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): MARCH 22,1999
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: March 26, 1999
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
99.1 Press Release issued by Paragon Trade Brands, Inc. on March 22,
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 ANNOUNCES SETTLEMENT AGREEMENT
WITH KIMBERLY-CLARK CORPORATION
RESOLUTION OF PATENT LITIGATION ISSUES
PAVES WAY FOR PARAGON'S EMERGENCE FROM BANKRUPTCY
Norcross, GA, March 22, 1999 - Paragon Trade Brands, Inc. (NYSE: PTB) today
announced that it has finalized a settlement agreement with Kimberly-Clark
Corporation and will shortly file a motion with the United States Bankruptcy
Court for the Northern District of Georgia seeking approval of the settlement.
The agreement provides for resolution of all of K-C's claims pending in
Paragon's bankruptcy proceeding, including issues surrounding a patent dispute
that was the subject of litigation in the United States District Court for the
Northern District of Texas. On February 2, 1999, Paragon filed a motion with the
Bankruptcy Court to approve a similar settlement with The Procter & Gamble
Company. A hearing to consider the proposed P&G settlement is scheduled to take
place today.
The agreement with K-C addresses all of K-C's outstanding claims against the
Company. The K-C agreement, coupled with the previously announced P&G agreement,
will serve as the cornerstone for a consensual plan of reorganization for
Paragon. Paragon reiterated that its goal is to emerge from chapter 11 quickly,
positioned to produce the highest quality store brand absorbent products and
poised to achieve its long-range strategic goals.
Under the K-C agreement, Paragon grants K-C a prepetition unsecured claim in the
amount of $110 million and an administrative claim in the amount of $5 million.
K-C had previously filed a proof of claim in Paragon's bankruptcy proceedings
listing claims ranging from
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approximately $893 million to $2.4 billion. 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 K-C 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, K-C is granting licenses to Paragon in the U.S. and
Canada which give Paragon the freedom under enumerated K-C patents to market its
dual cuff diaper and training pant products which enjoy wide consumer
acceptance. In exchange for this right, Paragon has agreed to pay K-C running
royalties on net sales of the licensed products equal to: 2.5% of the first $200
million of net sales of the covered diaper products and 1.5% of such net sales
in excess of $200 million in each calendar year commencing January 1999 through
November 2004. In addition, Paragon has agreed to pay K-C running royalties of
5% of net sales of the covered training pant products for the same period.
The parties have agreed that, once the K-C settlement is approved by an unstayed
order of the Bankruptcy Court, K-C will dismiss with prejudice its complaint in
the Texas Action, as well as its related filings in the Federal District Court
in Georgia. Simultaneously, Paragon will dismiss with prejudice its
counterclaims in the Texas Action.
Paragon further disclosed that the K-C settlement will result in a material net
loss for the fiscal year ending December 27, 1998.
Commenting on the agreement with K-C, Bobby Abraham, Chief Executive Officer of
Paragon, stated, "We are very pleased to be able to put the K-C claims behind us
and turn toward quickly finalizing our plan of reorganization, emerging from
bankruptcy and capitalizing on the opportunities we have for growing Paragon's
business. The K-C license, together with the P&G licenses, will permit Paragon
greater freedom to optimize the performance of our diaper and training pant
products. While the royalties are a significant added cost, we believe Paragon's
store brand competitors will pay similar royalties for equivalent patent rights.
Thanks to our scale and consistent investments in productivity, we believe
Paragon is the most efficient store brand manufacturer. We remain dedicated to
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providing our retail customers with the best quality products at lower prices
than the national brands."
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.
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
