) Termination for Cause by the Company. By following the procedure
set forth in Paragraph 6(e) the Company shall have the right to terminate this
Agreement and the employment of the Executive for "Cause" in the event
Executive:
(i) has committed a significant act of dishonesty, deceit or
breach of fiduciary duty in the performance of the Executive's duties
as an employee of the Company;
(ii) has neglected or failed to perform substantially the
duties of the Executive's employment under this Agreement, including
but not limited to an act of insubordination;
(iii) has acted or failed to act in any other way that
reflects materially and adversely upon the Company, including but not
limited to the Executive's conviction of, guilty plea, or plea of nolo
contendere to (A) any felony, or any misdemeanor involving moral
turpitude, or (B) any crime or offense involving dishonesty with
respect to the Company; or
(iv) has knowingly failed to comply with the covenants
contained in Paragraphs 4 or 5 of this Agreement.
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If the employment of the Executive is terminated by the Company for Cause,
this Agreement and the Company's obligation to make further Base Salary and
Incentive Compensation payments hereunder shall thereupon immediately terminate,
and the Executive shall not be entitled to receive severance benefits. The
Executive's rights to other compensation and benefits shall be determined under
the Company's benefit plans and policies applicable to the Executive then in
effect.
(c) Termination for Good Reason by the Executive. By following the
procedure set forth in Paragraph 6(e), the Executive shall have the right to
terminate this Agreement and the Executive's employment with the Company for
"Good Reason" in the event:
(i) the Executive is not at all times a duly elected
President and Chief Executive Officer of the Company;
(ii) there is any material reduction in the scope of the
Executive's authority and responsibility (provided, however, in the
event of any illness or injury which prevents the Executive from
performing the Executive's duties, Good Reason shall not exist if the
Company reassigns the Executive's duties to one or more other
employees until the Executive is able to perform such duties);
(iii) there is a reduction in the Executive's Base Salary
below the minimum amount specified in Paragraph 3(a) above; a material
reduction in the Incentive Compensation opportunity of the Executive,
if any, under Paragraph 3(b) above; or a material reduction in the
other benefits to which Executive is entitled under Paragraph 3(c)
above, as compared to the benefits available to Executive at the time
of execution of this Agreement.
(iv) the Company requires the Executive's principal place of
employment be relocated fifty (50) miles from its location as of the
date of this Agreement;
(v) the Company otherwise fails to perform its material
obligations under this Agreement.
If the employment of the Executive is terminated by the Executive for Good
Reason, the Executive shall be entitled to the severance benefits set forth in
Paragraph 6(f) below, but the Company's obligation to make further Base Salary
payments and incentive compensation payments shall cease on the effective date
of such termination. The Executive's rights to other compensation and benefits
shall be determined under the Company's benefit plans and policies applicable to
the Executive then in effect.
(d) Termination Without Cause or Without Good Reason. The Company may
terminate this Agreement and the Executive's employment without Cause at any
time, and in such event the Executive shall be entitled to the severance
benefits set forth in Paragraph 6(f) below.
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The Executive may voluntarily terminate this Agreement and the Executive's
employment without Good Reason at any time, but in such event the Executive
shall not be entitled to the severance benefits set forth in Paragraph 6(f)
below. If the Executive voluntarily terminates this Agreement and the
Executive's employment without Good Reason, or if the Company terminates this
Agreement and the Executive's employment without Cause, then the Company's
obligation to make further Base Salary payments and Incentive Compensation
payments shall cease on the effective date of such termination. The Executive's
rights to other compensation and benefits shall be determined under the
Company's benefit plans and policies applicable to the Executive then in effect.
(e) Notice and Right to Cure. The party proposing to terminate this
Agreement and the employment of the Executive for Cause or Good Reason, as the
case may be, under Paragraph 6(b) or 6(c) above shall give written notice to the
other, specifying the reason therefor with particularity. In the case of a
termination pursuant to Paragraphs 6(b)(i), (iii) or (iv), or 6(c)(i), such
termination shall be effective immediately upon delivery of such notice. In the
case of any other proposed termination for Cause or Good Reason, as the case may
be, the notice shall be given with sufficient particularity so that the other
party will have an opportunity to correct any curable situation to the
reasonable satisfaction of the party giving the notice within the period of time
specified in the notice, which shall not be less than thirty (30) days. If such
correction is not so made or the circumstances or situation are not curable, the
party giving such notice may, within thirty (30) days after the expiration of
the time fixed to correct such situation, give written notice to the other party
that the employment is terminated as of the date of that writing. Where the
Agreement and the Executive's employment are terminated by the Executive without
Good Reason or by the Company without Cause, the termination date shall be the
date on which notification of termination shall be mailed in accordance with
Paragraph 12 of this Agreement, unless a different termination date shall be
designated by the party giving notice or agreed upon by the Executive and the
Company.
(f) Severance Benefits. If this Agreement and the Executive's
employment with the Company are terminated by reason of the Executive's death or
disability, or by the Company with Cause or by the Executive without Good Reason
then the Executive shall receive no severance benefits. If this Agreement and
the Executive's employment with the Company are terminated due to the expiration
of the Agreement, by the Company without Cause, or by the Executive for Good
Reason, then the Executive shall be entitled to the following benefits (the
"Severance Benefits"):
(i) Base Salary. The Company shall continue to pay to the
Executive the Executive's Base Salary for a period of one (1) year
after the date the Executive's employment with the Company is
terminated (the "Severance Period"), when and as such Base Salary
would have been paid, and as if the Executive continued to be employed
during such period and regardless of the death or disability of the
Executive after the date of termination.
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(ii) Incentive Compensation. In the event the Compensation
Committee of the Board of Directors determines that Incentive
Compensation is to be paid in the year in which the Executive's
employment and this Agreement are terminated under circumstances in
which this Agreement provides for the payment of Severance Benefits,
then the Executive will receive Incentive Compensation prorated for
the time during which services were rendered in the year of
termination, to the extent provided by the Compensation Committee for
the calculation of Incentive Compensation for that year.
(iii) Continuation of Benefits. During the Severance Period,
the Company shall provide the Executive with medical, dental, vision,
and regular and supplemental life insurance coverage substantially
similar to the coverage which the Executive was receiving or entitled
to receive immediately prior to the date of the termination of the
Executive's employment. In addition, during the Severance Period, the
Company shall pay on behalf of the Executive the cost of one annual
physical examination and the cost of the preparation of the
Executive's federal, state and local tax returns in accordance with
the terms set out in Exhibit A. The Company shall provide such
benefits to the Executive at Company expense, subject to the same
cost-sharing provisions, if any, applicable to the Executive
immediately prior to the date of the termination of employment.
Notwithstanding the foregoing, the Executive shall not be entitled to
receive such benefits to the extent that the Executive obtains other
employment which provides comparable benefits during the Severance
Period.
(iv) Outplacement Benefits. The Company, at its expense,
will provide to the Executive outplacement services, at a maximum cost
of $30,000, to be provided by an outplacement service provider
selected solely by the Company.
(v) Termination of Benefits. Notwithstanding any other
provision of this Agreement, in the event that the Executive at any
time violates the provisions of Paragraph 4(a), 4(b), 4(c), or 5 of
this Agreement, then the Company's obligations, if any, to provide
base salary continuation and other severance benefits as set out in
Paragraph 6(f) of this Agreement shall cease, and such payments and
benefits shall immediately cease.
(g) Change of Control. Subject to the Executive's compliance with the
terms and conditions of this Agreement, if during the term of the Agreement the
Executive's employment is terminated without Cause as a result of a Change of
Control (as defined below) of the Company, and if the Executive is not offered a
comparable position by the Company, then the Severance Period shall be extended
to the second anniversary of the date of the termination of employment, and the
Executive shall be entitled to receive continued payments of Base Salary during
the second year of the Severance Period. All Severance Benefits other than
continued payments of Base
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Salary shall cease on the first anniversary of the termination of employment in
the event of a Change in Control. For purposes of this Paragraph 6(g), a Change
in Control shall mean:
(i) The acquisition by any person, entity or "group," within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act") (excluding, for this purpose, (A) the
Company or its subsidiaries or (B) any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of
voting securities of the Company), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of either the then outstanding shares of common
stock or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of
directors; or
(ii) During any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constituted the
Company's Board of Directors (as of the date hereof the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority
of the directors then comprising the then Incumbent Board (other than
an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (A) a
reorganization, merger, or consolidation of the Company with any other
company other than (I) a reorganization, merger, or consolidation in
which persons who were the stockholders of the company immediately
prior to such reorganization, merger, or consolidation, immediately
thereafter, own more than fifty percent (50%) of the combined voting
power of the reorganized, merged, or consolidated company's then
outstanding voting securities, or (II) a reorganization, merger, or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" acquires more than
thirty percent (30%) of the combined voting power of the Company's
then outstanding securities; or (B) a liquidation or dissolution of
the Company; or (c) the sale of all or substantially all of the assets
of the Company.
(h) Expiration of Term of Agreement. At the expiration of the term of
this Agreement as defined in Paragraph 1 above, if the Agreement has not been
previously terminated under Paragraph 6(a), (b), (c) or (d) of this Agreement,
all duties and obligations of the parties
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under this Agreement, except those set out in Paragraphs 4, 5 and 6(f), when
applicable, shall cease.
(i) Survival of Certain Provisions. Notwithstanding the expiration or
termination of this Agreement, and the Executive's employment with the Company
for any reason under this Agreement, the provisions of Paragraphs 4, 5 and 6(f),
when applicable, to the extent provided therein, survive any such termination
and shall be binding upon the Executive and the Company in accordance with the
provisions of Paragraphs 4, 5 and 6(f).
(j) Participation in Retention Plan. The Executive shall participate
in the Reorganization Retention Plan adopted by the Company as of August 20,
1997, as amended, subject to the terms and conditions of such plan. For purposes
of participation in the Reorganization Retention Plan, Executive shall be
considered a Participant with a separate employment agreement with the Company
and thus shall not be a Severance Participant under the terms of the
Reorganization Retention Plan.
(k) Retention Payments Excluded from Severance. Any retention payments
paid pursuant to the terms of the August 20, 1997 Reorganization Retention Plan
shall be excluded from the calculation of severance payments provided for under
other Paragraphs of this Agreement.
7. Arbitration. The parties hereby agree that any dispute arising under
this Agreement or any claim for breach or violation of any provision of this
Agreement shall be submitted to arbitration, pursuant to the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
("AAA"), to a single arbitrator selected by mutual agreement of the parties or,
if the parties do not mutually agree on the arbitrator, in accordance with the
rules of the AAA. The award determination of the arbitrator shall be final and
binding upon the parties. Either party shall have the right to bring an action
in any court of competent jurisdiction to enforce this Paragraph and to enforce
any arbitrator's award rendered pursuant to this Paragraph. The venue for all
proceedings in arbitration under this provision, and for any judicial
proceedings related to the arbitration, shall be in Kansas City, Missouri.
8. Business Expenses. The Company shall reimburse the Executive for
entertainment and travel expenses related to the Company's business in
accordance with the policies of the Company applicable to the Executive on the
date of this Agreement, subject to the right of the Company to modify its
general policies relating to expense reimbursement for employees.
9. Severability. If any one or more of the provisions of this Agreement
shall be held invalid or unenforceable, the remaining provisions shall remain
valid and enforceable to the maximum extent permitted by law.
10. Entire Agreement. This Agreement contains a statement of all agreements
and understandings between the Executive and the Company on the subject matters
covered by the
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Agreement, and it replaces and supersedes all prior contracts and agreements
between the Executive and the Company concerning such matters. No additions or
modifications to this Agreement will be effective unless made in writing and
signed by the Executive and the Company.
11. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the personal representatives, heirs and assigns of the Executive and
to any successors in interest and assigns of the Company.
12. Notices. All notices required or permitted to be given hereunder shall
be registered or certified mail addressed to the respective parties at their
addresses set forth below:
To the Executive: Xxxxxxx X. Xxxxxx
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
To the Company: Payless Cashways, Inc.
Two Pershing Square
2300 Main, P. 0. Xxx 000000
Xxxxxx Xxxx, XX 00000-0000
Attn: Vice President - Human Resources
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
Two Pershing Square
0000 Xxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
or such other address as a party hereto may notify the other in writing.
13. Applicable Law. This Agreement, or any portion thereof, shall be
interpreted in accordance with the laws of the State of Missouri.
14. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Executive may not assign any of his rights or
delegate any of his duties or obligations under this Agreement without the
Company's express written consent.
15. Non-Waiver Provision. The failure of either party of this Agreement to
insist upon strict adherence to any term of this Agreement, or to object to any
failure to comply with any provision of this Agreement, shall not (a) constitute
or operate as a waiver of that terms or provision, (b) estop that party from
enforcing that term or provision, or (c) preclude that party from enforcing that
term or provision or any other term or provision. The receipt of a party to
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this Agreement of any benefit from this Agreement shall not effect a waiver or
estoppel of the right of that party to enforce any provision of this Agreement.
16. Golden Parachute Savings Provision. If, in the absence of this
provision, any amount received or to be received by the Executive pursuant to
this Agreement would be subject to the "Excise Tax" imposed on "excess parachute
payments" by Section 4999 of the Internal Revenue Code of 1986 or any
corresponding provision of any later Federal tax law, the Company shall, in its
reasonable discretion, reduce the amounts payable to the largest amount that
will result in elimination of any Excise Tax liability.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first written above.
XXXXXXX X. XXXXXX PAYLESS CASHWAYS, INC.
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxxxxx
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