SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): FEBRUARY 2,1999
PARAGON TRADE BRANDS, INC.
(Exact name of registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-11368
(Commission File Number)
91-1554663
(IRS Employer Identification No.)
180 TECHNOLOGY PARKWAY, NORCROSS, GA 30092
(Address of principal executive offices) (Zip Code)
(678) 969-5000
(Registrant's telephone number, including area code)
NONE
(Former name or former address, if changed since last report)
Page 1 of 6
Exhibit Index is at Page 3
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ITEM 5. OTHER EVENTS
See attached Exhibit 99.1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARAGON TRADE BRANDS, INC.
By: /S/ ALAN J. CYRON
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Name: Alan J. Cyron
Title: Chief Financial Officer
Dated: February 5, 1999
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
99.1 Press Release issued by Paragon Trade Brands, Inc. on
February 2, 1999.
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Exhibit 99.1
NEWS
FOR IMMEDIATE RELEASE
CONTACT: Kurt P. Ross
Guy B. Lawrence
K.P. ROSS, INC.
tel: (212) 308-3333
E-mail: [email protected]
PARAGON FINALIZES AGREEMENT WITH PROCTER & GAMBLE
BANKRUPTCY COURT FILING SEEKS APPROVAL OF SETTLEMENT
Norcross, GA, February 2, 1999 - Paragon Trade Brands, Inc. (NYSE: PTB) today
announced that it has finalized its previously announced agreement in principle
with the Procter & Gamble Company and filed a motion with the United States
Bankruptcy Court for the Northern District of Georgia to approve the settlement.
The agreement provides for resolution of all of P&G's claims pending in
Paragon's bankruptcy proceeding, including issues surrounding a patent dispute
that was the subject of litigation in the Delaware District Court, and
constitutes a significant step forward in Paragon's reorganization process.
According to Paragon, the agreement will serve as the cornerstone for the
formulation of a consensual plan of reorganization. Paragon believes the
settlement provides a means for resolving P&G's claims against the Company,
managing litigation risk going forward and emerging from bankruptcy positioned
to produce the highest quality absorbent products and to achieve its long-range
strategic goals.
Under the agreement, Paragon grants P&G a prepetition unsecured claim in the
amount of $158.5 million and an administrative claim in the amount of $5
million. P&G had previously filed a proof of claim in Paragon's bankruptcy
proceedings listing claims totaling approximately $6 billion, including a claim
for damages in the amount of approximately $178.4 million related to a finding
by the Delaware District Court in December 1997 that Paragon's "ultra" diapers
infringed two P&G patents. The parties have agreed that payments of the
agreed-upon amounts pursuant to a plan of reorganization will be in full
settlement of any and all claims P&G and Paragon have asserted against each
other through the date of the settlement agreement. The parties will exchange
mutual general releases to that effect.
As part of the agreement, P&G is granting licenses to Paragon in the U.S. and
Canada which give Paragon the freedom under P&G's patents to market dual cuff
diaper and training pant products which
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enjoy wide consumer acceptance. In exchange for this right, Paragon has
agreed to pay P&G running royalties on net sales of the licensed products equal
to: 2% through October 2005, .75% thereafter through October 2006 and .375%
thereafter through March 2007 in the U.S.; and 2% through October 2008 and 1.25%
thereafter through December 2009 in Canada. The agreement also provides that
P&G will grant Paragon and/or its affiliates "most favored licensee" status
with respect to patents currently owned by P&G or for which an application is
pending as of the date of the settlement agreement. In addition, Paragon has
agreed with P&G that prior to litigating any future patent dispute, the parties
will engage in good faith negotiations and will consider arbitrating the dispute
rather than immediately resorting to legal action.
Once the settlement is approved by a Final Order of the Bankruptcy Court, the
parties have agreed that Paragon will withdraw its appeal of the P&G judgment
and P&G will withdraw its contempt motion in Delaware.
Paragon further reported that it continues to pursue settlement of the claims
asserted by Kimberly-Clark Corporation in Paragon's chapter 11 case and believes
that considerable progress continues to be made.
Commenting on the agreement with P&G, Bobby Abraham, Chief Executive Officer of
Paragon, stated, "With the P&G settlement agreement in place we look forward to
quickly resolving the remaining claims against the Company, finalizing our plan
of reorganization, emerging from bankruptcy and capitalizing on the
opportunities we have for growing Paragon's business. While we continue to
believe that our products do not infringe any valid P&G patent, the P&G licenses
will permit Paragon greater freedom to optimize the performance of its diaper
and training pant products while paying the same royalties it believes will be
paid by Paragon's store brand competitors for similar patent rights. Thanks to
our scale and consistent investments in productivity, this settlement still
allows Paragon to remain the most efficient store brand manufacturer dedicated
to providing retail customers and the ultimate consumer with quality products at
lower prices than the national brands. In addition to the licenses, our
agreement regarding the handling of future patent disputes provides a foundation
for Paragon to grow in the future with less risk of disruptive and costly patent
litigation."
Paragon Trade Brands is the leading manufacturer of store brand infant
disposable diapers in the United States and Canada. Paragon manufactures a line
of premium and economy diapers, training pants, and feminine care and adult
incontinence products, which are distributed throughout the United States and
Canada, primarily through grocery and food stores, mass merchandisers, warehouse
clubs, toy stores and drug stores that market the products under their own store
brand names. Paragon has also established international joint ventures in
Mexico, Argentina, Brazil and China for the sale of infant disposable diapers
and other absorbent personal care products.
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Statements made in this press release, other than those concerning historical
information, should be considered forward-looking statements. Such statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those expressed in the Company's forward-looking
statements. Factors which could affect the Company's financial results,
including, but not limited to: the Company's Chapter 11 filing; increased raw
material prices; new product and packaging introductions by competitors;
increased price and promotion pressure from competitors; new competitors in the
market; Year 2000 compliance issues; and patent litigation, are described in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on the
forward-looking statements contained herein, which speak only as of the date
hereof, and which are made by management pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
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ALAN J. CYRON
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
PARAGON TRADE BRANDS, INC.
180 TECHNOLOGY PARKWAY
NORCROSS, GA 30092
678/969-5200
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