SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
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): JANUARY 13, 2000
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 65
Exhibit Index is at Page 5
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ITEM 5. BANKRUPTCY OR RECEIVERSHIP
On January 6, 1998, Paragon Trade Brands, Inc. (OTC Bulletin Board: PGNFQ), a
Delaware corporation (the "Company"), filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"),
thereby commencing Case No. 98-60390, in the United States Bankruptcy Court for
the Northern District of Georgia (the "Bankruptcy Court"). On or about November
15, 1999, the Company and its Official Committee of Unsecured Creditors (the
"Creditors' Committee") filed a Second Amended Plan of Reorganization (as
subsequently modified through January 13, 2000, the "Plan") and related
Disclosure Statement (as subsequently modified through November 18, 1999, the
"Disclosure Statement") with the Bankruptcy Court. By order dated November 18,
1999, the Bankruptcy Court approved the Disclosure Statement as containing
"adequate information" as such term is defined in Section 1125 of the Bankruptcy
Code. At such time, the Court also approved certain voting procedures and
established Friday, January 7, 2000 as the voting deadline for the Plan and
Thursday, January 13, 2000 as the date for a hearing to consider confirmation of
the Plan. A confirmation hearing was held by the Bankruptcy Court on January 13,
2000. By order dated January 13, 2000, the Bankruptcy Court confirmed the Plan.
A copy of the Plan is attached hereto as Exhibit 99.1 and is incorporated herein
by reference. Capitalized terms used herein and not defined have the meanings
assigned to them in the Plan.
The Plan incorporates certain modifications with respect to the Stock Purchase
Agreement pursuant to which PTB Acquisition Company, LLC, an affiliate of
Wellspring Capital Management LLC (collectively, "Wellspring") has agreed to
acquire substantially all of the New Common Stock of the Company as part of the
plan of reorganization (the "Wellspring Transaction"). The Plan also reflects
the terms of a global settlement reached between the Company, the Creditors'
Committee, the Official Committee of Equity Security Holders, The Procter &
Gamble Company and Kimberly-Clark Corporation with respect to certain
distributions to be made to the Company's creditors and stockholders under the
Plan.
Under the Plan, Paragon will be reorganized either (a) through the consummation
of the Wellspring Transaction and the distribution of the proceeds as outlined
under the Plan, or (b) alternatively, if the Wellspring Transaction is not
consummated, pursuant to a stand-alone plan of reorganization. At the
confirmation hearing, Wellspring informed the Bankruptcy Court that it was
committed to consummating the Wellspring Transaction. The Company expects to
close the Wellspring Transaction and exit Chapter 11 by January 31, 2000.
Under the Wellspring Transaction, Wellspring will purchase up to 98.5% (subject
to reduction with respect to any New Common Stock purchased in accordance with
the Wellspring Rights Offering) of the New Common Stock to be issued and
outstanding on the Effective Date for a purchase price equal to $10.00 per share
of New Common Stock, or approximately $117 million in cash. Holders of allowed
unsecured claims will receive distributions in amounts equal to their pro rata
share of the approximate $117 million of cash, after payment of administrative
and priority claims, and $146 million of 11.25% five-year senior subordinated
notes (the "New Notes") and the right to participate in the Wellspring Rights
Offering of the New Common Stock of Reorganized Paragon. The Company's current
stockholders will receive their pro rata share of 1.5% of the New Common Stock,
certain warrants to purchase up to 5% of the New Common Stock (the "Warrants")
and the right to participate in the Wellspring Rights Offering (to the extent
all such rights are not exercised by holders of allowed unsecured claims).
Pursuant to the Wellspring Rights Offering, up to approximately 214,000 shares
of New Common Stock have been subscribed for by certain of the Company's
stockholders. The Company is in the process of determining which rights
subscriptions have been validly exercised. As a result, this number may change.
If Paragon is reorganized on a stand-alone basis as permitted under the Plan,
holders of allowed unsecured claims will receive distributions in amounts equal
to their pro rata share of 99.13% of the New Common Stock and the Company's
current stockholders will receive their pro rata share of .87% of the New Common
Stock Amount along with Warrants to purchase up to 1.8% of the New Common Stock
of Reorganized Paragon.
2
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Under either the Wellspring Transaction or a stand-alone plan, holders of
allowed unsecured claims and the Company's current stockholders also will
receive a portion of the proceeds, if any, of certain claims which will remain
with the estate to be pursued by a Litigation Claims Representative approved in
accordance with the terms of the Plan.
As of January 14, 2000, the Company had 11,949,694 shares of common stock issued
and outstanding. Under either the Wellspring Transaction or a stand-alone plan,
the total number of shares of stock that Reorganized Paragon shall have
authority to issue shall be 25,000,000, of which 5,000,000 shares shall be
shares of preferred stock and 20,000,000 shall be shares of New Common Stock.
Under the terms of the Plan, as of January 13, 2000, all shares of the Company's
common stock were deemed non-transferable and exist only for purposes of
entitling holders thereof as of such date to receive certain rights and their
pro rata distribution under the Plan. In order to receive such pro rata
distribution, holders of common stock as of January 13, 2000 must surrender
their shares to the Company's Transfer Agent in accordance with the terms of a
New Stock Transmittal Letter to be sent to such holders by the Transfer Agent.
Under the Wellspring Transaction, 11,581,203 shares of New Common Stock shall be
issued to Wellspring (such amount may be adjusted as a result of the Company's
ongoing determination of the actual number of valid subscriptions under the
Wellspring Rights Offering); 178,365 shares of New Common Stock shall be issued
to the Company's current stockholders; and up to an additional approximately
214, 000 shares of New Common Stock shall be issued to certain of the Company's
current stockholders who exercised rights under the Wellspring Rights Offering
(such amount may be adjusted as a result of the Company's ongoing determination
of the actual number of valid subscriptions under the Wellspring Rights
Offering). Under the Wellspring Transaction, the total number of outstanding
shares of New Common Stock will be 11,891,000. Under a stand-alone plan,
13,448,425 shares of New Common Stock shall be issued to the Company's
creditors; and 118,149 shares of New Common Stock shall be issued to the
Company's current stockholders. Under a stand-alone plan, the total number of
outstanding shares of New Common Stock will be 13,566,574.
As of December 26, 1999, the Company has approximately $391.7 million of Total
Assets and $84.1 million of Total Liabilities.
Paragon Trade Brands, Inc. is the leading manufacturer of store brand infant
disposable diapers in the United States and, through its wholly owned
subsidiary, Paragon Trade Brands (Canada) Inc., is the leading marketer of store
brand infant disposable diapers in Canada. Paragon manufactures a line of
premium and economy diapers, training pants, 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 Form 8-K, 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 and product costs; 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.
3
<PAGE>
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
-------------------------------
Name: Alan J. Cyron
Title: Chief Financial Officer
Dated: January 20, 2000
4
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
99.1 Modified Second Amended Plan of Reorganization.
5
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
- ------------------------------------------------x
IN RE) ) Case No. 98-60390
)
PARAGON TRADE BRANDS, INC., ) Chapter 11
)
Debtor. ) Judge Murphy
)
Federal Tax I.D. No. 91-1554663 )
)
- ------------------------------------------------x
MODIFIED SECOND AMENDED PLAN OF REORGANIZATION
ALSTON & BIRD LLP O'MELVENY & MYERS LLP
Attorneys for Debtor and Debtor in Attorneys for the Official
Possession Committee of Unsecured Creditors
1201 West Peachtree Street 153 East 53rd Street
Atlanta, Georgia 30309-3424 New York, New York 10022
(404) 881-7000 (212) 326-2000
and and
WILLKIE FARR & GALLAGHER PARKER HUDSON RAINER & DOBBS LLP
Special Reorganization Counsel for Debtor Attorneys for the Official
and Debtor in Possession Committee of Unsecured Creditors
787 Seventh Avenue Suite 1500
New York, New York 10019-6099 285 Peachtree Center Avenue
(212) 728-8000 Atlanta, Georgia 30303
(404) 523-5300
Dated as of: January 13, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
I. DEFINITIONS..................................................................................................1
1.1. ADMINISTRATIVE CLAIM.............................................................................1
1.2. AFFILIATE........................................................................................1
1.3. ALLOWED CLAIM....................................................................................1
1.4. ALLOWED INTEREST.................................................................................2
1.5. APPLICABLEBAR DATE...............................................................................2
1.6. BALLOT...........................................................................................2
1.7. BANKRUPTCY CODE..................................................................................2
1.8. BANKRUPTCY COURT.................................................................................2
1.9. BANKRUPTCY RULES.................................................................................2
1.10. BOARD OF DIRECTORS...............................................................................2
1.11. BUSINESS DAY.....................................................................................2
1.12. BYLAWS...........................................................................................3
1.13. CASH.............................................................................................3
1.14. CASH EQUIVALENTS.................................................................................3
1.15. CERTIFICATE OF INCORPORATION.....................................................................3
1.16. CHAPTER 11 CASE..................................................................................3
1.17. CLAIM............................................................................................3
1.18. CLAIMS OBJECTION DEADLINE........................................................................3
1.19. CLASS............................................................................................3
1.20. COMMISSION.......................................................................................3
1.21. COMMITTEES.......................................................................................3
1.22. CONFIRMATION.....................................................................................3
1.23. CONFIRMATION DATE................................................................................3
1.24. CONFIRMATION HEARING.............................................................................3
1.25. CONFIRMATION ORDER...............................................................................3
1.26. CONVENIENCE CLAIM................................................................................4
1.27. CREDITORS' COMMITTEE.............................................................................4
1.28. CURE STATEMENT...................................................................................4
1.29. DEBTOR...........................................................................................4
1.30. DEBTOR IN POSSESSION.............................................................................4
1.31. DEBTOR'S PROFESSIONALS...........................................................................4
1.32. DELAWARE ACTION..................................................................................4
1.33. DIP BANK AGENT...................................................................................4
1.34. DIP CLAIM........................................................................................4
1.35. DIP CREDIT AGREEMENT.............................................................................4
1.36. DISALLOWED.......................................................................................4
1.37. DISBURSEMENT ACCOUNT(S)..........................................................................4
1.38. DISCLOSURE STATEMENT.............................................................................5
1.39. DISCLOSURE STATEMENT HEARING.....................................................................5
(i)
<PAGE>
1.40. DISPUTED.........................................................................................5
1.41. DISPUTED CLAIMS RESERVE..........................................................................5
1.42. DISTRIBUTION.....................................................................................5
1.43. DISTRIBUTION DATE................................................................................5
1.44. DISTRIBUTION RECORD DATE.........................................................................5
1.45. EFFECTIVE DATE...................................................................................5
1.46. EQUITY COMMITTEE.................................................................................5
1.47. ESTATE...........................................................................................5
1.48. ESTIMATED........................................................................................5
1.49. ESTIMATED CLAIMS SCHEDULE........................................................................5
1.50. ESTIMATION ORDER.................................................................................5
1.51. EXCHANGE ACT.....................................................................................6
1.52. FEE CLAIM........................................................................................6
1.53. FEE CLAIMS BAR DATE..............................................................................6
1.54. FILED, FILEORFILING..............................................................................6
1.55. FINAL DISTRIBUTION...............................................................................6
1.56. FINAL DISTRIBUTION DATE..........................................................................6
1.57. FINAL ORDER......................................................................................6
1.58. IMPAIRED.........................................................................................6
1.59. INITIAL DISTRIBUTION DATE........................................................................6
1.60. INTEREST.........................................................................................6
1.61. INTEREST HOLDERS' NEW COMMON STOCK AMOUNT........................................................6
1.62. K-C..............................................................................................6
1.63. K-C SETTLEMENT...................................................................................7
1.64. K-C SETTLEMENT AGREEMENT.........................................................................7
1.65. K-C SETTLEMENT ORDER.............................................................................7
1.66. LITIGATION CLAIMS................................................................................7
1.67. LITIGATION TRUSTEE...............................................................................7
1.68. LITIGATION PROCEEDS..............................................................................7
1.69. NEW BOARD........................................................................................7
1.70. NEW COMMON STOCK.................................................................................7
1.71. NEW COMMON STOCK AMOUNT..........................................................................7
1.72. NEW NOTES........................................................................................7
1.73. NEW NOTES AMOUNT.................................................................................8
1.74. NEW CREDIT AGREEMENT.............................................................................8
1.75. NEW ORGANIZATIONAL DOCUMENTS.....................................................................8
1.76. NEW SECURITIES...................................................................................8
1.77. NON-TEEP RETENTION PLAN..........................................................................8
1.78. OLD COMMON STOCK.................................................................................8
1.79. OLD COMMON STOCK INTERESTS.......................................................................8
1.80. OLD STOCK OPTIONS................................................................................8
1.81. OLD STOCK OPTION INTERESTS.......................................................................8
1.82. P&G..............................................................................................8
1.83. P&G SETTLEMENT...................................................................................8
1.84. P&G SETTLEMENT AGREEMENT.........................................................................9
(ii)
<PAGE>
1.85. P&G SETTLEMENT ORDER.............................................................................9
1.86. PERIODIC DISTRIBUTION DATE.......................................................................9
1.87. PERSON...........................................................................................9
1.88. PETITION DATE....................................................................................9
1.89. PLAN.............................................................................................9
1.90. PLAN VOTING DEADLINE.............................................................................9
1.91. POPE & TALBOT....................................................................................9
1.92. PREPETITION......................................................................................9
1.93. PREPETITION BANK CLAIM...........................................................................9
1.94. PREPETITION CLAIMS BAR DATE......................................................................9
1.95. PREPETITION LINE OF CREDIT.......................................................................9
1.96. PREPETITION PARAGON CANADA GUARANTY..............................................................9
1.97. PREPETITION REVOLVING CREDIT AGREEMENT...........................................................9
1.98. PRIORITY NON-TAX CLAIM..........................................................................10
1.99. PRIORITY TAX CLAIM..............................................................................10
1.100. PROFESSIONAL....................................................................................10
1.101. PROFESSIONAL FEE RESERVE........................................................................10
1.102. PROPONENTS......................................................................................10
1.103. PRO RATA SHARE..................................................................................10
1.104. RECORD DATE.....................................................................................10
1.105. REGISTRATION RIGHTS AGREEMENT...................................................................10
1.106. REORGANIZED PARAGON.............................................................................10
1.107. RESTATED BYLAWS.................................................................................11
1.108. RESTATED CERTIFICATE OF INCORPORATION...........................................................11
1.109. RIGHTS..........................................................................................11
1.110. SCHEDULES.......................................................................................11
1.111. SECURED CLAIM...................................................................................11
1.112. SECURITIES ACT..................................................................................11
1.113. TEEP RETENTION PLAN.............................................................................11
1.114. TEXAS ACTION....................................................................................11
1.115. UNCLAIMED PROPERTY..............................................................................11
1.116. UNSECURED CLAIM.................................................................................11
1.117. UNSECURED CLAIMS DISTRIBUTION POOL..............................................................11
1.118. UNSECURED CREDITOR NEW COMMON STOCK AMOUNT......................................................11
1.119. VOTING PROCEDURES...............................................................................12
1.120. VOTING RECORD DATE..............................................................................12
1.121. WARRANTS........................................................................................12
1.122. WELLSPRING......................................................................................12
1.123. WELLSPRING COMMITMENT...........................................................................12
1.124. WELLSPRING CONSIDERATION........................................................................12
1.125. WELLSPRING INVESTMENT AMOUNT....................................................................12
1.126. WELLSPRING NEW NOTES INDENTURE..................................................................12
1.127. WELLSPRING NEW NOTES INDENTURE TRUSTEE..........................................................12
1.128. WELLSPRING NEW NOTES INTEREST RATE..............................................................13
1.129. WELLSPRING RIGHTS OFFERING......................................................................13
(iii)
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1.130. WELLSPRING RIGHTS OFFERING PROCEDURES...........................................................13
1.131. WELLSPRING STOCK PURCHASE AGREEMENT.............................................................13
1.132. WEYERHAEUSER....................................................................................13
II. METHOD OF CLASSIFICATION OF CLAIMS AND INTERESTS AND GENERAL PROVISIONS...................................13
2.1. General Rules of Classification...................................................................13
2.2. Administrative Claims, Fee Claims and Priority Tax Claims.........................................13
2.3. Satisfaction of Claims and Interests..............................................................13
2.4. Bar Date for Fee Claims...........................................................................13
III. IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND NOT
IMPAIRED BY THE PLAN.......................................................................................14
3.1. Unimpaired Classes Conclusively Presumed to Accept the Plan.......................................14
3.2. Classes of Claims and Interests Impaired by the Plan and Entitled to Vote.........................14
3.3. Classes Receiving No Distribution and Deemed to Reject the Plan...................................14
3.4. Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code...................................14
IV. CLASSIFICATION OF CLAIMS AND INTERESTS.....................................................................14
4.1. Classification....................................................................................14
V. PROVISIONS FOR ALLOWANCE, TREATMENT AND PAYMENT OF ADMINISTRATIVE
CLAIMS AND PRIORITY TAX CLAIMS.............................................................................15
5.1. Treatment of Allowed Priority Tax Claims..........................................................15
5.2. Treatment of Allowed Administrative Claims........................................................15
5.3. Treatment of Allowed DIP Claims...................................................................15
5.4. Treatment of FeeClaims............................................................................16
VI. TREATMENT OF CLASSES OF ALLOWED CLAIMS AND ALLOWED INTERESTS...............................................16
6.1. Treatment of Allowed Secured Claims (Class 1).....................................................16
6.2. Treatment of Allowed Priority Non-Tax Claims (Class 2)............................................17
6.3. Treatment of Allowed Unsecured Claims (Class 3A)..................................................17
6.4. Treatment of Allowed Convenience Claims (Class 3B)................................................18
6.5. Treatment of Allowed Old Common Stock Interests (Class 4A)........................................18
6.6. Treatment of Old Stock Option Interests (Class 4B)................................................18
6.7. No Distribution in Excess of Allowed Amount of Claim..............................................18
(iv)
<PAGE>
VII. COMPROMISE AND SETTLEMENT OF CERTAIN CLAIMS; THE WELLSPRING STOCK PURCHASE AGREEMENT.....................18
7.1. Compromise and Settlement of Claims Held by P&G...................................................19
7.2. Compromise and Settlement of Claims Held by K-C...................................................19
7.3. Allowance of the Prepetition Bank Claims..........................................................19
7.4. Allowance and Payment of Postpetition Interest....................................................19
7.5. The Wellspring Stock Purchase Agreement...........................................................19
7.7. Withdrawal of Pending Litigation..................................................................20
VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................................................20
8.1. Assumption or Rejection...........................................................................20
8.2. Cure of Defaults upon Assumption..................................................................21
8.3. Rejection Damage Claims...........................................................................21
8.4. Objections........................................................................................21
8.5. Bar Date for Rejection Damage Claims..............................................................21
8.6. Deemed Consents...................................................................................21
IX. MEANS OF IMPLEMENTATION OF THE PLAN........................................................................21
9.1. Funding and Distribution of Cash..................................................................22
9.2. Working Capital Facility..........................................................................22
9.3. Intentionally omitted.............................................................................22
9.4. Cancellation of Instruments.......................................................................22
9.5. Restated Certificate of Incorporation; Restated Bylaws............................................22
9.6. Issuance of New Common Stock, New Notes and Warrants..............................................22
9.7. Certain Provisions Regarding New Common Stock.....................................................23
9.8. Estimation of Disputed Claims.....................................................................23
9.9. Continuation of Business..........................................................................23
9.10. Provisions for Management........................................................................23
9.11. Consummation of P&G Settlement...................................................................24
9.12. Consummation of K-C Settlement...................................................................24
9.13. Revesting of Property in Reorganized Paragon.....................................................24
9.14. Surrender of Instruments/Cancellation of Stock...................................................24
9.15. Release of Liens and Perfection of Liens.........................................................25
9.16. Registration of Securities.......................................................................26
9.17. Avoidance Actions................................................................................27
9.18. Exemption from Certain Transfer Taxes............................................................27
9.19. Compromise of Controversies......................................................................27
9.20. Continuation of Paragon's 401(k) and Profit Sharing Plan.........................................27
9.21. Investigation, Prosecution and/or Settlement of the Litigation Claims............................27
9.22. Wellspring Rights Offering.......................................................................33
(v)
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X. ADMINISTRATION OF THE PLAN..................................................................................33
10.1. Implementation of Plan...........................................................................33
10.2. Responsibilities of Reorganized Paragon..........................................................33
10.3. Other............................................................................................34
10.4. Powers of Reorganized Paragon as Administrator of the Plan.......................................34
10.5. Exculpation and Limitation of Liability..........................................................34
10.6. Distribution by Reorganized Paragon..............................................................34
10.7. Establishment and Maintenance of Disbursement Accounts...........................................34
XI. DISTRIBUTIONS..............................................................................................35
11.1. Timing of Distributions.........................................................................35
11.2. Manner of Payment...............................................................................35
11.3. Persons Deemed Holders of Registered Securities.................................................35
11.4. Compliance with Tax Requirements................................................................35
11.6. De Minimis Distributions........................................................................35
11.7. Periodic Distributions to Holders of Allowed Unsecured Claims and Allowed Old Common Stock
Interests......................................................................................36
11.8. Initial Distributions to the Holders of Subsequently Allowed Unsecured Claims and Allowed
Interests......................................................................................36
11.9. Subsequent Periodic Distributions to Holders of Previously Allowed Claims and Previously
Allowed Interests..............................................................................36
11.10. Final Distribution..............................................................................36
11.11. Distributions on Disputed Claims................................................................37
11.12. Disbursement of Funds and Delivery of New Securities............................................37
11.13. Fractional Cents................................................................................37
11.14. Fractional Securities...........................................................................37
11.15. Disputed Payments...............................................................................37
11.16. Unclaimed Property..............................................................................38
XII. DISPUTED CLAIMS, DISPUTED INTERESTS, ESTIMATION, RESERVES AND MISCELLANEOUS DISTRIBUTION PROVISIONS.......38
12.1. Objections to Claims; Prosecution of Disputed Claims.............................................38
12.2. Estimated Claims Schedule........................................................................38
12.3. Estimation Order.................................................................................38
12.4. No Recourse to Reorganized Paragon...............................................................38
12.5. Disputed Claims Reserves.........................................................................39
12.6. Fluctuation in Value of New Securities...........................................................39
12.7. Voting of Certain New Common Stock...............................................................39
12.8. Returned Distributions...........................................................................39
12.9. Estimation of Claims.............................................................................40
12.10. Amendments of Claims............................................................................40
(vi)
<PAGE>
XIII. WAIVERS, DISCHARGE, RELEASE, INDEMNIFICATION, ABANDONMENT, AND SETTLEMENT OF CLAIMS......................40
13.1. Discharge of Debtor.............................................................................40
13.2. Complete Satisfaction...........................................................................40
13.3. Release of Debtor...............................................................................41
13.4. Exoneration.....................................................................................41
13.5. Indemnification.................................................................................41
13.6. Release of Committee Members....................................................................42
13.7. Enforceability of Releases......................................................................42
13.8. Additional Releases.............................................................................42
13.9. Injunction......................................................................................42
13.10. Terms of Injunctions or Stays...................................................................42
XIV. CONDITIONS TO CONFIRMATION/EFFECTIVE DATE.................................................................42
14.1. Conditions Precedent to Confirmation.............................................................42
14.2. Conditions Precedent to Effective Date...........................................................43
14.3. Additional Conditions Precedent to Effective Date................................................43
14.4. Waiver of Conditions Precedent to Confirmation and Consummation..................................44
14.5. Mootness.........................................................................................44
XV. MISCELLANEOUS PROVISIONS...................................................................................44
15.1. Administration Pending Effective Date............................................................44
15.2. Carrying Out of Terms............................................................................44
15.3. Withdrawal of the Plan...........................................................................44
15.4. Amendments and Modifications to Plan.............................................................44
15.5. Severability.....................................................................................45
15.6. Confirmation Order...............................................................................45
15.7. Compliance with Securities Laws and Tax Requirements.............................................45
15.8. Interpretation, Rules of Construction, Computation of Time, and Choice of Law....................45
15.9. Binding Effect of the Plan.......................................................................46
15.10. Payment of Statutory Fees.......................................................................46
15.11. Dissolution of Committees.......................................................................46
15.12. Governing Law...................................................................................47
15.13. Method of Notice................................................................................47
15.14. Authorization of Corporate Action...............................................................48
15.15. Continued Confidentiality Obligations...........................................................48
XVI. RETENTION OF JURISDICTION.................................................................................49
16.1. Retention of Jurisdiction........................................................................49
</TABLE>
(vii)
<PAGE>
INTRODUCTION
This Modified Second Amended Plan of Reorganization, dated as
of January 13, 2000, is jointly proposed by Paragon Trade Brands, Inc.
("Paragon" or the "Debtor"), the above-captioned debtor and debtor in
possession, and Paragon's Official Committee of Unsecured Creditors (the
"Creditors' Committee"). Reference is made to the Disclosure Statement (as
defined below), including exhibits thereto, for a discussion of the Debtor's
history, business, results of operations, historical financial information, and
for a summary and analysis of this Plan. No solicitation materials, other than
the Disclosure Statement and related materials transmitted herewith and approved
by the Bankruptcy Court, have been authorized by the Bankruptcy Court for use in
soliciting acceptances or rejections of this Plan.
Under the Plan, Paragon will be reorganized either (a) through
the consummation of a stock purchase agreement (the "Wellspring Stock Purchase
Agreement") with PTB Acquisition Company LLC, a wholly-owned subsidiary of
Wellspring Capital Management LLC ("Wellspring"), and the distribution of the
proceeds thereof to fund certain distributions under the Plan, or (b)
alternatively, on a stand-alone plan of reorganization basis. In the event that
the Wellspring Stock Purchase Agreement is consummated, holders of Allowed
Unsecured Claims will receive distributions in amounts equal to their Pro Rata
Share of Cash, New Notes, and the right to participate in the Wellspring Rights
Offering, and holders of Allowed Old Common Stock Interests will receive their
Pro Rata Share of the Interest Holders' New Common Stock Amount, the right to
participate in the Wellspring Rights Offering (to the extent all such rights are
not exercised by holders of Allowed Unsecured Claims in the Wellspring Rights
Offering), and the Warrants. If the Wellspring Stock Purchase Agreement is not
consummated and Paragon is reorganized on a stand-alone basis hereunder, holders
of Allowed Unsecured Claims will receive distributions in amounts equal to their
Pro Rata Share of the Unsecured Creditor New Common Stock Amount and holders of
Allowed Old Common Stock Interests will receive their Pro Rata Share of the
Interest Holders' New Common Stock Amount and the Warrants. Whether or not the
Wellspring Stock Purchase Agreement is consummated, holders of Allowed Unsecured
Claims and Allowed Old Common Stock Interests also will receive such portion of
the Litigation Proceeds, if any, as is allocable to such Claims and Interests in
accordance with the provisions of this Plan. Section 7.5 of the Plan sets forth
the circumstances in which the different plan alternatives set forth in this
paragraph will be pursued.
I.
DEFINITIONS
In addition to such other terms as are defined in other
Sections of the Plan, the following terms (which appear in the Plan as
capitalized terms) have the following meanings as used in the Plan:
1.1. "ADMINISTRATIVE CLAIM" means any Claim, other than a Fee Claim,
for a cost or expense of administration of the Chapter 11 Case asserted or
arising under sections 503(b) and 507(a)(1) of the Bankruptcy Code, or a Claim
given such status by Final Order of the Bankruptcy Court, and any fees or
charges assessed against the Estate under section 1930, title 28, United States
Code.
1.2. "AFFILIATE" means an affiliate as such term is defined in
section 101(2) of the Bankruptcy Code.
1.3. "ALLOWED CLAIM" or "Allowed [Class ____] Claim" means a Claim
against the Debtor (in the relevant Class, if a Class is specified) to the
extent such Claim is either:
(a) listed by the Debtor in the Schedules in an amount greater
than zero and as not being contingent, unliquidated, disputed or undetermined,
to the extent that it is not objected to on or before the Claims Objection
Deadline and is not otherwise Disallowed;
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(b) a Claim or any portion of such Claim, proof of which has
been timely Filed by any Applicable Bar Date, or deemed timely Filed under
applicable law or by Final Order of the Bankruptcy Court, pursuant to the
Bankruptcy Code, Bankruptcy Rules or applicable law, or Filed late, with
Bankruptcy Court leave pursuant to a Final Order, after notice and a hearing,
and either (i) is not objected to on or before the Claims Objection Deadline and
is not otherwise Disallowed, or (ii) is otherwise allowed by a Final Order;
(c) a Claim or any portion of such Claim that: (i) is allowed:
(A) in any contract, instrument, indenture or other agreement entered into in
connection with the Plan; (B) in a Final Order or, in the case of Claims held by
P&G and K-C, the P&G Settlement Order and the K-C Settlement Order,
respectively; or (C) pursuant to the terms of the Plan; or (ii) is settled prior
to the Effective Date pursuant to any stipulation among the Debtor and the Claim
holder that has been approved by the Bankruptcy Court pursuant to a Final Order;
or
(d) with respect to an Administrative Claim only, (i) was
incurred by the Debtor in the ordinary course of business during the Chapter 11
Case (including under any license agreement with P&G or K-C) to the extent due
and owing without defense, offset, recoupment or counterclaim of any kind, and
(ii) is not otherwise Disputed.
Unless otherwise specified herein or by Final Order of the
Bankruptcy Court, "Allowed Claim" shall not, for purposes of computation of
Distributions under the Plan, include interest or similar charges accrued after
the Petition Date. For purposes of determining the amount of an "Allowed Claim,"
there shall be deducted therefrom an amount equal to the amount of any claim
which the Debtor may hold against the holder thereof, to the extent the Debtor
is entitled to exercise a right of set off pursuant to applicable law.
1.4. "ALLOWED INTEREST" means an Interest (exclusive of any shares of
stock representing such Interest held in treasury) in the Debtor that is
registered as of the Record Date in such stock register as may be maintained by
or on behalf of the Debtor, and to which no objection has been made before any
applicable deadline or which has been allowed by Final Order.
1.5. "APPLICABLE BAR DATE" means, as the case may be, the Prepetition
Claims Bar Date, the Fee Claims Bar Date or such other bar date as may be fixed
by the Plan or any order of the Bankruptcy Court.
1.6. "BALLOT" means the form of ballot distributed, together with the
Disclosure Statement, to holders of Claims and Interests entitled to vote for
the purpose of acceptance or rejection of the Plan.
1.7. "BANKRUPTCY CODE" means title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Case.
1.8. "BANKRUPTCY COURT" means the United States Bankruptcy Court for
the District of Georgia, Atlanta Division, or, to the extent that such court
ceases to exercise jurisdiction over the Chapter 11 Case, such other court or
adjunct thereof that exercises jurisdiction over the Chapter 11 Case.
1.9. "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended, promulgated under section 2075 of title 28 of the United
States Code, as applicable to the Chapter 11 Case.
1.10. "BOARD OF DIRECTORS" means the board of directors of the Debtor
as it exists immediately prior to the Effective Date.
1.11. "BUSINESS DAY" means any day other than a Saturday, Sunday or
"legal holiday" as defined in Bankruptcy Rule 9006(a).
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1.12. "BYLAWS" means the Bylaws of the Debtor, as in effect on the
Petition Date, as amended, through the Effective Date.
1.13. "CASH" means legal tender of the United States of America.
1.14. "CASH EQUIVALENTS" means (a) readily marketable direct
obligations of, or obligations guaranteed by, the United States of America, (b)
commercial paper of domestic corporations carrying a Moody's Rating of "A" or
better, or equivalent rating of any other nationally recognized rating service,
and (c) interest-bearing certificates of deposit or other similar obligations,
having maturities of not more than one (1) year, of domestic banks or other
financial institutions having a shareholders' equity or equivalent capital of
not less than Five Hundred Million Dollars ($500,000,000).
1.15. "CERTIFICATE OF INCORPORATION" means the Certificate of
Incorporation of the Debtor, as in effect on the Petition Date, as amended,
through the Effective Date.
1.16. "CHAPTER 11 CASE" means the case under chapter 11 of the
Bankruptcy Code concerning Paragon which was commenced on the Petition Date and
is being administered in the Bankruptcy Court under case number 98-60390 (Judge
Murphy).
1.17. "CLAIM" means a claim, as such term is defined in section 101(5)
of the Bankruptcy Code, against the Debtor.
1.18. "CLAIMS OBJECTION DEADLINE" means (a) for all Claims other than
Fee Claims, the date that is the later of (i) the Effective Date, (ii) sixty
(60) calendar days after the Filing of a proof of claim for such Claim, and
(iii) such other deadline for objecting to a Claim as may be specifically fixed
by the Plan, the Confirmation Order, the Bankruptcy Rules or an order of the
Bankruptcy Court, which order may be entered on notice only to the Debtor and
counsel to the Committees (and, if the Wellspring Stock Purchase Agreement has
been executed and has not been terminated, Wellspring) and at any time
regardless of whether before or after the date specified in clauses (i) and (ii)
hereof; and (b) for Fee Claims, the date established as such in the Confirmation
Order.
1.19. "CLASS" means any class of Claims or Interests established under
Article IV of the Plan pursuant to section 1122 of the Bankruptcy Code.
1.20. "COMMISSION" means the Securities and Exchange Commission.
1.21. "COMMITTEES" means the official committees appointed in the
Chapter 11 Case pursuant to section 1102(a) of the Bankruptcy Code, consisting
of the Creditors' Committee and the Equity Committee.
1.22. "CONFIRMATION" means the signing of the Confirmation Order by
the Bankruptcy Court confirming the Plan pursuant to section 1129 of the
Bankruptcy Code.
1.23. "CONFIRMATION DATE" means the date on which the Confirmation
Order is entered on the docket maintained by the Clerk of the Bankruptcy Court.
1.24. "CONFIRMATION HEARING" means the hearing held by the Bankruptcy
Court on Confirmation of the Plan, as such hearing may be adjourned or continued
from time to time.
1.25. "CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code. In the
event that the Wellspring Stock Purchase Agreement has been executed and has not
been terminated, the form of the Confirmation Order must be reasonably
satisfactory to Wellspring. The form of
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the Confirmation Order also must be reasonably satisfactory to each of P&G and
K-C, provided each of P&G and K-C, as the case may be, has voted to accept the
Plan.
1.26. "CONVENIENCE CLAIM" means any Allowed Unsecured Claim against
the Debtor in the amount of five thousand dollars ($5,000.00) or less; PROVIDED,
HOWEVER, that if the holder of an Allowed Unsecured Claim in an amount greater
than five thousand dollars ($5,000.00) but not greater than ten thousand dollars
($10,000.00) elects on such holder's Ballot (a) Convenience Claim treatment and
(b) to reduce such Claim to five thousand dollars ($5,000.00) in accordance with
Section 6.4(b) hereof, such Claim shall be treated as a Convenience Claim for
all purposes. No holder of an Allowed Unsecured Claim against the Debtor in
excess of ten thousand dollars ($10,000.00) shall be entitled to elect
Convenience Class treatment with respect to such Allowed Unsecured Claim.
1.27. "CREDITORS' COMMITTEE" means the Official Committee of Unsecured
Creditors appointed in the Chapter 11 Case by the United States Trustee pursuant
to section 1102 of the Bankruptcy Code, on or about January 16, 1998, as
reconstituted from time to time.
1.28. "CURE STATEMENT" shall have the meaning ascribed to such term in
Section 8.1 hereof.
1.29. "DEBTOR" means Paragon Trade Brands, Inc., a Delaware
corporation.
1.30. "DEBTOR IN POSSESSION" means the Debtor as debtor in
possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
1.31. "DEBTOR'S PROFESSIONALS" means any Persons retained by the
Debtor pursuant to section 327 of the Bankruptcy Code.
1.32. "DELAWARE ACTION" means the action commenced on or about January
20, 1994 in the United States District Court for the District of Delaware,
entitled THE PROCTER & GAMBLE COMPANY V. PARAGON TRADE BRANDS, INC., Case No.
94-CV-16 (LON) (D. Del.).
1.33. "DIP BANK AGENT" means The Chase Manhattan Bank as agent for the
syndicate of lending institutions under the DIP Credit Agreement, or any
successor thereto or replacement thereof appointed in accordance with the terms
of the DIP Credit Agreement.
1.34. "DIP CLAIM" means any Claim arising under the DIP Credit
Agreement.
1.35. "DIP CREDIT AGREEMENT" means that certain Debtor in Possession
credit facility approved by the Bankruptcy Court by interim order dated January
21, 1998 and Final Order dated January 30, 1998, as provided under the Revolving
Credit and Guaranty Agreement dated as of January 7, 1998, among the Debtor, as
borrower, certain subsidiaries of the Debtor, as guarantors, and the DIP Bank
Agent, as agent for the lenders thereunder, as amended by the First Amendment,
dated January 30, 1998, the Second Amendment, dated March 23, 1998, the Third
Amendment, dated April 15, 1998, the Fourth Amendment, dated September 28, 1998,
and the Fifth Amendment, dated as of June 14, 1999, and as thereafter amended in
accordance with its terms up to and including the Effective Date, or the
agreements or other documents evidencing any successor or replacement
postpetition financing facility, and all documents related thereto.
1.36. "DISALLOWED" means with reference to any Claim or Interest, such
Claim or Interest or any portion thereof which has been disallowed or deemed
disallowed by Final Order or by operation of the Plan.
1.37. "DISBURSEMENT ACCOUNT(S)" means the account(s) to be established
by the Debtor on the Effective Date in accordance with Section 10.7 of the Plan,
together with any interest earned thereon.
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1.38. "DISCLOSURE STATEMENT" means the disclosure statement, including
all exhibits, appendices and attachments thereto, approved by order of the
Bankruptcy Court in accordance with section 1125 of the Bankruptcy Code, as such
statement may be amended or supplemented from time to time.
1.39. "DISCLOSURE STATEMENT HEARING" means the hearing held by the
Bankruptcy Court to consider approval of the Disclosure Statement, as such
hearing may be adjourned or continued from time to time.
1.40. "DISPUTED" means with respect to a Claim or Interest, any Claim
or Interest that is not yet an Allowed Claim or Interest or a Disallowed Claim
or Interest.
1.41. "DISPUTED CLAIMS RESERVE" means, in respect of any Class of
Claims or Interests, the amount of Cash, New Securities and/or Warrants reserved
in accordance with Section 12.5 hereof for such Class of Claims or Interests.
1.42. "DISTRIBUTION" means the distribution in accordance with the
Plan of: (a) Cash; (b) New Notes; (c) New Common Stock; and/or (d) Warrants, as
the case may be.
1.43. "DISTRIBUTION DATE" means, as the case may be, the Initial
Distribution Date, each Periodic Distribution Date and the Final Distribution
Date.
1.44. "DISTRIBUTION RECORD DATE" means 5:00 p.m. (Atlanta, Georgia
time) on the Confirmation Date or such other date and time as designated in the
Confirmation Order.
1.45. "EFFECTIVE DATE" means the first (1st) Business Day following
satisfaction of the conditions precedent to the Effective Date specified in
Section 14.2 of the Plan, unless otherwise waived as provided in Sections 14.3
and 14.4 of the Plan, or such other date fixed by the Proponents, with the
consent of P&G, K-C and, in the event that the Wellspring Stock Purchase
Agreement has been executed and has not been terminated in accordance with its
terms, Wellspring (such consent in each case not to be unreasonably withheld).
1.46. "EQUITY COMMITTEE" means the Official Committee of Interest
Holders appointed in the Chapter 11 Case by the United States Trustee pursuant
to section 1102 of the Bankruptcy Code, on or about November 2, 1998, as
constituted from time to time.
1.47. "ESTATE" means the Debtor's estate, created pursuant to section
541 of the Bankruptcy Code, in and upon commencement of the Chapter 11 Case.
Pursuant to Sections 9.13 and 9.21 hereof, the Litigation Claims shall remain
vested in and property of the Estate following the Effective Date, and the
Estate shall remain in existence for the purpose of allowing the investigation,
prosecution and/or settlement of the Litigation Claims pursuant to Section 9.21
hereof.
1.48. "ESTIMATED" means with reference to any Claim or Interest, any
Claim or Interest estimated by an Estimation Order.
1.49. "ESTIMATED CLAIMS SCHEDULE" shall have the meaning ascribed to
such term in Section 12.2 hereof.
1.50. "ESTIMATION ORDER" means an order or orders of the Bankruptcy
Court estimating or otherwise determining Disputed Claims and/or Disputed
Interests for Distribution and/or reserve purposes. The "Estimation Order" may
be part of the Confirmation Order if the Confirmation Order grants the same
relief with respect to any Disputed Claim or Disputed Interest that would have
been granted in a separate Estimation Order.
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1.51. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
1.52. "FEE CLAIM" means a Claim for compensation or reimbursement of
expenses pursuant to sections 327, 328, 330, 331, 503(b)(2), 503(b)(3) or
503(b)(4) of the Bankruptcy Code in connection with an application made to the
Bankruptcy Court in the Chapter 11 Case. "Fee Claims" shall not include any
claims for professional fees or expenses of the DIP Bank Agent under the DIP
Credit Agreement.
1.53. "FEE CLAIMS BAR DATE" means the date fixed by the Bankruptcy
Court in the Confirmation Order by which all holders of Fee Claims must have
filed requests for payment of such Fee Claims or be forever barred from
asserting such Claims against the Debtor, the Estate, Reorganized Paragon or its
property.
1.54. "FILED," "FILE" OR "FILING" means, filed, file or filing with
the Clerk of the Bankruptcy Court in the Chapter 11 Case.
1.55. "FINAL DISTRIBUTION" means the last Distribution of the
remaining Cash, New Securities and/or Warrants to holders of Allowed Unsecured
Claims and/or Allowed Interests, as the case may be, in the relevant Class, as
contemplated under the Plan.
1.56. "FINAL DISTRIBUTION DATE" means the date on which a Final
Distribution is made to holders of Allowed Unsecured Claims and/or Allowed
Interests pursuant to the Plan, which date shall, unless otherwise ordered by
the Bankruptcy Court, occur after all Disputed Unsecured Claims and Disputed
Interests in the relevant Class, and all Litigation Claims, have been resolved
by Final Order or otherwise.
1.57. "FINAL ORDER" means an order or judgment of the Bankruptcy Court
that has not been reversed, stayed, modified or amended and as to which the time
to appeal or seek review, rehearing, reargument or certiorari has expired and as
to which no appeal or petition for review, rehearing, reargument, stay or
certiorari is pending, or as to which any right to appeal or to seek certiorari,
review, or rehearing has been waived, or, if an appeal, reargument, petition for
review, certiorari or rehearing has been sought, the order or judgment of the
Bankruptcy Court has been affirmed by the highest court to which the order was
appealed or from which the reargument, review or rehearing was sought, or
certiorari has been denied, and as to which the time to take any further appeal
or seek further reargument, review or rehearing has expired.
1.58. "IMPAIRED" means any Claim or Interest that is impaired within
the meaning of section 1124 of the Bankruptcy Code.
1.59. "INITIAL DISTRIBUTION DATE" means the date for making initial
Distributions under the Plan to holders of Allowed Unsecured Claims or Allowed
Interests in the relevant Class, which date shall be on or as soon as reasonably
practicable after the Effective Date.
1.60. "INTEREST" means any "equity security," as such term is defined
in section 101(16) of the Bankruptcy Code, of the Debtor. Specifically,
"Interests" include Old Common Stock Interests and Old Stock Option Interests.
1.61. "INTEREST HOLDERS' NEW COMMON STOCK AMOUNT" means (i) if the
Wellspring Stock Purchase Agreement is consummated, 178,359 shares of New Common
Stock (I.E., one and one-half percent (1 1/2%) of the New Common Stock Amount),
subject to dilution resulting from those items set forth in Section 1.118(i)(1)
through (4), and (ii) if the Wellspring Stock Purchase Agreement is not
consummated, the Interest Holders' New Common Stock Amount shall mean 118,149
shares of New Common Stock (I.E., .87% of the New Common Stock Amount), subject
to dilution for those items set forth in Section 1.118(i)(1) through (3).
1.62. "K-C" means Kimberly-Clark Corporation, a Delaware corporation.
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1.63. "K-C SETTLEMENT" means the compromise and settlement by and
between the Debtor and K-C pursuant and subject to the terms and conditions of
the K-C Settlement Agreement.
1.64. "K-C SETTLEMENT AGREEMENT" means the settlement agreement dated
March 19, 1999, as amended through the date hereof, by and between the Debtor
and K-C (including all exhibits thereto and any related agreements, including
any licenses provided for therein).
1.65. "K-C SETTLEMENT ORDER" means the order of the Bankruptcy Court,
dated August 6, 1999, authorizing and approving the K-C Settlement Agreement.
1.66. "LITIGATION CLAIMS" means, collectively, any pre-Effective Date
claims of the Debtor against (a) Weyerhaeuser arising from or relating to (i)
that certain Asset Transfer Agreement, dated January 26, 1993, (ii) that certain
related Intellectual Property Agreement, dated February 3, 1993 and/or (iii) any
other agreements with Weyerhaeuser relating to Weyerhaeuser's spin-off of
Paragon in 1993, (b) Pope & Talbot arising from or relating to the Asset
Purchase Agreement, dated February 8, 1996, between Paragon and Pope & Talbot,
and/or any other agreements with Pope & Talbot relating to such Asset Purchase
Agreement, and (c) Oracle Corporation and/or Anderson Consulting LLP arising
from or relating to any agreements between and/or among Paragon and Oracle
Corporation, Paragon and Anderson Consulting LLP, and/or Paragon, Oracle
Corporation and Andersen Consulting LLP in connection with Paragon's purchase
and/or implementation of Oracle's CPG ERP software.
1.67. "LITIGATION CLAIMS REPRESENTATIVE" means any Person designated
as the representative of the Estate to prosecute the Litigation Claims pursuant
to Section 9.21 hereof.
1.68. "LITIGATION PROCEEDS" means the proceeds, if any, recovered by
the Litigation Claims Representative on account of the Litigation Claims, net of
any costs, fees and expenses incurred by the Litigation Claims Representative in
connection with the Litigation Claims; PROVIDED, HOWEVER, that the defined term
"Litigation Proceeds" shall not be deemed to include the first $500,000.00 in
proceeds received on account of the Litigation Claims, which amount or portion
thereof shall be delivered by the Litigation Claims Representative to
Reorganized Paragon as and when received for allocation and Distribution to
holders of Allowed Unsecured Claims in accordance with the Distribution
provisions of the Plan. With regard to any Litigation Claim against Weyerhaeuser
or any other Litigation Claims defendant, the Litigation Proceeds from such
Litigation Claim shall also be net of any asserted indemnification rights or
other similar claims, if any, Weyerhaeuser or any such other defendant recovers
against Paragon arising from or relating to the assertion and/or prosecution of
such Litigation Claim (which shall be reimbursed by the Litigation Claims
Representative to Reorganized Paragon out of any Litigation Proceeds received
unless already netted out of such proceeds).
1.69. "NEW BOARD" means the Board of Directors of Reorganized Paragon
immediately following the Effective Date, as set forth in Section 9.10(a)
hereof.
1.70. "NEW COMMON STOCK" means the shares of common stock of
Reorganized Paragon authorized and/or to be issued pursuant to the terms of
the Plan and having the rights as set forth in the Restated Certificate of
Incorporation.
1.71. "NEW COMMON STOCK AMOUNT" means 11,891,000 shares of New Common
Stock; provided, that, if the Wellspring Stock Purchase Agreement is not
consummated, the New Common Stock Amount shall mean 13,566,574 shares of New
Common Stock.
1.72. "NEW NOTES" means, in the event that the Wellspring Stock
Purchase Agreement is consummated, the notes to be issued on the Effective Date
by Reorganized Paragon pursuant to the Wellspring New Notes Indenture in an
aggregate principal amount equal to the New Notes Amount.
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1.73. "NEW NOTES AMOUNT" means a principal amount equal to $160
million (bearing interest at the non-default rate of eleven and one-quarter
percent (11.25%) per annum), provided that such amount shall be adjusted (upward
or downward, as applicable) as follows: (a) the New Notes Amount shall be
reduced by the amount that the Cash Deficit (as defined in the Wellspring Stock
Purchase Agreement) exceeds $10 million; (b) if the Cash Deficit is less than $4
million, then the New Notes Amount shall be increased by an amount equal to $4
million minus the Cash Deficit; (c) if the Cash Deficit is greater than or equal
to $4 million but less than or equal to $10 million, then the New Notes Amount
shall not be adjusted; and (d) the New Notes Amount shall be increased by the
amount of the Cash Excess (as defined in the Wellspring Commitment), plus $4
million. The Cash Deficit and Cash Excess shall be adjusted upward or downward,
as the case may be, by (1) the amount by which the liabilities listed on
Schedule 5.10 to the Wellspring Stock Purchase Agreement are greater or less on
the Effective Date than the amounts set forth on such schedule, and (2) any
change in Paragon's Net Working Capital (as defined in the Wellspring Stock
Purchase Agreement) from June 27, 1999.
1.74. "NEW CREDIT AGREEMENT" shall have the meaning ascribed to such
term in Section 9.2 hereof.
1.75. "NEW ORGANIZATIONAL DOCUMENTS" means the Restated Certificate of
Incorporation and Restated By-Laws of Reorganized Paragon, the forms of which
shall be (a) Filed by the Proponents at least ten (10) calendar days prior to
the date of the Confirmation Hearing, and (b) reasonably satisfactory to P&G,
K-C and the Equity Committee. In the event that the Wellspring Stock Purchase
Agreement has been executed and has not been terminated, the forms of the New
Organizational Documents must be satisfactory to Wellspring.
1.76. "NEW SECURITIES" means the New Common Stock and, if the
Wellspring Stock Purchase Agreement is consummated, the New Notes. In the event
that the Wellspring Stock Purchase Agreement has been executed and has not been
terminated, the forms of the New Securities must (a) be satisfactory to the
Proponents and Wellspring, (b) be reasonably satisfactory to P&G and K-C, and
(c) contain substantially the same terms as set forth in Appendix 1 to the
Wellspring Stock Purchase Agreement.
1.77. "NON-TEEP RETENTION PLAN" means those certain employee retention
and incentive programs, approved by the Bankruptcy Court by order dated July 2,
1998, or such other similar employee retention and incentive programs in effect
as of the Effective Date of the Plan.
1.78. "OLD COMMON STOCK" means all authorized $.01 par value common
shares of the Debtor issued and outstanding prior to the Effective Date and
non-transferable as of the Distribution Record Date.
1.79. "OLD COMMON STOCK INTERESTS" means Interests based on Old Common
Stock.
1.80. "OLD STOCK OPTIONS" means all unexercised rights of any kind to
acquire any Old Common Stock of, or other Interest in, the Debtor that is not
evidenced by an issued and outstanding share of Old Common Stock or other
instrument evidencing a present ownership interest in the Debtor. "Old Stock
Options" shall include all options, warrants, calls, subscriptions or other
similar rights or other agreements, commitments, or obligations of the Debtor to
issue, transfer, or sell any shares of capital stock, including Old Common Stock
and preferred stock, of the Debtor.
1.81. "OLD STOCK OPTION INTERESTS" means Interests based on Old Stock
Options.
1.82. "P&G" means The Procter & Gamble Company, an Ohio corporation.
1.83. "P&G SETTLEMENT" means the compromise and settlement by and
between the Debtor and P&G pursuant and subject to the terms and conditions of
the P&G Settlement Agreement.
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1.84. "P&G SETTLEMENT AGREEMENT" means the settlement agreement dated
February 2, 1999, as amended through the date hereof, by and between the Debtor
and P&G (including all exhibits thereto and any related agreements, including
any licenses provided for therein).
1.85. "P&G SETTLEMENT ORDER" means the order of the Bankruptcy Court,
dated August 6, 1999, authorizing and approving the P&G Settlement Agreement.
1.86. "PERIODIC DISTRIBUTION DATE" means, with respect to the relevant
Classes: (a) initially, the first Business Day that is four (4) calendar months
after the Initial Distribution Date; (b) subsequently, the first Business Day
that is four (4) calendar months after the immediately preceding scheduled
Periodic Distribution Date; and (c) such other dates as Reorganized Paragon may
determine from time to time in its reasonable discretion.
1.87. "PERSON" means, without limitation, (a) any individual,
corporation, partnership, joint venture, association, joint stock company,
estate, trust, trustee, United States trustee, unincorporated association or
organization, government, governmental unit, agency or any subdivision thereof,
and (b) any other "entity" or "person" as such terms are defined in sections
101(15) and 101(41) of the Bankruptcy Code.
1.88. "PETITION DATE" means January 6, 1998.
1.89. "PLAN" means this Second Amended Plan of Reorganization for the
Debtor, and all exhibits and supplements hereto, as amended or modified by the
Proponents in accordance with the Bankruptcy Code, the Bankruptcy Rules and this
Plan.
1.90. "PLAN VOTING DEADLINE" means the date set by the Bankruptcy
Court by which all Ballots for acceptance or rejection of the Plan must have
been received.
1.91. "POPE & TALBOT"" means, collectively, (a) Pope & Talbot Company,
a Delaware corporation, and (b) Pope & Talbot Wis., Inc., a Delaware
Corporation.
1.92. "PREPETITION" means arising or accruing prior to the Petition
Date.
1.93. "PREPETITION BANK CLAIM" means any Claim against the Debtor
arising under or governed by: (a) the Prepetition Revolving Credit Agreement;
(b) the Prepetition Line of Credit; or (c) the Prepetition Paragon Canada
Guaranty.
1.94. "PREPETITION CLAIMS BAR DATE" means June 5, 1998, the date fixed
by the Bankruptcy Court by Final Order, dated March 24, 1998, as the deadline
for filing proofs of Claim arising or accruing prior to the Petition Date
against the Debtor or the Estate.
1.95. "PREPETITION LINE OF CREDIT" means that certain Prepetition
unsecured short-term line of credit, dated February 6, 1996, as amended, between
Paragon and Wachovia Bank of Georgia, N.A., on an uncommitted basis.
1.96. "PREPETITION PARAGON CANADA GUARANTY" means that certain
Prepetition guaranty by Paragon of a $5 million unsecured line of credit, dated
November 5, 1993, as amended, from The Bank of Nova Scotia which is available to
Paragon Canada, a subsidiary of the Debtor.
1.97. "PREPETITION REVOLVING CREDIT AGREEMENT" means that certain $150
million revolving credit facility dated as of February 16, 1996 and December 28,
1997, as amended, between Paragon and a group of financial institutions,
pursuant to which The Chase Manhattan Bank serves as agent.
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1.98. "PRIORITY NON-TAX CLAIM" means that portion of any Claim that is
entitled to priority in payment under section 507(a) of the Bankruptcy Code,
exclusive of Priority Tax Claims, Administrative Claims and Fee Claims.
1.99. "PRIORITY TAX CLAIM" means that portion of any Claim that is
entitled to priority in payment under section 507(a)(8) of the Bankruptcy Code.
1.100. "PROFESSIONAL" means any Person: (a) employed pursuant to an
order of the Bankruptcy Court in accordance with sections 327, 1102 or 1103 of
the Bankruptcy Code and to be compensated for services rendered and reimbursed
for related expenses incurred prior to the Effective Date, pursuant to sections
327, 328, 329, 330, and/or 331; or (b) for which compensation and reimbursement
has been allowed by the Bankruptcy Court pursuant to sections 503(b)(2) or (4)
of the Bankruptcy Code.
1.101. "PROFESSIONAL FEE RESERVE" means the reserve of Cash or other
security (in form and substance reasonably acceptable to counsel to the
Proponents) to be established by the Debtor or Reorganized Paragon on the
Effective Date in an amount fixed by the Bankruptcy Court on or before the
Confirmation Date (based on estimates Filed by Professionals at least ten (10)
calendar Days prior to the first date scheduled for the commencement of the
Confirmation Hearing) to provide for the payment of Fee Claims allowed by the
Bankruptcy Court.
1.102. "PROPONENTS" means the Debtor and the Creditors' Committee.
1.103. "PRO RATA SHARE" means, as of the date of calculation and with
respect to an Allowed Claim or Allowed Interest in any Class, a proportion equal
to the ratio of:
(a) the Allowed Claim (or Allowed Interest); divided by:
(b) the sum of:
(i) the aggregate of all Allowed Claims (or Allowed
Interests) of that particular Class that are Allowed Claims (or Allowed
Interests) as of such date; plus
(ii) the aggregate of all Estimated Claims (or
Estimated Interests) of that particular Class as set forth in the
relevant Estimation Order (except to the extent that Estimated Claims
or Estimated Interests have been expunged or otherwise Disallowed) that
are not described in clause (i) above, on such date; plus:
(iii) the aggregate of all Disputed Claims (or
Disputed Interests) of that particular Class that are not set forth in
the Estimation Order (except to the extent such Disputed Claims or
Disputed Interests have been expunged or otherwise Disallowed), on that
date.
1.104. "RECORD DATE" means the applicable Voting Record Date or the
Distribution Record Date, as the context requires.
1.105. "REGISTRATION RIGHTS AGREEMENT" shall have the meaning ascribed
to such term in Section 9.16 of the Plan. The Registration Rights Agreement
shall (i) be filed by the Proponents and Wellspring at least three (3) calendar
Days prior to the date of the Confirmation Hearing, and (ii) be satisfactory to
Wellspring in form and substance; PROVIDED, HOWEVER, that no Registration Rights
Agreement will be filed unless, as a result of the Wellspring Rights Offering,
such Registration Rights Agreement is required for a holder of New Common Stock
(other than Wellspring) to transfer its New Common Stock to a third party
without restriction.
1.106. "REORGANIZED PARAGON" means the Debtor from and after the
Effective Date, as reorganized pursuant to the Plan.
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1.107. "RESTATED BYLAWS" means the bylaws of Reorganized Paragon, as
amended and restated in connection with the Plan.
1.108. "RESTATED CERTIFICATE OF INCORPORATION" means the certificate
of incorporation of Reorganized Paragon, as amended and restated in connection
with the Plan.
1.109. "RIGHTS" means the rights to acquire shares of New Common
Stock for a purchase price of $10.00 per share in accordance with Section 9.22
of the Plan.
1.110. "SCHEDULES" means the schedules of assets and liabilities and
the statements of financial affairs for the Debtor as required by section 521 of
the Bankruptcy Code, Filed on or about March 3, 1998, as the same have been or
may hereafter be amended from time to time.
1.111. "SECURED CLAIM" means that portion of a Claim against the
Debtor that is (a) secured by a valid, perfected and enforceable security
interest, lien, mortgage or other encumbrance, that is not subject to avoidance
under applicable bankruptcy or non-bankruptcy law, in or upon any right, title
or interest of the Debtor in and to property of the Estate, to the extent of the
value of the holder's interest in such property as of the Confirmation Date, or
(b) subject to setoff under section 553 of the Bankruptcy Code, to the extent of
the amount subject to setoff, each as determined by sections 506(a) and 1111(b)
of the Bankruptcy Code and Bankruptcy Rule 3012.
1.112. "SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated therewith.
1.113. "TEEP RETENTION PLAN" means that certain top eight executives
incentive plan authorized and approved by Final Order of the Bankruptcy Court
dated August 7, 1998.
1.114. "TEXAS ACTION" means the action commenced on or about October
25, 1995 in the United States District Court for the Northern District of Texas
entitled KIMBERLY-CLARK CORPORATION V. PARAGON TRADE BRANDS, INC., Case No.
3:95-CV-2574 (N.D. Tex.).
1.115. "UNCLAIMED PROPERTY" means any Distribution of Cash, New
Securities and/or Warrants unclaimed on or after the twelfth (12th) month
following the applicable date of Distribution. Unclaimed Property shall include:
(a) Cash, New Notes (if any), shares of New Common Stock, Litigation Proceeds,
Warrants and checks (and the funds represented thereby) mailed to the holder of
any Allowed Claim and/or Allowed Interest and returned as undeliverable without
a proper forwarding address; (b) uncashed checks (and the funds represented
thereby); or (c) Cash, New Notes (if any), shares of New Common Stock,
Litigation Proceeds, Warrants and checks (and the funds represented thereby) not
mailed or delivered to the holder of any Allowed Claim and/or Allowed Interest
because no address was available to which to mail or deliver such property, in
each case after reasonable inquiry by Reorganized Paragon or other party
attempting to make such Distribution.
1.116. "UNSECURED CLAIM" means any Claim other than a Secured Claim,
a Convenience Claim, an Administrative Claim, a Fee Claim, a Priority Non-Tax
Claim, or a Priority Tax Claim.
1.117. "UNSECURED CLAIMS DISTRIBUTION POOL" means the aggregate amount
of (a) that portion of the Litigation Proceeds allocable to holders of Allowed
Unsecured Claims pursuant to the Plan, and (b) the Unsecured Creditor New Common
Stock Amount, to be distributed to holders of Allowed Unsecured Claims pursuant
to the Plan.
1.118. "UNSECURED CREDITOR NEW COMMON STOCK AMOUNT" means (i) if the
Wellspring Stock Purchase Agreement is consummated, such percentage of the New
Common Stock Amount that is acquired by holders of Allowed
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Unsecured Claims participating in the Wellspring Rights Offering pursuant to
Section 9.22 of the Plan, subject to dilution resulting from (1) the
distribution of New Common Stock, options or warrants pursuant to any employee
retention plan adopted by Reorganized Paragon on or after the Effective Date,
(2) the issuance of Warrants to holders of Allowed Interests in accordance with
the terms of this Plan, (3) the issuance of New Common Stock by Reorganized
Paragon, as determined by the New Board, after the Effective Date and subject to
the exercise of preemptive rights in accordance with the Restated Certificate of
Incorporation and Restated Bylaws, and (4) Wellspring's exercise of the Mabesa
Option (as defined and set forth in the Wellspring Commitment), subject to the
exercise of preemptive rights, and (ii) if the Wellspring Stock Purchase
Agreement is not consummated, the Unsecured Creditor New Common Stock Amount
shall 11,712,241 shares of New Common Stock (I.E., 99.13% of the New Common
Stock Amount) minus the amount of New Common Stock to be issued under the TEEP
Retention Plan, subject to dilution for those items set forth in subsections
i(1) through (3) above in this definition.
1.119. "VOTING PROCEDURES" means the voting and balloting rules and
procedures approved by order of the Bankruptcy Court in connection with the
acceptance or rejection of the Plan.
1.120. "VOTING RECORD DATE" means 5:00 p.m. (Atlanta, Georgia time)
on November 1, 1999 or such other date and time as designated in the order
approving the Disclosure Statement.
1.121. "WARRANTS" means warrants to purchase New Common Stock of
Reorganized Paragon. If the Wellspring Stock Purchase Agreement is consummated,
the Warrants shall contain terms substantially similar to the summary of terms
contained on Exhibit "A" annexed hereto or otherwise reasonably satisfactory to
the Proponents, Wellspring and the Equity Committee. If the Wellspring Stock
Purchase Agreement is not consummated, the Warrants shall contain terms
substantially similar to the summary of terms contained on Exhibit "B" annexed
hereto or otherwise reasonably satisfactory to the Proponents, the Equity
Committee, P&G and K-C.
1.122. "WELLSPRING" means Wellspring Capital Management LLC.
1.123. "WELLSPRING COMMITMENT" means that certain commitment letter
dated October 14, 1999, between Paragon and Wellspring, a copy of which is
annexed hereto as Exhibit "C," as superseded by the parties' agreements under
the Wellspring Stock Purchase Agreement.
1.124. "WELLSPRING CONSIDERATION" means the Wellspring Investment
Amount, less the amount of Cash necessary to provide Distributions to holders of
Allowed Convenience Claims pursuant to Section 6.4 of the Plan.
1.125. "WELLSPRING INVESTMENT AMOUNT" means $117,116,500.00 in Cash
consideration less the value of the New Common Stock issued pursuant to the TEEP
Retention Plan at $10.00 per share, subject to reduction as a result of the
Wellspring Rights Offering, to be paid by Wellspring or its designee(s) under
the Wellspring Stock Purchase Agreement.
1.126. "WELLSPRING NEW NOTES INDENTURE" means the indenture, dated as
of the Effective Date, executed by Reorganized Paragon and the Wellspring New
Notes Indenture Trustee, pursuant to which, if the Wellspring Stock Purchase
Agreement is consummated, the New Notes will be issued, the form of which shall
(a) be filed by the Proponents at least ten (10) calendar days prior to the date
of the Confirmation Hearing and be in form and substance reasonably satisfactory
to P&G and K-C, and (b) contain terms substantially similar to the summary of
terms attached as Appendix 1 to the Wellspring Stock Purchase Agreement. The
Wellspring New Notes Indenture must be in a form and substance satisfactory to
the Proponents, Wellspring, P&G and K-C.
1.127. "WELLSPRING NEW NOTES INDENTURE TRUSTEE" means any Person
denominated as the trustee in the Wellspring New Notes Indenture.
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1.128. "WELLSPRING NEW NOTES INTEREST RATE" means eleven and one-
quarter percent (11.25%) per annum.
1.129. "WELLSPRING RIGHTS OFFERING" means the equity rights offering
under Section 9.22 of the Plan pursuant to which (a) the holder of an Allowed
Unsecured Claim may, on or prior to the Plan Voting Deadline, exercise its
rights to receive shares of New Common Stock pursuant to the Wellspring Rights
Offering Procedures (i) in lieu of a portion of the Cash Distribution such
holder otherwise would have been entitled to receive under the Plan, or (ii) by
making a Cash payment, and (b) the holder of an Allowed Old Common Stock
Interest may exercise rights to purchase shares of New Common Stock pursuant to
the Wellspring Rights Offering Procedures.
1.130. "WELLSPRING RIGHTS OFFERING PROCEDURES" means the terms and
procedures of the Wellspring Rights Offering that, if the Wellspring Stock
Purchase Agreement has been executed and has not been terminated, will govern
the terms of the Wellspring Rights Offering and shall be in substantially the
same form as the Wellspring Rights Offering Procedures annexed hereto as Exhibit
"D." The Wellspring Rights Offering Procedures must be reasonably satisfactory
to P&G and K-C.
1.131. "WELLSPRING STOCK PURCHASE AGREEMENT" means that certain stock
purchase agreement between Paragon and Wellspring or its designee(s), pursuant
to which Wellspring or its designee(s), if the Wellspring Stock Purchase
Agreement is consummated, will acquire 98.5% of the New Common Stock Amount less
shares of New Common Stock issued pursuant to the TEEP Retention Plan at $10.00
per share, subject to reduction as a result of the Wellspring Rights Offering.
The Wellspring Stock Purchase Agreement shall be substantially in the form of
the stock purchase agreement annexed hereto as Exhibit E.
1.132. "WEYERHAEUSER" means the Weyerhaeuser Company, a Washington
corporation.
II.
METHOD OF CLASSIFICATION OF CLAIMS AND
INTERESTS AND GENERAL PROVISIONS
2.1. GENERAL RULES OF CLASSIFICATION. Generally, for voting and
Distribution purposes, a Claim or Interest is classified in a particular Class
only to the extent that the Claim or Interest qualifies within the description
of that Class, and is classified in a different Class or Classes to the extent
the Claim or Interest qualifies within the description of such different Class
or Classes. Unless otherwise provided, to the extent a Claim qualifies for
inclusion in a more specifically defined Class and a more generally defined
Class, it shall be included in the more specifically defined Class. A Claim or
Interest is classified in a particular Class only to the extent the Claim or
Interest is an Allowed Claim or Allowed Interest in that Class and has not been
paid, released or otherwise satisfied before the Effective Date.
2.2. ADMINISTRATIVE CLAIMS, FEE CLAIMS AND PRIORITY TAX CLAIMS.
Administrative Claims, Fee Claims and Priority Tax Claims have not been
classified and are excluded from the Classes set forth in Article IV hereof, in
accordance with section 1123(a)(1) of the Bankruptcy Code.
2.3. SATISFACTION OF CLAIMS AND INTERESTS. The treatment to be
provided for Allowed Claims and Allowed Interests pursuant to the Plan shall be
in full satisfaction, settlement, release and discharge of such Allowed Claims
and Allowed Interests.
2.4. BAR DATE FOR FEE CLAIMS. The Confirmation Order shall establish
the Fee Claims Bar Date and the date for filing any objections to any Fee Claim.
Notice of entry of the Confirmation Order shall be served on all Professionals.
Any Person that fails to File an application for payment of a Fee Claim on or
before the time and date established in the Confirmation Order shall be forever
barred from asserting such Fee Claim against any of the Debtor,
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the Estate, Reorganized Paragon or its property and the holder thereof shall be
enjoined from commencing or continuing any action, employment of process or acts
to collect, offset or recover such Fee Claim.
III.
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND NOT IMPAIRED BY THE PLAN
3.1. UNIMPAIRED CLASSES CONCLUSIVELY PRESUMED TO ACCEPT THE PLAN.
Classes 1 (Secured Claims) and 2 (Priority Non-Tax Claims) are not Impaired
under the Plan. Under section 1126(f) of the Bankruptcy Code, the holders of
Claims in such Classes are conclusively presumed to accept the Plan and the
votes of such holders do not need to be and will not be solicited.
3.2. CLASSES OF CLAIMS AND INTERESTS IMPAIRED BY THE PLAN AND ENTITLED
TO VOTE. Classes 3A (Unsecured Claims), 3B (Convenience Claims) and 4A (Old
Common Stock Interests) are Impaired under the Plan and the holders of Claims
and Interests in such Classes are entitled to vote to accept or reject the Plan
in accordance with the Voting Procedures. The Proponents reserve the right to
seek an order of the Bankruptcy Court determining that a particular Class is not
Impaired and therefore is deemed to have accepted the Plan.
3.3. CLASSES RECEIVING NO DISTRIBUTION AND DEEMED TO REJECT THE PLAN.
Old Stock Option Interests in Class 4B (Old Stock Option Interests) will not
receive or retain any property under the Plan. Under section 1126(g) of the
Bankruptcy Code, the holders of such Interests are deemed to reject the Plan and
the votes of such holders will not be solicited.
3.4. CONFIRMATION PURSUANT TO SECTION 1129(B) OF THE BANKRUPTCY CODE.
The Proponents intend to request that the Bankruptcy Court confirm the Plan in
accordance with section 1129(b) of the Bankruptcy Code with respect to Class 4B
because Class 4B is deemed to have rejected the Plan. The Proponents also may
seek confirmation of the Plan under section 1129(b) of the Bankruptcy Code to
the extent any other Class rejects or is deemed to have rejected the Plan.
IV.
CLASSIFICATION OF CLAIMS AND INTERESTS
4.1. CLASSIFICATION. Pursuant to section 1122 of the Bankruptcy Code,
the following is a designation of Classes of Claims and Interests under the
Plan:
"Class 1" shall consist of all Secured Claims. Unless
otherwise ordered by the Bankruptcy Court, each Allowed
Secured Claim in Class 1 shall be considered to be a separate
subclass within Class 1, and each such subclass shall be
deemed to be a separate Class for purposes of the Plan.
"Class 2" shall consist of all Priority Non-Tax Claims.
"Class 3A" shall consist of all Unsecured Claims.
"Class 3B" shall consist of all Convenience Claims.
"Class 4A" shall consist of all Old Common Stock Interests.
"Class 4B" shall consist of all Old Stock Option Interests.
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V.
PROVISIONS FOR ALLOWANCE, TREATMENT AND PAYMENT
OF ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS
5.1. TREATMENT OF ALLOWED PRIORITY TAX CLAIMS.
(a) PAYMENT. Each holder of an Allowed Priority Tax Claim
shall receive, at the option of the Debtor or Reorganized Paragon, as
applicable, either (i) Cash equal to 100% of the unpaid amount of such Allowed
Claim on or as soon as reasonably practicable after the later of (A) the
Effective Date, or (B) the first Business Day after the date that is thirty (30)
calendar days after the date such Priority Tax Claim becomes an Allowed Claim,
or (ii) annual Cash payments commencing on or as soon as reasonably practicable
after the later to occur of the Effective Date and the date on which such
Priority Tax Claim becomes an Allowed Claim, over a period not exceeding six (6)
years after the date of assessment of such Allowed Priority Tax Claim, together
with interest (payable quarterly in arrears) on the unpaid balance of such
Allowed Priority Tax Claim at a per annum rate equal to the federal judgment
statutory rate as of the Effective Date. Allowed Priority Tax Claims may be
prepaid, at any time, without penalty. Any Claim or demand for a penalty
relating to an Allowed Priority Tax Claim shall be Disallowed pursuant to the
Plan, and the holder of an Allowed Priority Tax Claim shall not assess or
attempt to collect such penalty from the Debtor, the Estate, Reorganized Paragon
or its property. Holders of Allowed Priority Tax Claims shall be limited to the
consideration provided under the Plan and shall have no recourse to Reorganized
Paragon for any pre-Confirmation Date Priority Tax Claims against the Debtor.
Notwithstanding the foregoing, the holder of an Allowed Priority Tax Claim may
receive such other, less favorable treatment as may be agreed upon by the
claimant and the Debtor or Reorganized Paragon, as applicable.
(b) RELEASE OF SECURITY INTERESTS. All liens, security
interests and like encumbrances of a holder of an Allowed Priority Tax Claim on
property of the Debtor or the Estate respecting such Claim shall be deemed
released pursuant to Sections 9.13 and 9.15 hereof as of the Effective Date, and
shall not attach to Reorganized Paragon's property.
5.2. TREATMENT OF ALLOWED ADMINISTRATIVE CLAIMS. Unless otherwise
provided for herein, each holder of an Allowed Administrative Claim shall
receive Cash equal to 100% of the unpaid amount of such Allowed Administrative
Claim on or as soon as reasonably practicable after the later of: (a) the
Effective Date; (b) the first Business Day after the date that is thirty (30)
calendar days after the date such Administrative Claim becomes an Allowed Claim;
or (c) such other date established pursuant to the terms of any Final Order of
the Bankruptcy Court, which may include the Confirmation Order. Holders of
Allowed Administrative Claims shall be limited to the consideration provided
under the Plan and shall have no recourse to Reorganized Paragon for any
pre-Confirmation Date Administrative Claims against the Debtor. Notwithstanding
the two immediately preceding sentences, Allowed Administrative Claims for goods
sold or services rendered representing liabilities incurred by the Debtor in the
ordinary course of business during the Chapter 11 Case shall be paid by
Reorganized Paragon in the ordinary course of business in accordance with the
terms and conditions of any agreements, understandings, or trade terms relating
thereto, or pursuant to the terms of a Final Order of the Bankruptcy Court,
which may include the Confirmation Order. Notwithstanding the foregoing, the
holder of an Allowed Administrative Claim may receive such other, less favorable
treatment as may be agreed upon by such holder and the Debtor or Reorganized
Paragon, as applicable.
5.3. TREATMENT OF ALLOWED DIP CLAIMS. On the Effective Date, the DIP
Bank Agent shall be paid 100% of the unpaid non-contingent amounts of the
Allowed DIP Claims and such Claims otherwise shall be treated pursuant to the
terms of the DIP Credit Agreement. Upon payment or satisfaction in full of the
Allowed DIP Claims, the DIP Credit Agreement shall be deemed terminated and the
obligations or rights issued or granted pursuant thereto shall be canceled,
subject in all respects to any carve-out provided in the Bankruptcy Court order
approving the DIP Credit Agreement on a final basis. On or as soon as reasonably
practicable after the Effective Date, all interest, fees, expenses and other
charges
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that have accrued and are required to be paid pursuant to the terms of
the DIP Credit Agreement but have not been paid as of the Effective Date shall
be paid (subject to proration) to the DIP Bank Agent for distribution to those
parties entitled to receive such interest, fees, expenses and other charges
pursuant to the DIP Credit Agreement.
5.4. TREATMENT OF FEE CLAIMS. Each holder of a Fee Claim shall receive
Cash from the Professional Fee Reserve equal to 100% of the unpaid amount of
such Fee Claim in such amounts as are allowed by the Bankruptcy Court (a) on the
later of (i) the Effective Date, and (ii) a date which is no later than five (5)
Business Days after the entry of an order of the Bankruptcy Court allowing such
Fee Claim, or (b) upon such other less favorable terms as may be mutually agreed
upon between such holder of a Fee Claim and the Debtor or Reorganized Paragon,
as applicable. In the event that the aggregate amount of all Fee Claims allowed
by the Bankruptcy Court is less than the Professional Fee Reserve, the excess
shall be allocated and made available for Distribution to holders of Allowed
Unsecured Claims in accordance with the Distribution provisions of the Plan. In
the event that the aggregate amount of all Fee Claims allowed by the Bankruptcy
Court is more than the Professional Fee Reserve, the deficiency shall be
withdrawn from the Class 3A Disputed Claims Reserve for payment to the holders
of Allowed Fee Claims.
VI.
TREATMENT OF CLASSES OF ALLOWED CLAIMS
AND ALLOWED INTERESTS
6.1. TREATMENT OF ALLOWED SECURED CLAIMS (CLASS 1).
(a) PAYMENT. Claims in Class 1 are not Impaired under the
Plan. On or as soon as reasonably practicable after the later of (i) the
Effective Date, or (ii) the first Business Day after the date that is thirty
(30) calendar days after the date such Secured Claim becomes an Allowed Claim,
each holder of an Allowed Secured Claim shall receive, at the election of the
Debtor or Reorganized Paragon, as applicable, one of the following
distributions: (1) Cash equal to 100% of the unpaid amount of such Allowed
Secured Claim; (2) the proceeds of the sale or disposition of the property
securing such Allowed Secured Claim to the extent of the value of such holder's
interest in such property; (3) the surrender to the holder of such Allowed
Secured Claim of the property securing such Claim; (4) such treatment that
leaves unaltered the legal, equitable or contractual rights of the holder of
such Allowed Secured Claim; or (5) such other distribution as shall be necessary
to leave the holder of such Secured Claim Unimpaired and to satisfy the
requirements of chapter 11 of the Bankruptcy Code. The manner and treatment of
each Allowed Secured Claim shall be determined by the Debtor, in its discretion,
on or before the Effective Date, or by Reorganized Paragon, after the Effective
Date, and upon notice to the holder of such Secured Claim. To the extent a Claim
is partially an Allowed Secured Claim based on an offset right and partially an
Allowed Claim of another type, (x) the portion of such Claim that is a Secured
Claim shall be equal to the amount of the allowed, liquidated, nondisputed,
noncontingent claim owing to the Debtor as to which a valid setoff right exists,
and (y) the remainder of such Claim shall be classified in another relevant
Class to the extent of the excess. If a Claim is a fully Secured Claim based on
an offset right, the allowance of such Claim shall not affect any obligations or
liabilities due and payable (at such time) to the Debtor that is in an amount in
excess of the amount offset and the payment, in full and in Cash, of all amounts
due and owing as of the Effective Date to the Debtor and the turnover of any
property of the Debtor held by such claimant on account of any unliquidated,
disputed or contingent right of setoff shall be a precondition to the allowance
of such Secured Claim. Notwithstanding the foregoing, the holder of an Allowed
Secured Claim may receive such other less favorable treatment as may be agreed
to by such holder and the Debtor or Reorganized Paragon, as applicable.
(b) RELEASE OF SECURITY INTERESTS. Unless an Allowed Secured
Claim is treated pursuant to Section 6.1(a)(4) above, all liens, security
interests and like encumbrances of a holder of an Allowed Secured Claim on
property of the Debtor or the Estate respecting such Claim shall be deemed
released pursuant to Sections 9.13 and 9.15 hereof as of the Effective Date, and
shall not attach to Reorganized Paragon's property.
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6.2. TREATMENT OF ALLOWED PRIORITY NON-TAX CLAIMS (CLASS 2). Claims in
Class 2 are not Impaired under the Plan. On or as soon as reasonably practicable
after the later of (a) the Effective Date, and (b) the first Business Day after
the date that is thirty (30) calendar days after the date such Priority Non-Tax
Claim becomes an Allowed Claim, each holder of an Allowed Priority Non-Tax Claim
shall be entitled to receive payment, in Cash, in an amount equal to 100% of the
unpaid amount of its Allowed Priority Non-Tax Claim. Notwithstanding the
foregoing, the holder of an Allowed Priority Non-Tax Claim may receive such
other less favorable treatment as may be agreed to by such holder and the Debtor
or Reorganized Paragon, as applicable.
6.3. TREATMENT OF ALLOWED UNSECURED CLAIMS (CLASS 3A). Claims in
Class 3A are Impaired under the Plan.
(a) TREATMENT IF THE WELLSPRING STOCK PURCHASE AGREEMENT IS
CONSUMMATED. If the Wellspring Stock Purchase Agreement has been consummated,
then, on or as soon as reasonably practicable after the Initial Distribution
Date, each Periodic Distribution Date thereafter and the Final Distribution
Date, each holder of an Allowed Unsecured Claim in Class 3A shall receive on
account of such Allowed Unsecured Claim, in accordance with Article XI hereof,
(i) such holder's Pro Rata Share of (1) the Wellspring Investment Amount (minus
the sum of $1,094,500.00 in Cash plus the amount of Cash used to make
Distributions to Class 3B (Convenience Claims), and subject to dollar for dollar
reduction in accordance with the Wellspring Rights Offering Procedures in the
case of certain holders as a result of such holder's exercise of rights pursuant
to the Wellspring Rights Offering), (2) the New Notes, and (3) that portion of
Litigation Proceeds allocable to holders of Allowed Unsecured Claims under the
Plan, and (ii) any New Common Stock properly subscribed for by such holder under
the Wellspring Rights Offering pursuant to Section 9.22 of the Plan. For
purposes of determining the Litigation Proceeds which are allocable to holders
of Allowed Unsecured Claims: (a) with respect to Litigation Claims against
Weyerhaeuser and Pope & Talbot, 25% of the Litigation Proceeds shall be
allocable to holders of Allowed Unsecured Claims as and when such Litigation
Proceeds are received, with the remainder of the Litigation Proceeds being
available for Distributions to holders of Allowed Old Common Stock Interests;
and (b) with respect to Litigation Claims against Oracle Corporation and/or
Andersen Consulting LLP, 50% of the Litigation Proceeds shall be allocable to
holders of Allowed Unsecured Claims as and when such Litigation Proceeds are
received and 50% of such Litigation Proceeds shall be allocable to holders of
Allowed Old Common Stock Interests. Notwithstanding anything to the contrary
herein, once the holders of Allowed Unsecured Claims receive payment in full
(including postpetition interest to the extent provided under Section 7.4
hereof), any Litigation Proceeds which would otherwise be distributed to the
holders of such Claims shall be distributed pro rata to the holders of Allowed
Old Common Stock Interests pursuant to Section 6.5 hereof.
(b) TREATMENT IF THE WELLSPRING STOCK PURCHASE AGREEMENT IS
NOT CONSUMMATED. If the Wellspring Stock Purchase Agreement is not executed, or
is executed and is terminated or not consummated, then, on or as soon as
reasonably practicable after the Initial Distribution Date, each Periodic
Distribution Date thereafter and the Final Distribution Date, each holder of an
Allowed Unsecured Claim in Class 3A shall receive on account of such Allowed
Unsecured Claim, in accordance with Article XI hereof, such holder's Pro Rata
Share of the Unsecured Claims Distribution Pool then available for Distribution.
For purposes of determining the Litigation Proceeds which are part of the
Unsecured Claims Distribution Pool: (a) with respect to Litigation Claims
against Weyerhaeuser and Pope & Talbot, 25% of the Litigation Proceeds shall be
deposited in the Unsecured Claims Distribution Pool as and when such Litigation
Proceeds are received, with the remainder of the Litigation Proceeds being
available for Distributions to holders of Allowed Old Common Stock Interests;
and (b) with respect to Litigation Claims against Oracle Corporation and/or
Andersen Consulting LLP, 50% of the Litigation Proceeds shall be allocable to
holders of Allowed Unsecured Claims as and when such Litigation Proceeds are
received and 50% of such Litigation Proceeds shall be allocable to holders of
Allowed Old Common Stock Interests. Notwithstanding anything to the contrary
herein, once the holders of Allowed Unsecured Claims receive payment in full
(including postpetition interest to the extent provided under Section 7.4
hereof), any Litigation Proceeds which would otherwise be distributed to the
holders of such Claims or deposited in the Unsecured Claims Distribution Pool
shall be distributed pro rata to the holders of Allowed Old Common Stock
Interests pursuant to Section 6.5 hereof.
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6.4. TREATMENT OF ALLOWED CONVENIENCE CLAIMS (CLASS 3B).
(a) TREATMENT. Claims in Class 3B are Impaired under the Plan.
On or as soon as reasonably practicable after the later of (i) the Effective
Date, and (ii) the first Business Day after the date that is thirty (30)
calendar days after such Convenience Claim becomes an Allowed Claim, each holder
of an Allowed Convenience Claim shall receive Cash equal to fifty percent (50%)
of the unpaid amount of such Allowed Claim.
(b) ELECTION OF TREATMENT. Any holder of an Allowed Unsecured
Claim whose Allowed Unsecured Claim is equal to or less than five thousand
dollars ($5,000.00) shall receive treatment of its Allowed Claim under Section
6.4(a) hereof in full settlement, satisfaction, release and discharge of such
Allowed Claim. Any holder of an Allowed Unsecured Claim whose Allowed Unsecured
Claim is more than five thousand dollars ($5,000.00) but not more than ten
thousand dollars ($10,000.00), and who timely elects to reduce the amount of
such Allowed Claim to five thousand dollars ($5,000.00) in accordance with the
terms of this Section 6.4 (b) also shall receive treatment of its Allowed Claim,
as so reduced, under Section 6.4(a) hereof in full settlement, satisfaction,
release and discharge of such Allowed Claim. No holder of an Allowed Unsecured
Claim in excess of ten thousand dollars ($10,000.00) shall be entitled to elect
treatment under Section 6.4 (a) hereof with respect to such Allowed Unsecured
Claim. Election of treatment in Class 3B must be made on such holder's Ballot
and be received by the Debtor on or prior to the Plan Voting Deadline. Any
election of Convenience Claim treatment made after the Plan Voting Deadline
shall not be binding upon the Debtor or Reorganized Paragon unless the Plan
Voting Deadline is expressly waived, in writing, by the Proponents. The exercise
of such an election shall in no way preclude the Debtor, Reorganized Paragon or
other parties in interest from objecting to the Claim.
6.5. TREATMENT OF ALLOWED OLD COMMON STOCK INTERESTS (CLASS 4A).
Interests in Class 4A are Impaired under the Plan. On or as soon as reasonably
practicable after the Initial Distribution Date, each Periodic Distribution Date
thereafter and the Final Distribution Date, each holder of an Allowed Old Common
Stock Interest shall be entitled to receive, in accordance with Article XI
hereof, (a) such holder's Pro Rata Share of (i) the Interest Holders' New Common
Stock Amount, (ii) the Warrants and (iii) that portion of the Litigation
Proceeds allocable to holders of Allowed Old Common Stock Interests under the
Plan, and (b) any New Common Stock properly subscribed for by any such holder
under the Wellspring Rights Offering pursuant to Section 9.22 of the Plan. For
purposes of determining the Litigation Proceeds which are allocable to holders
of Allowed Old Common Stock Interests: (a) with respect to Litigation Claims
against Weyerhaeuser and Pope & Talbot, 25% of the Litigation Proceeds shall be
deposited in the Unsecured Claims Distribution Pool as and when such Litigation
Proceeds are received, with the remainder of the Litigation Proceeds being
available for Distributions to holders of Allowed Old Common Stock Interests;
and (b) with respect to Litigation Claims against Oracle Corporation and/or
Andersen Consulting LLP, 50% of the Litigation Proceeds shall be allocable to
holders of Allowed Unsecured Claims as and when such Litigation Proceeds are
received and 50% of such Litigation Proceeds shall be allocable to holders of
Allowed Old Common Stock Interests. On the Effective Date, all Old Common Stock
Interests shall be deemed treated as set forth in Section 9.14(b) hereof.
6.6. TREATMENT OF OLD STOCK OPTION INTERESTS (CLASS 4B). Interests in
Class 4B are Impaired under the Plan. All Old Stock Option Interests shall be
deemed canceled and the holders of such Interests shall receive no Distribution
of any kind under the Plan. On the Effective Date, all such Interests shall be
deemed extinguished and the certificates representing such Interests shall be
canceled and of no force and effect.
6.7. NO DISTRIBUTION IN EXCESS OF ALLOWED AMOUNT OF CLAIM.
Notwithstanding anything to the contrary herein, no holder of an Allowed Claim
shall receive in respect of such Claim any Distribution having a value, as of
the Effective Date, in excess of the allowed amount of such Claim.
VII.
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COMPROMISE AND SETTLEMENT OF CERTAIN CLAIMS; THE WELLSPRING STOCK PURCHASE
AGREEMENT
7.1. COMPROMISE AND SETTLEMENT OF CLAIMS HELD BY P&G. The Plan
incorporates the compromise and settlement of certain claims and issues between
the Debtor and P&G that were resolved by the P&G Settlement Agreement. The
negotiations resulting in the P&G Settlement Agreement were conducted in good
faith and at arms' length, and the P&G Settlement Agreement is of benefit to the
Estate and represents a fair, necessary and reasonable compromise of the Claims
held by P&G and related issues. As of the Effective Date, to the extent it has
not already been approved by a Final Order, the P&G Settlement Agreement shall
be deemed approved in all respects as if by a Final Order and the P&G Allowed
Claims (as defined in the P&G Settlement Agreement) shall be treated and allowed
in the amounts and classifications set forth therein. If not already effective
by its terms, the P&G Settlement Agreement shall become effective on the
Effective Date.
7.2. COMPROMISE AND SETTLEMENT OF CLAIMS HELD BY K-C. The Plan
incorporates the compromise and settlement of certain claims and issues between
the Debtor and K-C that were resolved by the K-C Settlement Agreement. The
negotiations resulting in the K-C Settlement Agreement were conducted in good
faith and at arms' length, and the K-C Settlement Agreement is of benefit to the
Estate and represents a fair, necessary and reasonable compromise of the Claims
held by K-C and related issues. As of the Effective Date, to the extent it has
not already been approved by a Final Order, the K-C Settlement Agreement shall
be deemed approved in all respects as if by a Final Order and the K-C Allowed
Claims (as defined in the K-C Settlement Agreement) shall be treated and allowed
in the amounts and classifications set forth therein. If not already effective
by its terms, the K-C Settlement Agreement shall become effective on the
Effective Date.
7.3. ALLOWANCE OF THE PREPETITION BANK CLAIMS. The Prepetition Bank
Claims shall be deemed Allowed Unsecured Claims as of the Petition Date in the
respective principal amounts of (a) $70,563,189 (on account of the Prepetition
Revolving Credit Agreement), and (b) $11,420,417 (on account of the Prepetition
Line of Credit), plus postpetition interest thereon to the extent provided for
pursuant to Section 7.4 hereof, and otherwise shall be disallowed.
7.4. ALLOWANCE AND PAYMENT OF POSTPETITION INTEREST. Holders of
Allowed Unsecured Claims shall be entitled to receive Distributions in
accordance with the Plan until the holders of such Claims receive payment in
full (including simple interest, calculated (a) in the case of the Allowed
Unsecured Claims held by P&G and the Allowed Unsecured Claims held by K-C, at
the per annum rate provided in the P&G Settlement Agreement and the K-C
Settlement Agreement, respectively, on the unpaid principal amount thereof from
April 15, 1999 through the Effective Date, and (b) in the case of all other
Allowed Unsecured Claims, at a per annum rate equal to the federal judgment
statutory rate as of the Effective Date, on the unpaid principal amount thereof
from the Petition Date through the Effective Date).
7.5. THE WELLSPRING STOCK PURCHASE AGREEMENT. Paragon and Wellspring
have agreed to implement the parties' agreements and understandings embodied in
the Wellspring Commitment through the terms of this Plan and the Wellspring
Stock Purchase Agreement. If, however, (a) Paragon and Wellspring are not able
to agree upon the terms of the Wellspring Stock Purchase Agreement and therefore
do not execute such agreement, (b) the Wellspring Stock Purchase Agreement is
executed but terminated by either Paragon or Wellspring pursuant to the terms
thereof, or (c) the Wellspring Stock Purchase Agreement is not consummated for
any reason by February 15, 2000, or such later date agreed to by the Proponents
and Wellspring (with the consent of P&G, K-C, and the Equity Committee, such
consent not to be unreasonably withheld), then Paragon will implement the
provisions of this Plan that do not contemplate or require consummation of the
Wellspring Stock Purchase Agreement, subject to the terms of the Wellspring
Commitment and the Wellspring Stock Purchase Agreement.
7.6. INTENTIONALLY OMITTED.
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7.7. COMPROMISE OF EQUITY COMMITTEE'S OBJECTIONS; WITHDRAWAL OF
PENDING LITIGATION. The Plan incorporates and embodies the compromise and
settlement of the Equity Committee's objections to, and appeals of the
Bankruptcy Court's approval of, (a) the K-C Settlement Agreement, (b) the P&G
Settlement Agreement, and (c) the bidding procedures and protections concerning
the Wellspring Stock Purchase Agreement and related transactions. Within five
(5) Business Days after the Effective Date, the Equity Committee shall (x)
dismiss with prejudice (i) the Equity Committee's appeal of the K-C Settlement
Order (No. 99-13877-B), (ii) the Equity Committee's appeal of the P&G Settlement
Order, and (iii) the Equity Committee's appeals of the Bankruptcy Court's orders
dated July 13, 1999 and August 20, 1999 (Case No. 1-99-CV-2590-JEC), concerning
the establishment of certain bidding procedures and protections in the Chapter
11 Case (collectively, the "Appeals"), and (y) if not already withdrawn,
withdraw with prejudice the Equity Committee's objections to the Debtor's
settlement agreement dated August 9, 1999, with Rhonda Tracy.
VIII.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1. ASSUMPTION OR REJECTION. Any unexpired lease or executory
contract that has not been expressly assumed or rejected by the Debtor with the
Bankruptcy Court's approval on or prior to the Confirmation Date shall, as of
the Confirmation Date but subject to the occurrence of the Effective Date, be
deemed to have been assumed by the Debtor (notwithstanding any provision thereof
limiting or conditioning such assumption) unless (a) there is pending before the
Bankruptcy Court on the Confirmation Date a motion to reject such unexpired
lease or executory contract, (b) such executory contract or unexpired lease is
otherwise designated for rejection on a "Schedule of Executory Contracts and
Unexpired Leases to be Rejected" Filed and served by the Debtor on the
Committees, P&G, K-C, Wellspring and all non-Debtor parties to each of the
executory contracts and unexpired leases listed thereon at least twenty (20)
calendar days before the first date scheduled for the commencement of the
Confirmation Hearing, provided that such executory contract or unexpired lease
is ultimately rejected by operation of the Plan or order of the Bankruptcy
Court, (c) such executory contract or unexpired lease is designated for
rejection by the Debtor or Reorganized Paragon based on the existence of a cure
amount dispute, as described in Section 8.2 hereof, or (d) such executory
contract or unexpired lease is an agreement, obligation, security interest,
transaction or similar undertaking that the Debtor believes is not an executory
contract or unexpired lease and is later determined by the Bankruptcy Court to
be an executory contract or unexpired lease that is subject to assumption or
rejection under section 365 of the Bankruptcy Code. Any party to an executory
contract or unexpired lease to be assumed by the Debtor by operation of the Plan
must assert all amounts that such party believes must be paid or cured by the
Debtor pursuant to section 365 of the Bankruptcy Code in a writing (a "Cure
Statement") Filed and served on the Debtor's counsel on or before 4:45 p.m.
(Atlanta, Georgia time) on January 6, 2000. Failure to File and serve a Cure
Statement strictly in accordance with the foregoing shall, unless the Debtor or
Reorganized Paragon otherwise agrees in writing, result in the waiver and
release of any and all Claims and amounts that otherwise may have been due to
such party upon the Debtor's assumption of the respective executory contract or
unexpired lease in excess of the respective cure amount reflected in the
Debtor's books and records. Any order entered after the Confirmation Date by the
Bankruptcy Court, after notice and hearing, authorizing the rejection of an
executory contract or unexpired lease, even if such rejection takes place after
the Effective Date as provided above, shall cause such rejection to be a
prepetition breach under sections 365(g) and 502(g) of the Bankruptcy Code, as
if such relief were granted and such order were entered prior to the
Confirmation Date. Listing an executory contract or unexpired lease on the
Schedule of Executory Contracts and Unexpired Leases to be Rejected shall not
constitute an admission by the Debtor or Reorganized Paragon that such contract
or lease, including related agreements, is an executory contract or unexpired
lease or that the Debtor or Reorganized Paragon has any liability thereunder.
The Debtor may amend the Schedule of Executory Contracts and Unexpired Leases to
be Rejected to add or delete any contract or lease at any time prior to the
Confirmation Hearing.
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8.2. CURE OF DEFAULTS UPON ASSUMPTION. All payments to cure defaults
("Cure Amounts") that may be required by section 365(b)(1) of the Bankruptcy
Code and Section 8.1 hereof shall be made by the Debtor and treated as Allowed
Administrative Claims pursuant to Section 5.2 hereof. Any disputes with respect
to Cure Amounts shall be resolved by the Bankruptcy Court. In the event of any
such dispute as to a Cure Amount, the Debtor or Reorganized Paragon shall place
in a segregated account the full Cure Amount timely asserted in a Cure Statement
in accordance with Section 8.1 hereof, or such lesser amount approved by the
Bankruptcy Court or agreed to by the Debtor and the asserting party, in order to
provide adequate assurance of prompt cure upon the resolution of any such
dispute. Any executory contract or unexpired lease that is subject to a cure
amount dispute may be added by the Debtor or Reorganized Paragon to the
"Schedule of Executory Contracts and Unexpired Leases to be Rejected" at any
time, including, without limitation, after the resolution by the Court of such
cure amount dispute, regardless of the occurrence of the Confirmation Date or
the Effective Date, based on the existence of such dispute.
8.3. REJECTION DAMAGE CLAIMS. If the rejection of any executory
contract or unexpired lease under the Plan gives rise to a Claim by the other
party or parties to such contract or lease, such Claim, to the extent that it is
timely Filed and is an Allowed Claim, shall be an Allowed Unsecured Claim and
classified in Class 3A; PROVIDED, HOWEVER, that the Unsecured Claim arising from
such rejection shall be forever barred and shall not be enforceable against the
Debtor, the Estate, Reorganized Paragon, its successors or properties, unless a
proof of Claim is timely Filed and served in accordance with Section 8.5 hereof.
8.4. OBJECTIONS. Any party to an executory contract or unexpired lease
objecting to assumption or rejection under this Article VIII must File and serve
upon the Debtor's counsel an objection in writing on or before 4:45 p.m.
(Atlanta, Georgia time) on January 6, 2000. If any party to an executory
contract or unexpired lease that is deemed assumed pursuant to this Article VIII
objects to such assumption, the Bankruptcy Court may conduct a hearing on such
objection at the Confirmation Hearing or such other hearing date as selected by
the Debtor on notice (which notice may be given orally on the record of the
Confirmation Hearing) to the objecting party. In the event of a dispute
regarding the amount of any cure payment or the ability of the Debtor to assume
or assign, including providing adequate assurance of future performance, the
Debtor may determine to reject such contract or lease pursuant to Section 8.2
above, and otherwise will make any payments required by section 365(b)(1) of the
Bankruptcy Code only after the entry of a Final Order resolving such dispute.
8.5. BAR DATE FOR REJECTION DAMAGE CLAIMS. All proofs of Claim with
respect to Claims arising from the rejection of executory contracts or unexpired
leases, to the extent not subject to an earlier date set by order of the
Bankruptcy Court, must be filed with the Bankruptcy Court within thirty (30)
calendar days after the date of service of notice of entry of an order (which
order may be the Confirmation Order) of the Bankruptcy Court approving such
rejection or such Claims shall be forever barred.
8.6. DEEMED CONSENTS. Unless a non-Debtor party to an executory
contract, unexpired lease, license or permit objects to the Debtor's assumption
or retention thereof in writing on or before 4:45 p.m. (Atlanta, Georgia time)
on January 6, 2000, then, unless such executory contract, unexpired lease,
license or permit has been rejected by the Debtor or will be rejected by
operation of the Plan, Reorganized Paragon shall enjoy all of the rights and
benefits under each such executory contract, unexpired lease, license and permit
without the necessity of obtaining such non-Debtor's party's written consent to
Reorganized Paragon's assumption or retention of such rights and benefits.
IX.
MEANS OF IMPLEMENTATION OF THE PLAN
In addition to the provisions set forth elsewhere in the Plan,
the following shall constitute the means of implementation of the Plan.
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9.1. FUNDING AND DISTRIBUTION OF CASH. On or before the Effective
Date, the Debtor shall obtain all Cash necessary to make the Cash payments
required to be made under the Plan. Such Cash may be obtained in any lawful
manner, including, without limitation, from results of operations, sales of
assets, through loans or dividends from Affiliates, from debt or equity
financing to be arranged by the Debtor, or from consummation of the Wellspring
Stock Purchase Agreement.
9.2. WORKING CAPITAL FACILITY. On or before the Effective Date,
the Debtor shall obtain a working capital line of credit for post-Effective Date
operations (the "New Credit Agreement").
9.3. INTENTIONALLY OMITTED.
9.4. CANCELLATION OF INSTRUMENTS. Unless otherwise provided for
herein, on the Effective Date, all notes, shares, instruments or other evidences
of Claims or Interests automatically shall be canceled and deemed null and void
as of the Effective Date and must be surrendered to the Debtor pursuant to
Section 9.14 below.
9.5. RESTATED CERTIFICATE OF INCORPORATION; RESTATED BYLAWS.
(a) IF THE WELLSPRING STOCK PURCHASE AGREEMENT IS CONSUMMATED:
On or prior to the date that is ten (10) calendar days prior to the date of the
Confirmation Hearing, the Debtor shall file its Restated Certificate of
Incorporation and Restated Bylaws, which (i) shall be in form and substance
acceptable to Wellspring, (ii) shall be in form and substance reasonably
satisfactory to the Creditors' Committee, P&G, K-C and the Equity Committee,
(iii) shall preserve customary preemptive rights of all holders of New Common
Stock with respect to future issuances of New Common Stock, and (iv) shall be
deemed adopted such that they become the certificate of incorporation and bylaws
of Reorganized Paragon as of the Effective Date. The Restated Certificate of
Incorporation shall authorize the issuance of not more than 20 million shares of
New Common Stock. Except as provided herein, no additional shares of New Common
Stock may be issued other than as directed by the New Board after the Effective
Date. The Restated Certificate of Incorporation and Restated Bylaws shall, INTER
ALIA, prohibit the issuance of non-voting stock to the extent required under
section 1123(a)(6) of the Bankruptcy Code.
(b) IF THE WELLSPRING STOCK PURCHASE AGREEMENT IS NOT
CONSUMMATED: On or prior to the date that is ten (10) calendar days prior to the
date of the Confirmation Hearing, the Proponents shall file the Restated
Certificate of Incorporation and Restated Bylaws, which shall be in form and
substance reasonably satisfactory to P&G and K-C and shall be deemed adopted
such that they become the certificate of incorporation and bylaws of Reorganized
Paragon as of the Effective Date. The Restated Certificate of Incorporation
shall authorize the issuance of not more than 20 million shares of New Common
Stock. Except as provided herein, no additional shares of New Common Stock may
be issued other than as directed by the New Board after the Effective Date. The
Restated Certificate of Incorporation and Restated Bylaws shall, INTER ALIA,
prohibit the issuance of non-voting stock to the extent required under section
1123(a)(6) of the Bankruptcy Code.
9.6. ISSUANCE OF NEW COMMON STOCK, NEW NOTES AND WARRANTS. On the
Effective Date, Reorganized Paragon shall issue: (a) 13,566,574 shares of New
Common Stock (provided, that 11,891,000 shares of New Common Stock shall be
issued if the Wellspring Stock Purchase Agreement is consummated); (b) if the
Wellspring Stock Purchase Agreement is consummated, a principal amount of New
Notes equal to the New Notes Amount; and (c) the Warrants. Holders of New Common
Stock shall have such rights with respect to dividends, liquidation, voting and
other matters as are set forth in the Restated Certificate of Incorporation.
After the Effective Date, Reorganized Paragon may amend or modify its
certificate of incorporation and bylaws in any manner not inconsistent with
applicable law, the Plan and/or such certificate of incorporation and bylaws.
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9.7. CERTAIN PROVISIONS REGARDING NEW COMMON STOCK. All authorized
and issued shares of New Common Stock not distributed in accordance with the
Plan shall be retained by Reorganized Paragon in its treasury and may be issued
as authorized by the New Board, including, without limitation, to employees
of Reorganized Paragon pursuant to an employee stock option plan.
9.8. ESTIMATION OF DISPUTED CLAIMS. On or before the Effective Date,
the Court shall enter one or more Estimation Orders estimating the dollar amount
of Disputed Claims that may become Allowed Claims, inclusive of contingent
and/or unliquidated Claims and Claims resulting from the rejection, if any, of
executory contracts and unexpired leases in accordance with Article VIII hereof.
This estimate shall be used for purposes of establishing the reserves for, and
calculating, the Initial and Periodic Distributions to holders of Allowed Claims
in Class 3A.
9.9. CONTINUATION OF BUSINESS. After the Effective Date, Paragon
shall continue to exist and engage in business as Reorganized Paragon, with all
the powers of a corporation under applicable law.
9.10. PROVISIONS FOR MANAGEMENT.
(a) DIRECTORS.
(i) DIRECTORS IF THE WELLSPRING STOCK PURCHASE
AGREEMENT IS CONSUMMATED: If the Wellspring Stock Purchase Agreement is
consummated, as of the Effective Date, the members of the New Board of
Reorganized Paragon shall consist of not less than seven (7) and no more than
ten (10) directors designated by Wellspring, (x) at least two (2) but no more
than four (4) of whom shall be independent directors (the selection of whom
shall be made with the consent of the Creditors' Committee, after
consultation with P&G, K-C and the Equity Committee), (y) at least one (1) of
whom shall be a member of Paragon's senior management, and (z) at least three
(3) of whom shall be affiliated with Wellspring.
(ii) DIRECTORS IF THE WELLSPRING STOCK PURCHASE
AGREEMENT IS NOT CONSUMMATED: If the Wellspring Stock Purchase Agreement is not
consummated, as of the Effective Date, the members of the New Board of
Reorganized Paragon shall consist of seven (7) directors, five (5) of whom shall
be independent directors and shall be designated by the Creditors' Committee
and two (2) of whom shall be designated by the Debtor. The members of the New
Board designated pursuant to this Section 9.10(a)(ii) must be reasonably
satisfactory to P&G, K-C and the Equity Committee.
(b) OFFICERS. The officers of the Debtor on the Effective Date
shall continue to serve as officers of Reorganized Paragon, as the case may be,
after the Effective Date and until such time as they may resign, be removed or
be replaced or their employment contracts, if any, may expire. If the Wellspring
Stock Purchase Agreement is consummated, Reorganized Paragon shall adopt a
management equity incentive plan in substantially the form set forth on Appendix
2 to the Wellspring Stock Purchase Agreement.
(c) EMPLOYMENT CONTRACTS. Subject to the following sentence,
all employment contracts entered into by the Debtor following the Petition Date
and not terminated or expired prior to the Effective Date shall remain in effect
and be binding on Reorganized Paragon after the Effective Date. After the
Effective Date, Reorganized Paragon may enter into (i) amendments to any
existing employment contracts, or (ii) new employment contracts, with such of
its officers, agents or employees as may be mutually acceptable to the New Board
and such officers, agents or employees.
(d) TEEP RETENTION PLAN ESCROW. On the Effective Date,
Reorganized Paragon shall pay to the employees eligible to receive such payment
the $2 million Cash component of the Earned Confirmation Bonus (as defined in
the TEEP Retention Plan) under the TEEP Retention Plan. In accordance with the
TEEP Retention Plan, shares of New Common Stock having a value as of the
Effective Date equal to $164,925 shall be issued and held in
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escrow to fund the payment of the Earned Confirmation Bonus exceeding $2
million, which New Common Stock shall be distributed within three (3) Business
Days of the Effective Date, unless the New Board determines, in its sole
discretion and in accordance with the TEEP Retention Plan, that it is fair and
prudent to pay such excess in Cash and elects to pay such excess in Cash, in
which event Cash in the amount of $164,925 shall be paid by Reorganized Paragon
to the employees eligible to receive such payment to fund any such excess. Upon
and after the occurrence of the Effective Date, Reorganized Paragon shall be
authorized and directed to otherwise carry out and implement the terms of the
TEEP Retention Plan in accordance with its terms.
(e) NON-TEEP RETENTION PLAN. From and after the Effective
Date, the Non-TEEP Retention Plan shall continue in accordance with its terms.
9.11. CONSUMMATION OF P&G SETTLEMENT. To the extent not already
implemented as of the Effective Date, Paragon and P&G shall take all steps
necessary to effectuate the P&G Settlement Agreement pursuant to the terms
thereof. As of the Effective Date, to the extent not already binding, valid and
enforceable in accordance with its terms, the P&G Settlement Agreement,
including the licenses and releases contemplated therein, shall be deemed
binding, valid and enforceable.
9.12. CONSUMMATION OF K-C SETTLEMENT. To the extent not already
implemented as of the Effective Date, Paragon and K-C shall take all steps
necessary to effectuate the K-C Settlement Agreement pursuant to the terms
thereof. As of the Effective Date, to the extent not already binding, valid and
enforceable in accordance with its terms, the K-C Settlement Agreement,
including the licenses and releases contemplated therein, shall be deemed
binding, valid and enforceable.
9.13. REVESTING OF PROPERTY IN REORGANIZED PARAGON. Except for the
Litigation Claims which will remain vested in the Estate in accordance with
Section 9.21 hereof or as otherwise expressly provided herein, on the Effective
Date, title to all property and assets of the Estate shall revest in Reorganized
Paragon free and clear of all Claims, liens, encumbrances and/or other interests
of any Person, and Reorganized Paragon may thereafter operate its business and
use, acquire and dispose of property and compromise or settle any Claims arising
on or after the Effective Date without supervision or approval of the Bankruptcy
Court, free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules, or
the Local Bankruptcy Rules of the Bankruptcy Court, other than those
restrictions expressly imposed by the Plan, the Confirmation Order or any
document executed and delivered by Reorganized Paragon pursuant to the Plan.
Without limiting the foregoing, Reorganized Paragon may pay the fees and charges
that it incurs on or after the Effective Date for fees of professionals,
disbursements and expenses or related support services relating to the Chapter
11 Case or otherwise without application to the Bankruptcy Court.
9.14. SURRENDER OF INSTRUMENTS/STOCK.
(a) SURRENDER OF INSTRUMENTS REGARDING CLAIMS: Except as otherwise
provided in the Plan, each holder (except for P&G, K-C and the holders of
Allowed Prepetition Bank Claims of an instrument evidencing or securing a Claim
shall surrender such instrument to the Debtor. No Distribution under the Plan
shall be made to or on behalf of any holder of a Claim unless and until such
instrument is received or the non-availability of such instrument is established
to the reasonable satisfaction of Reorganized Paragon. In accordance with
section 1143 of the Bankruptcy Code, other than with respect to an Allowed
Secured Claim treated pursuant to Section 6.1(a)(4) above, any such holder of
such a Claim that fails to (a) surrender or cause to be surrendered such
instrument, including, without limitation, any promissory note, instrument or
certificate, or, in the case of lost instruments, to execute and deliver an
affidavit of loss and indemnity reasonably satisfactory to Reorganized Paragon
and (b) in the event Reorganized Paragon requests, in the case of lost
instruments, furnish a bond or indemnity agreement in form and substance
reasonably satisfactory to Reorganized Paragon, on or prior to the later to
occur of (i) 180 calendar days from and after the Effective Date and (ii) the
first
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Distribution Date on which a Distribution is to be made to the holder of such
Allowed Claim, shall be deemed to have forfeited all rights and Claims and shall
not participate in any Distribution hereunder.
(b) SURRENDER OF OLD COMMON STOCK, ISSUANCE OF NEW COMMON STOCK AND
DISTRIBUTION OF LITIGATION PROCEEDS TO HOLDERS OF ALLOWED OLD COMMON STOCK
INTERESTS. At the Distribution Record Date, all Allowed Old Common Stock
Interests shall be deemed non-transferable and shall exist only for purposes of
entitling holders thereof to receive Rights under the Plan as well as such
holder's Pro Rata Share of: (i) the Interest Holders' New Common Stock Amount;
(ii) the Warrants; and (iii) that portion of the Litigation Proceeds allocable
to Allowed Old Common Stock Interest under the Plan. At the Distribution Record
Date (x) Chase Mellon as transfer agent with respect to the Old Common Stock and
transfer agent, registrar and exchange agent with respect to the New Common
Stock and the Warrants (the "Transfer Agent") shall cease all transfers of Old
Common Stock Interests, (y) the Depository Trust Company ("DTC") shall close the
stock register maintained by it on the Debtor's behalf and (z) the National
Association of Securities Dealers, Inc. ("NASD") shall discontinue all trading
in the Old Common Stock Interests, whether on the OTC Bulletin Board System or
otherwise. On the first Business Day immediately following the Distribution
Record Date, the Transfer Agent shall issue a transmittal letter (the "New Stock
Transmittal Letter") to all record holders of Allowed Old Common Stock Interests
as of the Distribution Record Date (the "Final Record Holders") notifying them
that they may receive their Pro Rata Share of the Interest Holders' New Common
Stock Amount, the Warrants and that portion of Litigation Proceeds allocable to
holders of Allowed Old Common Stock Interests under the Plan by surrendering
their Old Common Stock to the Transfer Agent. On or as soon as reasonably
practicable after the Effective Date, Reorganized Paragon shall transfer the
Interest Holders' New Common Stock Amount and the Warrants to the Transfer
Agent. The Transfer Agent shall then transfer certificates representing the
number of shares of New Common Stock and Warrants to which Final Record Holders
surrendering their Old Common Stock are entitled (the "Exchange Securities") to
the DTC. The DTC will then electronically transfer the appropriate number of
Exchange Securities to the appropriate Final Record Holders in book-entry form.
Such Final Record Holders shall hold such Exchange Securities for the account of
the beneficial owners of the Old Common Stock Interests from which such Exchange
Securities were converted. Upon each recovery of Litigation Proceeds by the
Litigation Claims Representative, the Litigation Claims Representative shall
remit that portion of the Litigation Proceeds allocable to Allowed Old Common
Stock Interests under the Plan to Reorganized Paragon for distribution to the
Transfer Agent. The Transfer Agent shall then distribute to each Final Record
Holder who timely surrendered Allowed Old Common Stock Interests in response to
the New Stock Transmittal Letter such Final Record Holder's Pro Rata Share of
such Litigation Proceeds Distribution and issue a transmittal letter (each, a
"Litigation Proceeds Transmittal Letter") notifying all Final Record Holders who
failed to surrender their Allowed Old Common Stock Interests in response to the
New Stock Transmittal Letter that they may receive their Pro Rata Share of (a)
the New Common Stock and Warrants (as such "Exchange Securities"), and (b) such
Litigation Proceeds Distribution by surrendering their Allowed Old Common Stock
Interests to the Transfer Agent. Final Record Holders who receive Litigation
Proceeds Distributions shall promptly allocate such Distributions in Cash or
Cash Equivalents among the beneficial owners of the underlying Allowed Old
Common Stock Interests. The Transfer Agent shall maintain lists setting forth
the names, addresses and taxpayer identification numbers of (c) the Final Record
Holders, (d) the Final Record Holders who surrender their Allowed Old Common
Stock Interest in response to the Stock Transmittal Letter, and (e) the Final
Record Holders who surrendered their Allowed Old Common Stock Interests in
response to each Litigation Proceeds Transmittal Letter. Copies of these lists
shall be transmitted by the Transfer Agent to the Equity Committee, Reorganized
Paragon and the Litigation Claims Representative. The Transfer Agent shall have
no obligation to send a Litigation Proceeds Transmittal Letter after one year
after the Effective Date to Final Record Holders who have failed to surrender
their Allowed Common Stock Interests, and any such non-surrendering holders
shall forfeit their rights to receive Distributions pursuant to section 11.16 of
the Plan.
9.15. RELEASE OF LIENS AND PERFECTION OF LIENS.
(a) PROCEDURES FOR RELEASING OF LIENS. Except as otherwise
specifically provided in the Plan, the Confirmation Order, or in any contract,
instrument or other agreement or document created in connection with the Plan:
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(i) each holder of: (1) a Secured Claim (other than an Allowed Secured Claim
treated pursuant to Section 6.1(a)(4) above); (2) a Claim that purportedly is
secured; and/or (3) a judgment, personal property or ad valorem tax, mechanics'
or similar lien Claim, in each case regardless of whether such Claim is an
Allowed Claim, shall, on the Effective Date and regardless of whether such Claim
has been listed in the Schedules or proof of such Claim has been Filed: (y) turn
over and release to the Debtor or Reorganized Paragon, as applicable, any and
all property that secures or purportedly secures such Claim, or such lien and/or
the Claim shall automatically, and without further action by the Debtor, the
Estate or Reorganized Paragon, be deemed released; and (z) execute such
documents and instruments as Reorganized Paragon requires to evidence such Claim
holder's release of such property or lien, and if such holder refuses to execute
appropriate documents or instruments, the Debtor or Reorganized Paragon (as
applicable) may, in its discretion, file a copy of the Confirmation Order, or
any other document required, in appropriate recording offices, which shall serve
to release any Claim holder's rights in such property; and (ii) on the Effective
Date, all right, title and interest in such property shall revert or be
transferred to Reorganized Paragon free and clear of all Claims and Interests,
including, without limitation, liens, escrows, charges, pledges, encumbrances
and/or security interests of any kind.
(b) ENTITLEMENT TO DISTRIBUTIONS PENDING RELEASE. Without
limiting the automatic release provisions of Section 9.15(a) hereof: (i) no
Distribution hereunder shall be made in respect of any Claim of the type
described in Section 9.15(a) hereof unless and until the holder thereof executes
and delivers to the Debtor or Reorganized Paragon (as applicable) such release
of liens or otherwise turns over and releases such Cash, pledge or other
possessory liens; and (ii) any such holder that fails to execute and deliver
such release of liens within 180 calendar days of the Effective Date shall be
deemed to have no Claim against the Debtor, the Estate, or Reorganized Paragon
or its assets or property in respect of such Claim and shall not participate in
any Distribution hereunder.
9.16. REGISTRATION OF SECURITIES. Reorganized Paragon shall make
commercially reasonable efforts to have the New Common Stock listed on a
nationally recognized market or exchange. All New Common Stock, Warrants and
Rights distributed pursuant to the Plan shall be entitled to the benefits and
exceptions provided by Section 1145 of the Bankruptcy Code to the maximum extent
provided by law.
(a) REGISTRATION RIGHTS IN THE EVENT THAT THE WELLSPRING STOCK
PURCHASE AGREEMENT IS CONSUMMATED: In the event that the Wellspring Stock
Purchase Agreement is consummated, the holders of New Common Stock whose resale
of such New Common Stock would be limited or restricted by federal securities
law shall have the right, pursuant to a registration rights agreement, the form
of which will be filed with the Bankruptcy Court (the "Registration Rights
Agreement") at least three (3) calendar days before the date of the Confirmation
Hearing, to cause Reorganized Paragon to (i) include the New Common Stock
issuable to them under the Plan (including any New Common Stock issued or
issuable in respect of the Warrants), on customary terms, in "piggyback"
underwritings and registrations and (ii) effect on customary terms, one demand
registration under the Securities Act for the public offering and sale of the
New Common Stock to them distributed under the Plan; PROVIDED, HOWEVER, that no
Registration Rights Agreement shall be filed unless, as a result of the
Wellspring Rights Offering, such Registration Rights Agreement is required for a
holder of New Common Stock (other than Wellspring) to transfer its New Common
Stock to a third party without restriction. If P&G and K-C participate in the
Wellspring Rights Offering, the Registration Rights Agreement must be reasonably
satisfactory to P&G and K-C.
(b) REGISTRATION RIGHTS IN THE EVENT THAT THE WELLSPRING STOCK
PURCHASE AGREEMENT IS NOT CONSUMMATED: If the Wellspring Stock Purchase
Agreement is not consummated, as soon as reasonably practicable after the
Effective Date, Reorganized Paragon shall file a "shelf" registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration") with
respect to all of the New Common Stock Distributed to the holders of Allowed
Unsecured Claims hereunder (the "Registrable Securities"). Reorganized Paragon
shall, subject to customary provisions for postponement of registration rights
by the issuer, use its reasonable efforts to cause the Shelf Registration to
become effective as soon as possible after the filing thereof and shall use its
reasonable efforts to keep the Shelf Registration continuously effective from
the date such Shelf Registration is effective until the second anniversary of
the
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Effective Date, in order to permit the prospectus forming a part thereof to
be usable by the holders of the Registrable Securities during such period. The
Shelf Registration shall provide for the offering and sale of the Registrable
Securities to or through brokers or dealers, acting as principal or agent, in
transactions (which may involve block transactions) on the nationally recognized
market or exchange on which the New Common Stock is listed, in ordinary
brokerage transactions, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices, or otherwise, or directly or indirectly
through brokers or agents in private sales at negotiated prices or through a
combination of any such methods of sale, including but not limited to a bulk
sale to a brokerage firm, but not pursuant to an underwritten public offering
(whether on a firm commitment or best efforts basis or otherwise).
9.17. AVOIDANCE ACTIONS. Subject to the occurrence of the Effective
Date, neither the Debtor, the Creditors' Committee, the Equity Committee nor any
other party in interest shall assert any right, claim or cause of action (other
than a Litigation Claim) not asserted by the Debtor prior to the Effective Date
and belonging to the Debtor or its Estate against any Person to avoid a transfer
under section 544, 547, 548, or 553(b) of the Bankruptcy Code, PROVIDED,
HOWEVER; that nothing herein shall prohibit the Debtor, the Creditors' Committee
or the Equity Committee from challenging the validity, priority, perfection or
extent of any lien, mortgage or security agreement or, subject to Section 12.1
hereof, objecting to any Claim. All such rights, claims and causes of action
shall be released and waived by the Debtor and its Estate under the Plan on the
Effective Date. Notwithstanding anything to the contrary contained herein,
nothing contained in this Plan shall prejudice any rights or defenses the Debtor
may have under section 502(d) of the Bankruptcy Code.
9.18. EXEMPTION FROM CERTAIN TRANSFER TAXES. Pursuant to section
1146(c) of the Bankruptcy Code (a) the issuance, transfer or exchange of any
securities, instruments or documents and (b) the creation of any other lien,
mortgage, deed of trust or other security interest under the Plan shall not be
subject to any stamp tax, transfer tax, intangible tax, recording fee, or
similar tax, charge or expense to the fullest extent provided for under section
1146(c) of the Bankruptcy Code.
9.19. COMPROMISE OF CONTROVERSIES. Pursuant to Bankruptcy Rule 9019,
and in consideration for the classification, distribution and other benefits
provided under the Plan, the provisions of the Plan shall constitute a good
faith compromise and settlement of all Claims, Interests and controversies
resolved pursuant to the Plan, including the claims and controversies settled
and resolved pursuant to the K-C Settlement Agreement and the P&G Settlement
Agreement and the compromise of the claims of PMI under Section 7.6 of the Plan.
To the extent not previously accomplished by the K-C Settlement Order or the P&G
Settlement Order, the entry of the Confirmation Order shall constitute the
Bankruptcy Court's approval of each of the foregoing compromises and
settlements, and all other compromises and settlements provided for in the Plan,
and such order shall constitute the Bankruptcy Court's determination that such
compromises and settlements are in the best interests of the Debtor, Reorganized
Paragon, the Estate, and any Person holding Claims and/or Interests against the
Debtor, and are fair, equitable and within the range of reasonableness required
by the Bankruptcy Code and/or Bankruptcy Rules.
9.20. CONTINUATION OF PARAGON'S 401(K) AND PROFIT SHARING PLAN. The
Debtor's existing 401(k) and profit sharing plan entitled the "Paragon
Retirement Investment Savings Management (PRISM) Plan" shall continue after the
Effective Date as the 401(k) and profit sharing plan of Reorganized Paragon,
unaffected by the Plan or the provisions hereof (except to the extent that Old
Common Stock Interests are being extinguished and canceled pursuant to Section
6.5 hereof).
9.21. INVESTIGATION, PROSECUTION AND/OR SETTLEMENT OF THE LITIGATION
CLAIMS. As of the Effective Date, the Litigation Claims shall remain vested in
the Estate and the Estate shall retain the right to investigate, prosecute
and/or settle such claims in accordance with the provisions of this Plan.
Pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, the Litigation Claims
Representative shall be the sole representative of the Estate for the limited
purpose of
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investigating, prosecuting and/or settling the Litigations Claims, and
delivering any Litigation Proceeds to Reorganized Paragon pursuant to the terms
of this Plan. All Litigation Proceeds, if any, shall be delivered by the
Litigation Claims Representative to Reorganized Paragon for distribution in
accordance with Sections 6.3 and 6.5 hereof, and subject to the other applicable
distribution provisions of the Plan, including Sections 9.21(q) and 9.21(s), to
the holders of Allowed Unsecured Claims and Allowed Old Common Stock Interests.
The Litigation Claims Representative shall be appointed by the Equity Committee.
Such appointment shall be announced on or before the date of the Confirmation
Hearing and included in the Confirmation Order. In order to permit the
Litigation Claims Representative to perform all its duties and responsibilities
under the Plan, Reorganized Paragon shall transfer Cash in the amount of
$1,094,500.00 (the "Litigation Fund") into an interest-bearing segregated
account for use by the Litigation Claims Representative in carrying out its
rights and obligations hereunder; PROVIDED, HOWEVER, that, if the Wellspring
Stock Purchase Agreement is not consummated, Reorganized Paragon shall only be
required to transfer Cash in the amount of $500,000.00 into the Litigation Fund;
provided, however, that the Equity Committee shall have the right to designate a
portion of the Interest Holders' New Common Stock Amount to be deposited into
the Litigation Fund. Neither Reorganized Paragon nor Wellspring shall have any
further obligation to fund any amounts into the Litigation Fund and shall bear
no further financial responsibility for the resolution of Litigation Claims;
provided, however, that, pursuant to Section 9.21(r) below, Reorganized Paragon
shall provide reasonable assistance to the Litigation Claims Representative with
respect to the assertion and prosecution of Litigation Claims (to the extent
such assistance does not require the expenditure of funds).
(a) USE OF THE LITIGATION FUND. The Litigation Claims
Representative may use the Litigation Fund to (i) satisfy the costs and expenses
(including, but not limited to, counsel and expert witness fees) of
investigating, prosecuting and/or settling the Litigation Claims, (ii) preserve,
protect and prosecute the Litigation Claims, and (iii) satisfy liabilities
incurred or related to the Litigation Claims; PROVIDED, HOWEVER, that if the
funds constituting the Litigation Fund have been used for such purposes and
exhausted, the Litigation Claims Representative may, consistent with its
fiduciary duties as a representative of the Estate, and provided the first
$500,000.00 in proceeds, if any, received on account of the Litigation Claims
are delivered by the Litigation Claims Representative to Reorganized Paragon in
accordance with the proviso contained in Section 1.68 of the Plan, use any
Litigation Proceeds for such purposes; PROVIDED, FURTHER, HOWEVER, that the use
of Litigation Proceeds for such purposes shall not exceed 50% of the recoveries
received on account of any single Litigation Claim, and provided that the total
amount of Litigation Proceeds used for such purposes shall not exceed $1
million.
(b) APPOINTMENT OF THE LITIGATION CLAIMS REPRESENTATIVE. The
Equity Committee shall appoint the Litigation Claims Representative as of the
Effective Date to investigate, prosecute and/or settle the Litigation Claims. On
and after the Effective Date, the Debtor and Reorganized Paragon, as the case
may be, shall execute and deliver or cause to be executed and delivered to the
Litigation Claims Representative all such documents, in recordable form where
necessary or appropriate, to confirm to the Litigation Claims Representative the
right to hold, investigate, prosecute and/or settle each of the Litigation
Claims.
(c) ACCEPTANCE OF DUTIES. The Litigation Claims Representative
shall be required to confirm in writing its appointment and its acceptance of
its rights and obligations hereunder. The Litigation Claims Representative shall
agree to receive, hold, investigate, prosecute and/or settle the Litigation
Claims and to administer and transfer the Litigation Proceeds and the income
derived therefrom pursuant to the terms of the Plan and the Confirmation Order;
provided, however, that if the Litigation Claims do not or will not, in the
judgment of the Litigation Claims Representative, result in sufficient
Litigation Proceeds to warrant the further investigation, prosecution and/or
settlement of the Litigation Claims, the Litigation Claims Representative shall
be empowered to determine not to so investigate, prosecute and/or settle such
claims, but instead to return any remaining amount of the Litigation Fund to
Reorganized Paragon for distribution in accordance with this Plan. The
Litigation Claims Representative shall not be required to post any bond or other
security for performance.
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(d) ONE LITIGATION CLAIMS REPRESENTATIVE. There shall be no
more than one Litigation Claims Representative at any time.
(e) TERM. The Litigation Claims Representative shall serve
until (a) the final resolution or abandonment of the Litigation Claims, or (b)
the Litigation Claims Representative's death, resignation, or removal.
(f) ACTIVITIES. The Litigation Claims Representative shall be
entitled to engage in such activities as it deems appropriate which are not in
conflict with the Plan. The Litigation Claims Representative shall devote such
time as is necessary to fulfill all of its duties as Litigation Claims
Representative.
(g) RESIGNATION OF THE LITIGATION CLAIMS REPRESENTATIVE. The
Litigation Claims Representative may resign at any time upon 30 days' written
notice, in accordance with the notice provisions of the Plan, to the Bankruptcy
Court, and counsel for the Equity Committee. Such resignation may become
effective prior to the expiration of such 30 day notice period upon the
appointment of a permanent or interim successor Litigation Claims
Representative.
(h) REMOVAL OF THE LITIGATION CLAIMS REPRESENTATIVE. The
Litigation Claims Representative may be removed by an order of the Bankruptcy
Court only for bad faith, gross negligence, willful misconduct, material
violation of the provisions of this Plan or a gross disregard of its duties
hereunder ("For Cause") and upon notice and a hearing. Any holder or Allowed
Unsecured Claim or Allowed Old Common Stock Interest or other party in interest
has standing to request the Bankruptcy Court to remove the Litigation Claims
Representative For Cause.
(i) SUCCESSOR LITIGATION CLAIMS REPRESENTATIVE. In the event
of the resignation, removal, death or incapacity of the Litigation Claims
Representative (or if for any other reason there is a vacancy in the position of
Litigation Claims Representative), the Bankruptcy Court may appoint a new
Litigation Claims Representative, upon motion of any party in interest, from a
list of candidates submitted in connection with any such motion, subject to the
consent of the Equity Committee or a majority vote of former members of the
Equity Committee. Every successor Litigation Claims Representative appointed
pursuant hereto shall execute, acknowledge and deliver to the Bankruptcy Court
an instrument in writing accepting such appointment hereunder, and thereupon
such successor Litigation Claims Representative, without any further act, shall
become fully vested with all of the rights, powers, duties and obligations of
its predecessor without any further act. Any predecessor Litigation Claims
Representative shall execute and deliver to the successor Litigation Claims
Representative any instruments reasonably requested by the successor Litigation
Claims Representative to effectuate the termination of the predecessor
Litigation Claims Representative and to aid in the investigation, prosecution
and/or settlement of the Litigation Claims. All fees and expenses of a
Litigation Claims Representative prior to the death, resignation or removal of
such Litigation Trustee shall be paid out of the Litigation Fund unless disputed
by the successor Litigation Claims Representative, in which case such dispute
shall be subject to resolution by the Bankruptcy Court.
(j) REIMBURSEMENT. The Litigation Claims Representative shall
be entitled to receive compensation, from the Litigation Fund, in an amount to
be negotiated by the Equity Committee, disclosed to the Bankruptcy Court at the
Confirmation Hearing and contained in the Confirmation Order, plus reimbursement
of reasonable out-of-pocket expenses (all such reasonable and necessary costs
and expenses incurred by the Litigation Claims Representative in connection with
the performance of its duties hereunder to be reimbursed to the Litigation
Claims Representative from the Litigation Fund); provided, however, that
compensation and/or expenses payable pursuant to an incentive contingent
compensation arrangement between the Litigation Claims Representative and
himself or herself, or between him/her and an attorney or other professionals
retained to prosecute a Litigation Claim must be approved by the Bankruptcy
Court and shall be paid only from the Litigation Proceeds, if any, of such
Litigation Claim.
(k) RETENTION OF PROFESSIONALS. The Litigation Claims
Representative may, but shall not be required to, consult with attorneys,
accountants, appraisers or other parties deemed by the Litigation Claims
Representative to
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have qualifications necessary to assist it in the proper
performance of its duties, including the employment of attorneys on a full or
partial contingent fee basis to prosecute Litigation Claims. The Litigation
Claims Representative may pay the salaries, fees and expenses of such persons
out of the Litigation Fund; provided, however, that compensation and/or expenses
payable pursuant to a contingent compensation arrangement between the Litigation
Claims Representative and an attorney or other professionals retained to
prosecute a Litigation Claim must be approved by the Bankruptcy Court and shall
be paid only from the Litigation Proceeds, if any, of such Litigation Claim. The
Litigation Claims Representative shall not be liable for any loss to the Estate
caused by any action of any person employed by the Litigation Claims
Representative by reason of any mistake or default of such person if the
selection, engagement and/or supervision of such person was made or taken in
good faith and without willful misconduct or gross negligence.
(l) POWERS OF LITIGATION CLAIMS REPRESENTATIVE. The Litigation
Claims Representative shall have all of the rights, powers and privileges
specified in the Plan unless specifically limited by other provisions of this
Plan or the Confirmation Order. The Litigation Claims Representative shall have
the power to take all such actions as in its judgment are necessary and
appropriate to effectuate the purposes of this Section of the Plan, including
but not limited to each power expressly granted in the subsections below and any
power reasonably incidental thereto. The Litigation Claims Representative shall
have the power to:
(i) Investigate, prosecute, settle and/or abandon
Litigation Claims and exercise, participate in or initiate any
proceeding before the Bankruptcy Court or any other court of
appropriate jurisdiction in connection with any proceeding relating to
the Litigation Claims, including any administrative, arbitrative or
other nonjudicial proceeding; provided, however, that the Litigation
Claims Representative shall seek Bankruptcy Court approval before
entering on a final basis into any settlement of a Litigation Claim.
(ii) Invest the Litigation Fund in accordance with
section 345 of the Bankruptcy Code or as otherwise permitted by a Final
Order of the Bankruptcy Court and as deemed appropriate by the
Litigation Claims Representative; PROVIDED, that the Litigation Claims
Representative may invest such funds in Cash Equivalents;
(iii) Enter into any agreement or execute any
document required by or consistent with the Plan, perform all of the
Litigation Claims Representative's obligations hereunder and thereunder
and take all other actions necessary to effectuate the foregoing to the
extent such actions are not inconsistent with the Plan;
(iv) Select and employ such professionals (which may
include the Equity Committee's current professionals), agents or
employees as it deems necessary to assist in the administration of the
Litigation Claims and compensate such persons from the Litigation Fund
without application to the Bankruptcy Court;
(v) Voluntarily engage in arbitration or mediation
with regard to any Litigation Claim;
(vi) Consult with former members of and counsel to
the Equity Creditor and the Creditors' Committee, as well as with any
creditor or counsel to such creditor in connection with the prosecution
of Litigation Claims; and
(vii) Exercise such other powers and duties as are
necessary or appropriate in its discretion to accomplish the purposes
of this Section 9.21 of the Plan.
(m) LIMITATION OF RIGHTS. Notwithstanding anything in this
Agreement to the contrary contained herein, the Litigation Claims Representative
shall not do or undertake any of the following:
(i) Take any action in contravention of the Plan;
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(ii) Grant liens on any of the Litigation Claims or
the Litigation Proceeds, if any; PROVIDED, HOWEVER, that contingent fee
arrangements shall not be considered a lien for purposes of this
section;
(iii) Attempt to modify or amend the Plan;
(iv) Guarantee any debt;
(v) Loan any portion of the Litigation Fund or
Litigation Proceeds, if any, to the Litigation Claims Representative or
any other Person; or
(vi) Transfer any Litigation Claim.
(n) LIMITATION ON LIABILITY. Except in the case of willful
misconduct or gross negligence, the Litigation Claims Representative and any
professionals it employs shall not be liable for any loss or damage by reason of
any action taken or omitted by the Litigation Claims Representative and any
professionals it employs pursuant to the discretion, power and authority
conferred on the Litigation Claims Representative by this Plan. No successor
Litigation Claims Representative shall be in any way liable for the acts or
omissions of any predecessor Litigation Claims Representative unless a successor
Litigation Claims Representative expressly assumes such responsibility. The
Litigation Claims Representative may rely, and shall be protected from liability
for acting, upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order or other paper or document reasonably
believed by the Litigation Claims Representative to be genuine and to have been
presented by an authorized party. Also, the Litigation Claims Representative
shall not be liable if it acts in good faith based on a mistake of fact before
having actual knowledge of an event. The Litigation Claims Representative shall
not be liable for any action taken or suffered by the Litigation Claims
Representative in reasonably relying upon the advice of counsel or other
professionals engaged by the Litigation Claims Representative in accordance with
this Plan. Persons dealing with the Litigation Claims Representative in matters
relating to the Litigation Claims shall have recourse only against the
Litigation Claims and the Litigation Proceeds, if any, subject to the rights of
holders of Allowed Unsecured Claims and Allowed Old Common Stock Interests to
receive such assets in accordance with the terms of the Plan, to satisfy any
liability incurred by the Litigation Claims Representative to such person in
carrying out the terms of this Section, and the Litigation Claims Representative
shall have no personal or individual obligation to satisfy such liability. The
Litigation Claims Representative and its employees and agents shall not be
liable because of any action taken by the Litigation Claims Representative
pursuant to discretionary powers and authority conferred upon the Litigation
Claims Representative or its employees except for its or their own gross
negligence or willful misconduct.
(o) FINAL ACCOUNTING. The Litigation Claims Representative
shall, within ninety (90) days after the completion of its duties or its
resignation, removal or death (in which case, the Litigation Claims
Representative's estate shall), render a final accounting containing at least
the following information:
(i) A description of the Litigation Claims;
(ii) A summarized accounting in sufficient detail of
all gains, losses, receipts, disbursements and other transactions in
connection with the Litigation Fund and the Litigation Claims during
the Litigation Claims Representative's term of service, including their
source and nature;
(iii) All receipts of principal and income must be
shown separately;
(iv) The ending balance of the Litigation Fund and
all Litigation Proceeds as of the date of the Litigation Claims
Representative's accounting, including the cash balance on hand and the
name and location of the depository where it is kept; and
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(v) All known liabilities owed by the Litigation
Claims Representative.
(p) DISTRIBUTION OF PROCEEDS. Subject to the provisions of
Section 9.21(a) above, all Litigation Proceeds, if any, received by the
Litigation Claims Representative on behalf of the Estate shall be delivered by
the Litigation Claims Representative to Reorganized Paragon for Distribution in
accordance with the applicable provisions of the Plan.
(q) WITHHOLDING TAXES. Any federal, state or local
withholding taxes or other amounts required to be withheld under applicable
law shall be deducted, as required, by Reorganized Paragon or the
Litigation Claims Representative, as applicable, from the Litigation Proceeds,
if any, delivered to Reorganized Paragon for distribution under the Plan. All
Persons entitled to receive distributions under the Plan of any Litigation
proceeds received shall be required to provide any information necessary to
effect the withholding of such taxes.
(r) FURTHER ASSURANCES: Reorganized Paragon shall not take any
action to release, impair or settle the Litigation Claims, and shall not, except
as may be required by law, take any position contrary to the Litigation Claims
Representative in any documents, agreements or public filings. Reorganized
Paragon shall reasonably cooperate with the Litigation Claims Representative,
and shall provide the Litigation Claims Representative with reasonable access to
Reorganized Paragon's books and records (including, after execution of an
acceptable common-interest agreement, privileged documents related to the
Litigation Claims) and personnel with knowledge of the Litigation Claims to the
extent necessary to allow the Litigation Claims Representative to properly
perform its duties hereunder. Upon the request of the Creditors' Committee, P&G
or K-C, the Litigation Claims Representative shall provide reasonable reports
regarding the status of the Litigation Claims and the Litigation Proceeds, if
any.
(s) FEDERAL TAX TREATMENT. For federal income tax purposes, it
is intended that the Estate will be treated as a liquidating trust, as defined
in Treasury Regulation ss. 301.7701-4(d), that comes into existence as of the
Effective Date. The primary purpose of the liquidating trust will be to
prosecute the Litigation Claims, and it will not continue or engage in the
conduct of a trade or business except to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the trust. The trust may not receive
or retain Cash or Cash Equivalents in excess of a reasonable amount to prosecute
the Litigation Claims. The investment powers of the Litigation Claims
Representative are limited to powers to invest in Cash and Cash Equivalents. The
trust is required to distribute at least annually to the Beneficiaries the net
income of the trust in excess of amounts reasonably necessary to prosecute the
Litigation Claims. In the event Estate receives Litigation Proceeds, the
Litigation Claims Representative shall, in lieu of immediately distributing all
such amounts, retain as a reserve an amount sufficient to pay the tax liability
that would result from the receipt of such amounts if they were deemed received
by Reorganized Paragon or the Estate did not qualify as a liquidating trust. The
Litigation Claims Representative thereafter shall promptly apply for a ruling
from the Internal Revenue Service that the Estate will qualify as a liquidating
trust and that the receipt of Litigation Proceeds by the Estate will not result
in the recognition of taxable income by Reorganized Paragon or the Estate. If
such ruling is secured, the reserved amounts shall be promptly distributed. If
such ruling is not secured, the Litigation Claims Representative shall use its
reasonable best efforts to secure from counsel experienced in such matters an
opinion reasonably satisfactory to Reorganized Paragon and the Litigation Claims
Representative that (i) the Estate will qualify as a liquidating trust or (ii)
the receipt of Litigation Proceeds by the Estate will not generate taxable
income for Reorganized Paragon or the Estate. If neither the ruling nor the
opinion can be secured, Reorganized Paragon shall be entitled to receive or, if
applicable, the Estate shall retain, such amounts as are necessary to pay the
tax liability associated with the Litigation Claims; and any excess amounts
shall be distributed to the Beneficiaries as promptly as is reasonable under the
circumstances. It is intended that Reorganized Paragon will be treated for tax
purposes as transferring the Litigation Claims to holders of Allowed Unsecured
Claims and Old Common Stock Interests ("Beneficiaries"), followed by a deemed
transfer by the Beneficiaries to the liquidating trust. The Beneficiaries will
be treated as the grantors and deemed owners of the Estate after the Effective
Date and will be taxed on their allocable shares of the Estate's income and gain
in each taxable year, whether or not they receive any distributions in such
year. After the Effective Date, the Litigation Claims Representative
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must file tax returns for the Estate as a grantor trust pursuant to Treasury
Regulation ss. 1.671-4(a). The Litigation Claims must be valued consistently for
all federal income tax purposes by the Debtor, the Litigation Claims
Representative, and the Beneficiaries. The Estate will terminate no later than 5
years after the Effective Date, PROVIDED, HOWEVER, that subject to the approval
of the Bankruptcy Court, the term of the Estate may be extended for a finite
term if such extension is necessary to the liquidating purpose of the Estate.
Each such extension must be approved by the Bankruptcy Court within 6 months of
the beginning of the term being extended.
9.22. WELLSPRING RIGHTS OFFERING
(a) HOLDERS OF UNSECURED CLAIMS. In accordance with the terms contained
in the Wellspring Rights Offering Procedures, the Wellspring Rights Offering
will permit each holder of a Class 3A Claim entitled to vote in respect of the
Plan to elect to subscribe for Rights. Collectively, the Rights, which will not
be evidenced by certificates, shall consist of the right to purchase up to 35%
of the issued and outstanding shares of New Common Stock (prior to dilution) as
of the Effective Date. Each Right shall represent the right to purchase one
share of New Common Stock for a purchase price of $10.00 per share. Subject to
any requirement of the securities laws, the Rights will be transferable in
accordance with the provisions set forth in the Wellspring Rights Offering
Procedures; PROVIDED, however, that no Person may acquire Rights by way of
transfer such that as of the Effective Date (after giving effect to the exercise
of all Rights properly subscribed to and acquired by transfer) such Person would
hold an amount of New Common Stock greater than ten percent (10%) of the New
Common Stock Amount.
(a)(b) HOLDERS OF OLD COMMON STOCK INTERESTS. In accordance
with the terms contained in the Wellspring Rights Offering Procedures, the
Wellspring Rights Offering also will permit each holder of an Allowed Old Common
Stock Interest as of the Voting Record Date to subscribe for Rights not
purchased by holders of Class 3A Claims pursuant to Section 9.22(a) hereof.
X.
ADMINISTRATION OF THE PLAN
10.1. IMPLEMENTATION OF PLAN. On the Effective Date, compliance with
the provisions of the Plan shall become the general responsibility of
Reorganized Paragon (subject to the supervision of the New Board pursuant to and
in accordance with the provisions of the Plan). Reorganized Paragon may, in its
discretion, hire a disbursing agent to perform Reorganized Paragon's
distribution and other functions with respect to the Plan. In such case,
references to Reorganized Paragon herein shall include such disbursing agent.
Notwithstanding the foregoing, Reorganized Paragon shall remain responsible for
all distribution functions with respect to the Plan, and for the actions and
conduct of any disbursing agent retained by Reorganized Paragon and acting in an
authorized capacity as disbursing agent hereunder.
10.2. RESPONSIBILITIES OF REORGANIZED PARAGON. The responsibilities
of Reorganized Paragon under the Plan shall include:
(a) calculating and implementing all Distributions in
accordance with the Plan;
(b) taking all steps and executing all instruments and
documents necessary to effectuate the Plan;
(c) complying with the Plan and the obligations hereunder;
(d) employing professionals, if necessary, to represent it
with respect to its responsibilities;
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(e) exercising such other powers as may be vested in
Reorganized Paragon pursuant to the Plan, the Confirmation Order, other orders
of the Bankruptcy Court, or as deemed by Reorganized Paragon to be necessary and
proper to implement the provisions of the Plan;
(f) periodic reporting to counsel to the Creditors' Committee
and to the Bankruptcy Court of the status of the Claims resolution process and
Distributions on Allowed Claims and Allowed Interests;
(g) such other responsibilities as may be vested in
Reorganized Paragon pursuant to the Plan, the Confirmation Order, or other
Bankruptcy Court order or as may be necessary and proper to carry out the
provisions of the Plan; and
(h) obtaining the entry of a final decree closing the Chapter
11 Case.
10.3. OTHER. Unless otherwise ordered by the Bankruptcy Court,
Reorganized Paragon shall not be required to post any bond or surety of
performance of its duties.
10.4. POWERS OF REORGANIZED PARAGON AS ADMINISTRATOR OF THE PLAN. The
powers of Reorganized Paragon as the administrator of the Plan shall, without
any further Bankruptcy Court approval, include: (a) the power to invest funds in
Cash Equivalents or otherwise in accordance with section 345 of the Bankruptcy
Code, and withdraw, make Distributions and pay taxes and other obligations from
funds held in accordance with the Plan; (b) the power to dispose of, and deliver
title to others of, Estate assets on behalf of the Debtor; (c) the power to
compromise and settle Claims and causes of action (other than Litigation Claims)
on behalf of or against the Debtor; and (d) such other powers as may be vested
in or assumed by Reorganized Paragon pursuant to this Plan or as may be
necessary and proper to carry out the provisions of this Plan.
10.5. EXCULPATION AND LIMITATION OF LIABILITY. Reorganized Paragon
shall be exculpated from and shall have no liability for any and all Claims,
causes of action and other assertions of liability arising out of the discharge
of the powers and duties conferred upon Reorganized Paragon by this Plan, the
Confirmation Order or any other order of the Bankruptcy Court entered pursuant
to or in furtherance of this Plan, or applicable law, or for any error of
judgment made or action undertaken in good faith, other than as a result of
fraud, gross negligence or willful misconduct. Reorganized Paragon shall not be
liable for any action taken or omitted in good faith and reasonably believed by
it to be authorized within the discretion or rights or powers conferred upon it
by the Plan, the Confirmation Order or any other order of the Bankruptcy Court.
In performing its duties hereunder, Reorganized Paragon shall have no liability
for any action taken by it in good faith in accordance with the advice of
counsel, accountants, appraisers and other professionals retained by it. Without
limiting the generality of the foregoing, Reorganized Paragon may rely on copies
of orders of the Bankruptcy Court reasonably believed by it to be genuine, and
shall have no liability for actions taken in good faith in reliance thereon.
Reorganized Paragon may rely without inquiry upon writings delivered to it
hereunder which it reasonably believes in good faith to be genuine and to have
been given by a proper Person. No holder of a Claim or Interest or other party
in interest shall have or pursue any Claim or cause of action against
Reorganized Paragon for making payments in accordance with or as otherwise
permitted by this Plan or for implementing the provisions of this Plan in
accordance with its terms.
10.6. DISTRIBUTION BY REORGANIZED PARAGON. All Distributions under
the Plan shall be made by Reorganized Paragon.
10.7. ESTABLISHMENT AND MAINTENANCE OF DISBURSEMENT ACCOUNTS. On or
before the Effective Date, the Debtor or Reorganized Paragon shall establish one
or more segregated interest-bearing bank accounts in the name of Reorganized
Paragon, which accounts shall be trust accounts for the benefit of each Class of
Claims pursuant to the Plan and utilized solely for the investment and
distribution of Cash consistent with the terms and conditions of the Plan. The
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Disbursement Account(s) shall be maintained at one or more domestic banks or
financial institutions, having a shareholders' equity or equivalent capital of
not less than Five Hundred Million Dollars ($500,000,000), of Reorganized
Paragon's choice, but in no event at any institution which is a party to the New
Credit Agreement. Reorganized Paragon may invest Cash in Disbursement Account(s)
in Cash Equivalents; PROVIDED, HOWEVER, that sufficient liquidity shall be
maintained in such account or accounts to (a) make promptly when due all
payments upon Disputed Claims if and when they become Allowed Claims, and (b)
make promptly when due the other payments provided for in the Plan.
XI.
DISTRIBUTIONS
11.1. TIMING OF DISTRIBUTIONS. Notwithstanding any provision of the
Plan obligating Reorganized Paragon to make Distributions on a particular date,
any Distributions and deliveries to be made hereunder to holders of Claims or
Interests that are Allowed Claims or Allowed Interests as of such date shall be
made on that date or as soon as reasonably practicable thereafter. Any
Distributions and deliveries to be made to any holder of a Claim or Interest
whose Claim or Interest is not an Allowed Claim or Allowed Interest at least ten
(10) Business Days prior to a particular Distribution Date shall be made on the
first Distribution Date thereafter or upon such other terms as agreed to by
Reorganized Paragon and the holder of such Claim or Interest.
11.2. MANNER OF PAYMENT. Except with respect to Allowed DIP Claims,
the Allowed Claims of P&G and K-C, and Allowed Prepetition Bank Claims, payment
of which shall be made by wire transfer of same day funds to the extent required
to be made in Cash, Cash Distributions to be made hereunder may, subject to
Sections 11.12 and 11.13 below, be made, at the option of Reorganized Paragon,
in Cash, by wire transfer or by check drawn on any domestic bank.
11.3. PERSONS DEEMED HOLDERS OF REGISTERED SECURITIES. Except as
otherwise provided herein, Reorganized Paragon (or its designee) shall be
entitled, but not required, to treat the record holder of a registered security
as the holder of the Claim or Interest respectively for purposes of all notices,
payments or other Distributions under this Plan unless Reorganized Paragon shall
have received from such record holder written notice by certified mail, return
receipt requested, specifying the name and address of any new holder thereof
(and the nature and amount of the Claim or Interest of such new holder) at least
ten (10) Business Days prior to the date of such notice, payment or other
Distribution. In the event of any dispute regarding the identity of any party
entitled to any payment or Distribution in respect of any Claim or Interest
under the Plan, no payments or Distributions shall be made in respect of such
Claim or Interest until the Bankruptcy Court resolves such dispute pursuant to a
Final Order.
11.4. COMPLIANCE WITH TAX REQUIREMENTS. To the extent applicable,
Reorganized Paragon shall comply with all tax withholding and reporting
requirements imposed on it by any governmental unit, and all Distributions
pursuant to the Plan shall be subject to such withholding and reporting
requirements. Reorganized Paragon shall be entitled to deduct any federal, state
or local withholding taxes from any payments made with respect to Allowed Claims
or Allowed Interests, as appropriate.
11.5. INTENTIONALLY OMITTED.
11.6. DE MINIMIS DISTRIBUTIONS. Notwithstanding anything herein to
the contrary, the following provisions shall apply to Class 3A Claims and Class
4A Interests: Reorganized Paragon shall not have any obligation to make a
Distribution of Cash to a holder of an Allowed Claim or Allowed Interest if such
Distribution would be less than $10 (or such other amount ordered by the
Bankruptcy Court) (the "Threshold Amount") except as provided herein. If, on any
Distribution Date, the Pro Rata Share of Cash that otherwise would have been
distributed to a holder of an Allowed Claim or Allowed Interest is less than the
Threshold Amount, Reorganized Paragon shall reserve such holder's Pro Rata
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Share of Cash until the first Distribution Date on which the amount to be
distributed to such holder is equal to or greater than the Threshold Amount. If,
at the time of the Final Distribution, the Pro Rata Share of Cash then allocable
to an Allowed Claim or Allowed Interest but not distributed as a result of the
foregoing sentence, is less than the Threshold Amount (taking into account prior
amounts reserved under this section for such Claim or Interest but not paid),
Reorganized Paragon shall not be required to make a Final Distribution of Cash
on account of such Allowed Claim or Allowed Interest. If, at the time of Final
Distribution, the Pro Rata Share of Cash then allocable to the holder of any
Allowed Claim or Allowed Interest would be less than the Threshold Amount,
Reorganized Paragon shall not be required to make a Final Distribution on
account of such Allowed Claim or Allowed Interest but, in the case of Cash, may
donate the Cash in the name of Reorganized Paragon to a not for profit
charitable organization to be chosen by Reorganized Paragon.
11.7. PERIODIC DISTRIBUTIONS TO HOLDERS OF ALLOWED UNSECURED CLAIMS
AND ALLOWED OLD COMMON STOCK INTERESTS. On the Initial Distribution Date and
each Periodic Distribution Date thereafter, Reorganized Paragon shall make a
Distribution of Cash, New Securities and/or Warrants to each holder of an
Allowed Unsecured Claim or Allowed Old Common Stock Interest, as the case may
be, in an amount equal to its Pro Rata Share (calculated as of the applicable
Distribution Date) of the Cash, New Securities and/or Warrants, as the case may
be, allocated to the relevant Class.
11.8. INITIAL DISTRIBUTIONS TO THE HOLDERS OF SUBSEQUENTLY ALLOWED
UNSECURED CLAIMS AND ALLOWED INTERESTS. Reorganized Paragon shall distribute to
the holders of Disputed Claims and Disputed Interests, as the case may be, as of
the Initial Distribution Date, that become Allowed Claims or Allowed Interests
after the Initial Distribution Date, Cash, New Securities and/or Warrants, as
the case may be, in an amount equal to the aggregate amount of Cash, New
Securities and/or Warrants, as the case may be, that would have been distributed
as of the Initial Distribution Date and each prior Periodic Distribution Date
(if any) to such holder in respect of such Allowed Claim or Allowed Interest had
it been an Allowed Claim or Allowed Interest on the Initial Distribution Date
and any subsequent Periodic Distribution Date. Any holder of a Claim or Interest
whose Claim or Interest is so allowed after the tenth (10th) Business Day prior
to the next Periodic Distribution Date shall receive its initial Distribution on
the next succeeding Periodic Distribution Date. For purposes of determining the
accrual of interest or rights in respect of any other payment from and after the
Effective Date, the New Securities and Warrants to be issued shall be deemed
issued as of the Effective Date regardless of the date on which they are
actually dated, authenticated or received by the holders of Allowed Claims or
Allowed Interests; PROVIDED, HOWEVER, that Reorganized Paragon shall withhold
any payment until such Distribution actually is made.
11.9. SUBSEQUENT PERIODIC DISTRIBUTIONS TO HOLDERS OF PREVIOUSLY
ALLOWED CLAIMS AND PREVIOUSLY ALLOWED INTERESTS. Subject to the second sentence
of Section 11.8 hereof, on each Periodic Distribution Date, Reorganized Paragon
shall distribute to each holder of an Allowed Claim or Allowed Interest, as the
case may be, on account of such Claim or Interest, an amount of Cash, New
Securities and/or Warrants, as the case may be, equal to: (a) the Distribution
from the relevant Disputed Claims Reserve that such holder of an Allowed Claim
or Allowed Interest, as applicable, would have received had it not received any
prior Distributions in respect of its Allowed Claims or Allowed Interests, less
(b) the total amount of any Distributions previously received in respect of its
Allowed Claim or Allowed Interest. Subject to Section 11.16 hereof, such
Distributions shall continue until the relevant Disputed Claims Reserve is
depleted of Cash, New Securities and/or Warrants held in such Disputed Claims
Reserve, other than as set forth below.
11.10. FINAL DISTRIBUTION. On the first (1st) Business Day that is ten
(10) Business Days after the date on which all Claims or Interests in the
relevant Class have been allowed by Reorganized Paragon or by Final Orders,
Disallowed or estimated for Allowance purposes by Final Orders or withdrawn with
prejudice (and in the case of Classes 3A and 4A, all Litigation Claims have been
resolved) and the Chapter 11 Case can be closed under applicable law and rules,
property remaining in the relevant Disputed Claims Reserve shall be distributed
to holders of Allowed Claims and Allowed Interests or released to Reorganized
Paragon, as the case may be, in accordance with the procedure set forth
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above for Periodic Distributions and subject to the provisions of Section 12.5
below, PROVIDED, HOWEVER, that such Distribution will be a final Distribution on
account of all Claims and Interests.
11.11. DISTRIBUTIONS ON DISPUTED CLAIMS. Notwithstanding anything to
the contrary contained herein, no Distribution shall be made on account of any
Claim or Interest that is partially an Allowed Claim or Allowed Interest and
partially a Disputed Claim or Disputed Interest until such Claim or Interest is
no longer Disputed in any respect.
11.12. DISBURSEMENT OF FUNDS AND DELIVERY OF NEW SECURITIES.
Reorganized Paragon shall make Cash payments to the holders of Allowed Claims to
the extent provided for in the Plan by check sent by first-class mail (or by
other equivalent or superior means as determined by Reorganized Paragon in its
sole and absolute discretion); PROVIDED, HOWEVER, that if any holder of an
Allowed Claim is entitled to receive a Cash Distribution under the Plan, as of
the Effective Date, in an amount in excess of $500,000, such holder shall have
the option, exercisable by written notice executed by such holder and providing
appropriate instructions delivered to the Debtor or Reorganized Paragon or such
person designated by one of the foregoing, within thirty (30) calendar days
prior to the applicable Distribution Date, to receive payment of Cash
Distributions by wire transfer. On the Effective Date, the Debtor shall deposit
Cash in the Professional Fee Reserve or provide other security (in form and
substance reasonably acceptable to counsel to the Proponents) sufficient to pay
Fee Claim holdbacks and estimated final allowances of compensation and
reimbursement of expenses to Professionals. Distributions of Cash, New
Securities and/or Warrants, as the case may be, pursuant to the Plan (including
shares of New Common Stock subscribed to as part of the Wellspring Rights
Offering) shall be effectuated on the Effective Date, the applicable
Distribution Date, such other date consistent with the provisions of the Plan,
or, with respect to each holder of an Allowed Claim or Allowed Interest, as soon
thereafter as Reorganized Paragon has received all documentation required
pursuant to the Plan.
11.13. FRACTIONAL CENTS. Whenever any payment of a fraction of a cent
would otherwise be called for, the actual payment shall reflect a rounding down
of such fraction to the nearest whole cent. To the extent Cash remains
undistributed as a result of the rounding of such fraction to the nearest whole
cent, such Cash shall revert to Reorganized Paragon.
11.14. FRACTIONAL SECURITIES. No fractional shares of New Common
Stock shall be issued in connection with the Plan.
(a) NEW COMMON STOCK. Whenever the issuance of a fractional
interest of New Common Stock shall otherwise be called for, fractional shares of
New Common Stock will be rounded to the next greater or lower number, as
follows: (i) fractions of 1/2 or greater will be rounded to the next higher
whole number, and (ii) fractions of less than 1/2 will be rounded to the next
lower whole number, including zero.
(b) NEW NOTES. New Notes will be issued only if the Wellspring
Stock Purchase Agreement is consummated and only in denominations of $1,000.
Whenever the issuance of a fractional New Note shall otherwise be called for,
the actual issuance on account of New Notes will be rounded up or down to the
nearest multiple of $1,000 or $0, as the case may be, and the difference in
value will be accounted for by Paragon by a distribution of Cash.
(c) NEW WARRANTS. No fractional Warrants shall be issued under
the Plan.
11.15. DISPUTED PAYMENTS. In the event of any dispute between or among
claimants as to the right of any Person to receive or retain any payment or
Distribution to be made to such Person under the Plan, Reorganized Paragon may,
in lieu of making such payment or Distribution to such Person, instead hold such
payment or Distribution until the disposition thereof is determined by Final
Order of the Bankruptcy Court.
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11.16. UNCLAIMED PROPERTY. If any Distribution remains unclaimed for a
period of twelve (12) months after it has been delivered (or attempted to be
delivered) in accordance with the Plan to the holder entitled thereto, such
Unclaimed Property shall be forfeited by such holder whereupon all right, title
and interest in and to the Unclaimed Property shall immediately and irrevocably
(a) in the case of all Classes other than Classes 3A and 4A, become the property
of Reorganized Paragon, and (b) in the case of Classes 3A and 4A, be available
for future Distributions to remaining holders of Allowed Unsecured Claims in
Class 3A or Allowed Interests in Class 4A, as applicable, and the holder of the
Allowed Claim or Allowed Interest previously entitled to such Unclaimed Property
shall cease to be entitled thereto.
XII.
DISPUTED CLAIMS, DISPUTED INTERESTS, ESTIMATION,
RESERVES AND MISCELLANEOUS DISTRIBUTION PROVISIONS
12.1. OBJECTIONS TO CLAIMS; PROSECUTION OF DISPUTED CLAIMS. Unless
otherwise ordered by the Bankruptcy Court, only the Debtor or Reorganized
Paragon shall be empowered to object to the allowance of Claims or Interests
filed or deemed filed with the Bankruptcy Court with respect to which it
disputes liability in whole or in part; provided, however, that the Litigation
Claims Representative may object to the allowance of any claim arising from or
relating to the assertion or prosecution of any Litigation Claim. All objections
shall be litigated to Final Order; PROVIDED, HOWEVER, that Reorganized Paragon
shall have the authority to file, settle, compromise or withdraw any objections
to Claims without approval of the Bankruptcy Court as permitted by the
Bankruptcy Code and/or Bankruptcy Rules; and PROVIDED, FURTHER, HOWEVER, that
the consent of the Creditors' Committee (unless otherwise ordered by the
Bankruptcy Court) shall be required for allowance by settlement of any Claim in
excess of $250,000.00. Unless otherwise ordered by the Bankruptcy Court,
Reorganized Paragon shall file and serve all objections to Claims as soon as
practicable, but in no event later than, the Claims Objection Deadline, or such
later date as may be approved by the Bankruptcy Court.
12.2. ESTIMATED CLAIMS SCHEDULE. At or prior to the commencement of
the Confirmation Hearing, the Debtor shall submit a schedule, as of such date
(the "Estimated Claims Schedule"), reflecting:
(a) the estimated aggregate amount, as of such date, of
Allowed Claims or Allowed Interests in each Class under the Plan;
(b) the estimated aggregate amount, as of such date, of
Disputed Claims or Disputed Interests in each Class under the Plan; and
(c) the estimated aggregate amount, as of such date, of
Disputed Claims and Disputed Interests in each Class under the Plan that the
Debtor believes ultimately may become Allowed Claims and Allowed Interests.
12.3. ESTIMATION ORDER. On or before the Effective Date, the Debtor
shall seek an Estimation Order establishing the aggregate amount of all Claims
and Interests that would be allowable in each Class based upon the Estimated
Claims Schedule. Such Estimation Order shall set the maximum allowable aggregate
amount of Claims and Interests in each Class for purposes of Distributions
hereunder. Notwithstanding anything to the contrary contained herein, such
Estimation Order shall NOT: (a) fix the amount of ultimately Allowed Claims or
Interests for purposes of Final Distributions hereunder; (b) result in the
allowance of any individual Claim or Interest; (c) impose any obligation upon
Reorganized Paragon for Distributions in excess of those expressly set forth
herein; or (d) prejudice any creditor's rights under section 502(j) of the
Bankruptcy Code.
12.4. NO RECOURSE TO REORGANIZED PARAGON. If the allowed amount of
any particular Disputed Claim or Disputed Interest is or may be reconsidered
under section 502(j) of the Bankruptcy Code and Bankruptcy Rule 3008, or
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any other applicable law, and/or is or may be ultimately allowed in an amount
that is greater than the estimated amount of such Claim or Interest, or the
ultimately allowed amount of all Disputed Claims or Disputed Interests in a
particular Class is or may be greater than the estimated aggregate amount of
such Claims or Interests, no Claim holder or Interest holder shall have recourse
to Reorganized Paragon (or any property thereof) or any Cash, New Securities or
Warrants previously distributed on account of any Allowed Claim or Allowed
Interest, except that such Claim or Interest holder shall have recourse only to
undistributed Cash, New Securities and Warrants, as applicable to its Class,
and, if the Wellspring Stock Purchase Agreement is not consummated, Reorganized
Paragon may issue such additional New Common Stock, up to the total number of
shares authorized to be issued as of the Effective Date.
12.5. DISPUTED CLAIMS RESERVES. In accordance with this Section 12.5
and any Estimation Order entered by the Bankruptcy Court before such date, on
the Effective Date, Reorganized Paragon shall establish a separate Disputed
Claims Reserve for each Class of Claims and Interests. Property reserved under
this Section shall be set aside, segregated and, in the case of Cash, held in an
interest bearing account to be established and maintained by Reorganized Paragon
pending resolution of such Disputed Claims and Disputed Interests. As and to the
extent that the amount of any Disputed Claim (other than a Disputed Unsecured
Claim) or Disputed Interest (other than a Disputed Old Common Stock Interest)
exceeds the amount of such Claim or such Interest which ultimately is allowed,
any excess Cash, New Securities and/or Warrants in the applicable Disputed
Claims Reserve previously reserved for on account of such Disputed Claim or
Disputed Interest shall be released to Reorganized Paragon. With respect to
Disputed Unsecured Claims in Class 3A and Disputed Interests in Class 4A, as and
to the extent that the amount of any Disputed Unsecured Claim or Disputed
Interest exceeds the amount of such Claim or Interest that is ultimately
allowed, any excess Cash, New Securities and/or Warrants in the Disputed Claims
Reserve for Class 3A or Class 4A, as applicable, shall be made available for
distribution to holders of Allowed Claims in Class 3A or Allowed Interests in
Class 4A, as applicable. Each Disputed Claims Reserve shall be terminated once
all Distributions and other dispositions of all Cash, New Securities and/or
Warrants required hereunder relevant to such Disputed Claims Reserve have been
made in accordance with the terms of the Plan. If a Disputed Interest Reserve is
established hereunder, all references to Disputed Claims Reserve shall apply to
the Disputed Interest Reserve and all references to Claims, Allowed Claims and
Disputed Claims shall apply to Interests, Allowed Interests, and Disputed
Interests as the context requires.
12.6. FLUCTUATION IN VALUE OF NEW SECURITIES. The value of New
Securities and Warrants held in reserve under Section 12.5 of the Plan is likely
to fluctuate. Reorganized Paragon does not, and shall be deemed not to,
represent or warrant that the value of the New Securities and Warrants will not
decline after the Effective Date. Reorganized Paragon also shall not otherwise
assume any liability or risk of loss which the holder of a Disputed Claim or
Disputed Interest which becomes an Allowed Claim or Allowed Interest, as
applicable, after the Effective Date may suffer by reason of any decline in
value of a reserved security pending determination of the amount of such
Disputed Claim or Disputed Interest. The risk or benefit of any appreciation or
depreciation in the value of any reserved securities shall be borne by the party
to whom such security is ultimately distributed.
12.7. VOTING OF CERTAIN NEW COMMON STOCK. New Common Stock that is
Unclaimed Property or held in Disputed Claims Reserves shall be voted at any
meeting of the stockholders of Reorganized Paragon in proportion to the actual
vote of the shares of New Common Stock that is not held as Unclaimed Property or
in Disputed Claims Reserves.
12.8. RETURNED DISTRIBUTIONS. In the event that any Distribution of
property is returned to Reorganized Paragon due to an incorrect or incomplete
address for the holder entitled thereto, Reorganized Paragon shall use
reasonable efforts to obtain an accurate address for such holder. If reasonable
efforts have not yielded an accurate address for such holder within 180 calendar
days after the date the Distribution of the returned property was made, then the
property to be distributed to such holder shall be deemed to be Unclaimed
Property in respect of such Claim or Interest and shall be treated as provided
in Section 11.16 of the Plan.
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12.9. ESTIMATION OF CLAIMS. The Debtor or Reorganized Paragon, as
applicable, may at any time request that the Bankruptcy Court estimate any
contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the
Bankruptcy Code regardless of whether the Debtor or Reorganized Paragon
previously has objected to such Claim or whether the Bankruptcy Court has ruled
on any such objection, and the Bankruptcy Court will retain jurisdiction to
estimate any Claim at any time during litigation concerning any objection to any
Claim, including, without limitation, during the pendency of any appeal relating
to any such objection. In the event that the Bankruptcy Court estimates any
contingent, unliquidated or Disputed Claim, the amount so estimated shall
constitute either an estimated allowed amount for purposes of Distributions
under the Plan or an estimation for purposes of allowance, but shall not fix a
maximum limitation on such Claim as an ultimately Allowed Claim, as determined
by the Bankruptcy Court. All of the aforementioned objection, estimation and
resolution procedures are intended to be cumulative and not necessarily
exclusive of one another. Claims may be estimated and subsequently compromised,
settled, withdrawn or resolved by any mechanism approved by the Bankruptcy
Court.
12.10. AMENDMENTS OF CLAIMS. Except as otherwise provided in the Plan,
a Claim may be amended: (a) no later than ten (10) days prior to the
Confirmation Hearing, only as agreed upon by the Debtor and the holder of such
Claim or as otherwise permitted by the Bankruptcy Court, the Bankruptcy Code,
the Bankruptcy Rules, or applicable law; or (b) after such time, to decrease,
but not increase, the face amount of such Claim. Any Claim (other than Claims
timely filed based upon the rejection of any executory contract or unexpired
lease) filed after the Confirmation Date shall be deemed Disallowed and expunged
without further action by the Debtor or the Bankruptcy Court unless the claimant
obtained prior Bankruptcy Court approval to file such claim.
XIII.
WAIVERS, DISCHARGE, RELEASE, INDEMNIFICATION,
ABANDONMENT, AND SETTLEMENT OF CLAIMS
13.1. DISCHARGE OF DEBTOR. Except as otherwise specifically provided
by the Plan or the Confirmation Order, the Confirmation of the Plan (subject to
the occurrence of the Effective Date) shall operate as a discharge, pursuant to
section 1141(d)(1) of the Bankruptcy Code, of the Debtor and Reorganized Paragon
from any debt, Claim or Interest that arose before the Confirmation Date,
including, but not limited to, all principal and interest, whether accrued
before, on, or after the Petition Date, and any debt, Claim or Interest of the
kind specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not a proof of Claim or Interest is Filed or is deemed Filed, whether
or not such Claim or Interest is Allowed, and whether or not the holder of such
Claim or Interest has voted on the Plan. On the Effective Date, as to every
discharged debt, Claim and Interest, the holder of such debt, Claim or Interest
shall be precluded from asserting against the Debtor, the Debtor's assets or
properties, and against Reorganized Paragon, any other or further Claim or
Interest based upon any document, instrument or act, omission, transaction or
other activity of any kind or nature that occurred prior to the Confirmation
Date.
13.2. COMPLETE SATISFACTION. Except as otherwise specifically provided
by the Plan, the treatment of Claims and Interests and rights that are provided
in the Plan shall be in complete satisfaction, discharge and release, effective
as of the Confirmation Date (but subject to the occurrence of the Effective
Date) of (a) all Claims against, liabilities of, liens on, obligations of and
Interests in the Debtor or Reorganized Paragon or the direct or indirect assets
and properties of the Debtor or Reorganized Paragon, whether known or unknown,
and (b) all causes of action (whether known or unknown, either directly or
derivatively through the Debtor or Reorganized Paragon) against, Claims against,
liabilities (as guarantor of a Claim or otherwise) of, liens on the direct or
indirect assets and properties of, and obligations of the Debtor, Reorganized
Paragon and their successors and assigns, and present and former directors,
officers, and employees of the Debtor based on the same subject matter as any
Claim or Interest, in each case regardless of whether a proof of Claim or
Interest was filed, whether or not allowed and whether or not the holder of the
Claim or Interest has voted on the Plan, or based on any act or omission,
transaction or other activity or security, instrument or other agreement of any
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kind or nature occurring, arising or existing prior to the Effective Date that
was or could have been the subject of any Claim or Interest, in each case
regardless of whether a proof of Claim or Interest was filed, whether or not
allowed and whether or not the holder of the Claim or Interest has voted on the
Plan.
13.3. RELEASE OF DEBTOR. Except as otherwise specifically provided by
the Plan or the Confirmation Order (and subject to the occurrence of the
Effective Date), any holder of a Claim or Interest accepting any Distribution or
other treatment pursuant to the Plan shall be presumed conclusively to have
released the Debtor and Reorganized Paragon, their successors and assigns, and
their respective present and former directors, officers, and employees of the
Debtor, and any Person claimed to be liable derivatively through and of the
foregoing, from any Claim or cause of action based on the same subject matter as
the respective Claim or Interest. The release described in the preceding
sentence shall be enforceable as a matter of contract against any holder of a
Claim or Interest timely notified of the provisions of the Plan.
13.4. EXONERATION. The entry of the Confirmation Order shall
constitute the determination by the Bankruptcy Court that the Debtor,
Reorganized Paragon and its officers, directors, partners, employees, members or
agents, and each Professional, attorney, financial advisors, accountant, or
other professional employed by any of them and the members of the Creditors'
Committee and the Equity Committee (in their capacity as such), P&G, K-C and
Wellspring, and any Professionals, attorneys, financial advisor, accountants or
other professionals employed by the Creditors' Committee, the Equity Committee,
P&G, K-C or Wellspring, shall have acted in good faith within the meaning of
section 1125(e) and 1129(a)(3) of the Bankruptcy Code, and shall be entitled to
the benefits of section 1125(e) of the Bankruptcy Code. Notwithstanding the
provisions of this Section 13.4, Wellspring shall not be exonerated or relieved
of its obligations under the Wellspring Commitment or the Wellspring Stock
Purchase Agreement or any breach of its obligations thereunder.
13.5. INDEMNIFICATION. In order to facilitate Paragon's expeditious
and effective reorganization, the Debtor and Reorganized Paragon shall
indemnify, hold harmless and reimburse each of the Debtor's respective present
and former officers, directors and employees from and against any and all
losses, Claims, damages, liabilities and actions asserted or filed against such
present and former officers, directors and employees for, by reason of, arising
from, in connection with, involving or relating to services rendered or acts or
omissions to act in those capacities relating to or arising out of the Plan, the
P&G Settlement or the K-C Settlement, or any efforts to defend or protect
against, resolve or settle the Texas Action, the Delaware Action or the facts or
Claims alleged or asserted, or which could have been alleged or asserted, in the
Delaware Action, the Texas Action or the Plan. All rights of the Debtor's
present and former officers, directors and employees with respect to
indemnification and limitation of liability under any provision of law, the
Certificate of Incorporation or Bylaws of the Debtor, or otherwise, from and
against any and all losses, claims, damages, liabilities and actions shall
survive confirmation of the Plan and shall not be discharged pursuant to section
1141 of the Bankruptcy Code. The Debtor and Reorganized Paragon shall pay any
legal or other expenses reasonably incurred by such present or former officers,
directors, or employees in connection with this indemnification or the
enforcement thereof, or in connection with any claim against which such present
or former officer, director, or employee is indemnified or for which liability
is limited. Notwithstanding the foregoing, the Debtor's and Reorganized
Paragon's obligations under this Section 13.5 for any Prepetition Claims for
indemnity shall be limited to the extent of available insurance coverage.
Reorganized Paragon shall be responsible for paying any deductibles associated
with any such insurance, and the Debtor or Reorganized Paragon shall obtain tail
insurance coverage for a period of six years after the Effective Date under the
Debtor's existing or a comparable directors and officers insurance policy. On
the Effective Date, the Debtor will be conclusively deemed to release all
directors and officers of the Debtor holding such offices at any time during the
period from and including the Petition Date through and including the
Confirmation Date from all liability based upon any act or omission related to
past service with, for or behalf of the Debtor except for:
(i) any indebtedness of any such Person to the
Debtor for money borrowed by such Person;
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(ii) any setoff or counterclaim the Debtor has
against such Person for money borrowed by such Person;
(iii) the uncollected amount of any claim made by the
Debtor (whether in a filed pleading, by letter or otherwise asserted in
writing) prior to the Effective Date against such Person which claim
has not been adjudicated to Final Order, settled or compromised; or
(iv) claims arising from the fraud, willful
misconduct, gross negligence or willful breach of fiduciary duty of
such Person.
13.6. RELEASE OF COMMITTEE MEMBERS. On the Confirmation Date, subject
to the occurrence of the Effective Date, the Debtor shall be deemed to have
released all causes of action against the members of the Committees, in their
respective capacities as such (but not in their capacities as holders of Claims
against or Interests in the Debtor and not with respect to Litigation Claims).
13.7. ENFORCEABILITY OF RELEASES. Notwithstanding anything contained
herein to the contrary, the foregoing release provisions of this Article XIII
above with respect to the release of non-Debtor third parties shall be enforced
only to the extent permitted by applicable bankruptcy and non-bankruptcy law.
13.8. ADDITIONAL RELEASES. The releases embodied in the Plan are in
addition to, and not in lieu of, any other release separately given,
conditionally or unconditionally, to the Debtor by any other Person or by the
Debtor to any other Person, including, for example, the releases contemplated
and provided for in the P&G Settlement Agreement and the K-C Settlement
Agreement.
13.9. INJUNCTION. The satisfaction, release and discharge pursuant to
this Article XIII also shall act as an injunction against any Person commencing
or continuing to prosecute or commence any act, action, employment of process,
or act to collect, offset or recover any Claim, Interest or cause of action
satisfied, released or discharged under the Plan to the fullest extent
authorized or provided by the Bankruptcy Code, including, without limitation, to
the extent provided for or authorized by sections 524 and 1141 thereof.
13.10. TERMS OF INJUNCTIONS OR STAYS. Unless otherwise provided, all
injunctions or stays provided for in the Chapter 11 Case under sections 105 or
362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation
Date, shall remain in full force and effect until the Effective Date.
13.11. PRESERVATION OF LITIGATION CLAIMS: Notwithstanding anything
contained herein to the contrary, including but not limited to any release
provided under Section 13.6 hereof, nothing contained in this Plan shall be
interpreted as or result in the release of Weyerhaeuser, Pope & Talbot, Oracle
Corporation or Andersen Consulting LLP from any Litigation Claim.
XIV.
CONDITIONS TO CONFIRMATION/EFFECTIVE DATE
14.1. CONDITIONS PRECEDENT TO CONFIRMATION. At or prior to
Confirmation, the following conditions must occur and be satisfied:
(a) DISCLOSURE STATEMENT ORDER. An order finding that the
Disclosure Statement contains adequate information pursuant to section 1125
of the Bankruptcy Code shall have been entered;
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(b) THE P&G SETTLEMENT AGREEMENT. The P&G Settlement Order
shall not have been reversed, stayed, modified or amended in any manner not
acceptable to the Proponents and P&G, and the P&G Settlement Agreement (and
licenses annexed thereto) shall not have been terminated by P&G or deemed
terminated in accordance with their respective terms;
(c) THE K-C SETTLEMENT AGREEMENT. The K-C Settlement Order
shall not have been reversed, stayed, modified or amended in any manner not
acceptable to the Proponents and K-C, and the K-C Settlement Agreement (and
licenses annexed thereto) shall not have been terminated by K-C or deemed
terminated in accordance with their respective terms;
(d) ESTIMATION ORDER. All Disputed Claims or Interests that
are contingent or unliquidated shall have been estimated or otherwise fixed
(either individually or in the aggregate) by one or more Estimation Orders; and
(e) EXIT FACILITY COMMITMENT. The Debtor shall have received a
commitment for the New Credit Agreement from a creditworthy financial
institution.
14.2. CONDITIONS PRECEDENT TO EFFECTIVE DATE. Before the Effective
Date occurs, the following conditions must occur and be satisfied:
(a) ENTRY OF CONFIRMATION ORDER; NO STAY. The Confirmation
Order shall have been entered, and no order of any court shall have been entered
and shall remain in effect (i) reversing, staying, remanding or otherwise
hindering the effectiveness of the Confirmation Order, the P&G Settlement Order
or the K-C Settlement Order or (ii) enjoining or restraining the Debtor from
consummating the Plan, the P&G Settlement Agreement, or the K-C Settlement
Agreement;
(b) EXIT FINANCING. All conditions precedent to closing the
New Credit Agreement (other than the occurrence of the Effective Date) shall
have been satisfied or waived and the New Credit Agreement shall have been
consummated;
(c) DOCUMENTS EXECUTED. All other documents required to be
delivered under the Plan shall have been executed and delivered by the parties
thereto, unless such execution or delivery has been waived by the parties
benefited by such documents; and
(d) CASH FOR CLOSING. Reorganized Paragon shall have
sufficient Cash on hand or availability under the New Credit Agreement to make
timely Distributions of Cash required hereunder.
14.3. ADDITIONAL CONDITIONAL PRECEDENTS TO EFFECTIVE DATE. In the
event that the Wellspring Stock Purchase Agreement has been executed and has not
been terminated, before the Effective Date occurs, the following additional
conditions must occur and be satisfied:
(a) CONFIRMATION DATE. The Confirmation Date shall have
occurred no later than January 15, 2000 or such later date as may be determined
by the Proponents and Wellspring, with the consent of P&G and K-C, such consent
not to be unreasonably withheld;
(b) CONSUMMATION OF THE WELLSPRING STOCK PURCHASE AGREEMENT.
All conditions precedent to consummation of the Wellspring Stock Purchase
Agreement other than the occurrence of the Effective Date shall have been
satisfied or waived as set forth therein;
(c) TRUST INDENTURE ACT. The New Notes shall qualify under the
Trust Indenture Act of 1939, as amended; and
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(d) EFFECTIVE DATE. The Effective Date shall have occurred on
or before February 15, 2000.
14.4. WAIVER OF CONDITIONS PRECEDENT TO CONFIRMATION AND
CONSUMMATION. Notwithstanding anything to the contrary contained in the Plan,
the Proponents may waive, with the consent of P&G and K-C (which consent
shall not be unreasonably withheld) any of the conditions precedent to (a)
Confirmation set forth in Sections 14.1(b) through 14.1(e) above, and (b) the
Effective Date set forth in Sections 14.2(d) and, with the consent of
Wellspring, Section 14.3 above.
14.5. MOOTNESS. The Proponents shall enjoy the benefit of the
mootness doctrine with respect to any conditions waived by the Proponents.
XV.
MISCELLANEOUS PROVISIONS
15.1. ADMINISTRATION PENDING EFFECTIVE DATE. Prior to the Effective
Date, the Debtor shall continue to operate its business as a Debtor in
Possession, subject to all applicable requirements of the Bankruptcy Code and
the Bankruptcy Rules. After the Effective Date, Reorganized Paragon may operate
its businesses, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code or the Bankruptcy Rules.
15.2. CARRYING OUT OF TERMS. All terms of the Plan may be put into
effect and carried out, without further action by the directors or shareholders
of Paragon or Reorganized Paragon, who shall be deemed to have unanimously
approved the Plan and all agreements and transactions provided for or
contemplated herein. All costs associated with the carrying out of the terms of
the Plan, including, but not limited to, costs for mailing, printing and
balloting shall be paid for and borne by the Debtor and its Estate.
15.3. WITHDRAWAL OF THE PLAN. The Proponents, acting jointly and
unanimously, reserve the right, at any time prior to the Confirmation Date, to
revoke or withdraw the Plan. Withdrawal of one Proponent as a proponent of this
Plan shall not constitute a withdrawal of the Plan, and the remaining Proponent
may seek confirmation of this Plan and, upon such occurrence, the term
"Proponents" as used in this Plan shall refer solely to the remaining Proponent
for all purposes. If the Proponents revoke or withdraw the Plan or if the
Confirmation Date does not occur, then the Plan shall be deemed null and void
and of no force and effect.
15.4. AMENDMENTS AND MODIFICATIONS TO PLAN. The Plan may be altered,
amended or modified by the Proponents, acting jointly and unanimously, before or
after the Confirmation Date, as provided in section 1127 of the Bankruptcy Code.
The Proponents reserve the right, in accordance with the Bankruptcy Code and the
Bankruptcy Rules, to amend or modify the Plan at any time prior to the entry of
the Confirmation Order. After the entry of the Confirmation Order, the
Proponents may, upon order of the Bankruptcy Court, amend or modify the Plan in
accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or
omission or reconcile any inconsistency in the Plan in such manner as may be
necessary to carry out the purpose and intent of the Plan. A holder of a Claim
or Interest that has accepted the Plan shall be deemed to have accepted the Plan
as it may be modified if the proposed modification does not materially and
adversely change the treatment of the Claim or Interest of such holder.
Notwithstanding anything to the contrary contained in this Section 15.4 or any
other provision of the Plan: (a) provided the Wellspring Stock Purchase
Agreement has been executed and has not been terminated, Sections 7.5, 7.6,
9.11, 9.12, 9.19(a), 9.21, 13.3, 13.4, 13.5, 13.9 hereof and any provisions
(including any definition) which (1) provide that Wellspring's consent or
approval is required or that a document must be satisfactory to Wellspring or
(2) relate to the New Notes, New Notes Amount, the New Common Stock or the
Warrants to be issued if the Wellspring Stock Purchase Agreement is executed and
has not been terminated, may not be altered, amended or modified without the
express written consent of Wellspring (which consent shall not be unreasonably
withheld); and (b) each of the Proponents hereby irrevocably agrees that the
provisions of Section 13.5 hereof shall not be altered, amended, or modified in
any material respect.
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15.5. SEVERABILITY. If any provision of the Plan is determined to be
unenforceable, such determination shall not limit or affect the enforceability
and operative effect of any other provisions of the Plan. Subject to the last
sentence of Section 15.4 hereof, to the extent any provision of the Plan would,
by its inclusion in the Plan, prevent or preclude the Bankruptcy Court from
entering the Confirmation Order, the Bankruptcy Court, on the request of the
Proponents, may modify or amend such provision, in whole or in part, as
necessary to cure any defect or remove any impediment to the confirmation of the
Plan existing by reason of such provision. A holder of a Claim or Interest that
has accepted the Plan shall be deemed to have accepted the Plan as it may be
modified in accordance with this Section if the proposed modification does not
materially and adversely change the treatment of the Claim or Interest of such
holder.
15.6. CONFIRMATION ORDER. The Confirmation Order shall ratify all
transactions effected by the Debtor during the period commencing on the Petition
Date and ending on the Confirmation Date.
15.7. COMPLIANCE WITH SECURITIES LAWS AND TAX REQUIREMENTS.
(a) SECTION 1145 EXEMPTION. Pursuant to, in accordance with
and solely to the extent provided under section 1145 of the Bankruptcy Code, the
original issuance of the New Common Stock, the issuance of the New Notes, the
Rights, the New Common Stock to be issued upon exercise of any stock options
approved as part of the Plan and the issuance of the Warrants, are exempt from
the registration requirements of section 5 of the Securities Act and any state
or local law requiring or licensing of an issuer, underwriter, broker or dealer
in, such New Notes or New Common Stock.
(b) SECTION 1146 EXEMPTION. To the extent permitted by section
1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of any
security under the Plan, or the execution, delivery or recording of an
instrument of transfer pursuant to, in implementation of or as contemplated by
the Plan, or the revesting, transfer or sale of any real property of the Debtor
pursuant to, in implementation of or as contemplated by the Plan shall not be
taxed under any state or local law imposing a stamp tax, transfer tax or similar
tax or fee. Consistent with the foregoing, each recorder of deeds or similar
official for any county, city or governmental unit in which any instrument
hereunder is to be recorded shall, pursuant to the Confirmation Order, be
ordered and directed to accept such instrument, without requiring the payment of
any documentary stamp tax, deed stamps, stamp tax, transfer tax, intangible tax
or similar tax.
15.8. INTERPRETATION, RULES OF CONSTRUCTION, COMPUTATION OF TIME,
AND CHOICE OF LAW.
(a) The provisions of the Plan shall control over any
descriptions thereof contained in the Disclosure Statement.
(b) Any term used in the Plan that is not defined in the Plan,
either in Article I (Definitions) or elsewhere, but that is used in the
Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to that
term in (and shall be construed in accordance with the rules of construction
under) the Bankruptcy Code or the Bankruptcy Rules. Without limiting the
foregoing, the rules of construction set forth in section 102 of the Bankruptcy
Code shall apply to the Plan, unless superseded herein. The definitions and
rules of construction contained herein do not apply to the Disclosure Statement
or to the Exhibits to the Plan except to the extent expressly so stated in the
Disclosure Statement or in each Exhibit to the Plan.
(c) The words "herein," "hereof," "hereto," "hereunder" and
others of similar import refer to the Plan as a whole and not to any particular
Article, Section, subsection or clause contained in the Plan, unless the context
requires otherwise.
(d) Unless specified otherwise in a particular reference, all
references in the Plan to Articles, Sections and Exhibits are references to
Articles, Sections and Exhibits of or to the Plan.
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(e) Any reference in the Plan to a contract, document,
instrument, release, bylaw, certificate, indenture or other agreement being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions.
(f) Any reference in the Plan to an existing document or
exhibit means such document or exhibit as it may have been amended, restated,
modified or supplemented as of the Effective Date.
(g) Captions and headings to Articles and Sections in the Plan
are inserted for convenience of reference only and shall neither constitute a
part of the Plan nor in any way affect the interpretation of any provisions
hereof.
(h) Whenever from the context it is appropriate, each term
stated in either the singular or the plural shall include both the singular and
the plural, and each pronoun stated in the masculine, feminine or neuter
includes the masculine, feminine and neuter.
(i) In computing any period of time prescribed or allowed by
the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
(j) All Exhibits to the Plan are incorporated into the Plan,
and shall be deemed to be included in the Plan, regardless of when Filed.
(k) Subject to the provisions of any contract, certificate,
bylaws, instrument, release, indenture or other agreement or document entered
into in connection with the Plan, the rights and obligations arising under the
Plan shall be governed by, and construed and enforced in accordance with,
federal law, including the Bankruptcy Code and Bankruptcy Rules.
15.9. BINDING EFFECT OF THE PLAN. The provisions of the Plan shall
be binding upon and inure to the benefit of the Debtor, Reorganized Paragon,
any holder of a Claim or Interest, their respective predecessors, successors,
assigns, agents, officers and directors and any other Person affected by the
Plan.
15.10. PAYMENT OF STATUTORY FEES. All fees payable pursuant to
section 1930 of title 28 of the United States Code shall be paid on or as
soon as reasonably practicable after the Effective Date or the date such fees
become due, as applicable.
15.11. DISSOLUTION OF COMMITTEES. On the Effective Date, the
Creditors' Committee and Equity Committee shall cease to exist and their members
and employees or agents (including, without limitation, attorneys, investment
bankers, financial advisors, accountants and other professionals) shall be
released and discharged from all further authority, duties, responsibilities and
obligations relating to, arising from or in connection with the Chapter 11 Case;
provided, however, that (a) members and/or professionals of such Committees may
pursue applicable Fee Claims; (b) counsel to the Creditors' Committee shall be
entitled to (i) monitor the Claims review, objection and reconciliation process,
bring the status of such process to the attention of the Bankruptcy Court, and
be heard with respect to any proposed resolution of a Claim for which Bankruptcy
Court approval is sought, and (ii) receive from Reorganized Paragon compensation
for services rendered and reimbursement for expenses incurred in connection with
such monitoring, in an amount not to exceed, without Reorganized Paragon's prior
written consent or further Bankruptcy Court order obtained on reasonable notice
to Reorganized Paragon, $7,500 per month and $75,000 in the aggregate; and (c)
the Equity Committee may appoint a subcommittee (not to exceed three members) to
continue in existence after the Effective Date and such subcommittee shall have
the right to consult, and shall exist solely for the limited purpose of
consulting, with the Litigation Claims Representative regarding the status of
the Litigation Claims (reasonable expenses
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incurred by members of the subcommittee may be reimbursed by the Litigation
Claims Representative from the Litigation Fund).
15.12. GOVERNING LAW. Except to the extent the Bankruptcy Code or
other federal law is applicable, or to the extent that an Exhibit hereto
provides otherwise, the rights, duties and obligations arising under the Plan
shall be governed by, and construed and enforced in accordance with, the
Bankruptcy Code and, to the extent not inconsistent therewith, the laws of the
State of Georgia, without giving effect to principles of conflicts of laws.
15.13. METHOD OF NOTICE. All notices required to be given under the
Plan, if any, shall be in writing and shall be sent by first class mail, postage
prepaid, or by overnight courier:
If to the Debtor or Reorganized Paragon, to:
Paragon Trade Brands, Inc.
180 Technology Parkway
Atlanta, GA 30092
Attn: General Counsel
(678) 969-5000
with copies to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attn: Myron Trepper, Esq.
Marc Abrams, Esq.
(212) 728-8000
and
Alston & Bird LLP
1201 West Peachtree
Atlanta, Georgia 30309-3424
Attn: Dennis Connolly, Esq.
(404) 881-7000
If to the Creditors' Committee, to:
O'Melveny & Myers, LLP
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Adam Harris, Esq.
Joel Zweibel, Esq.
(212) 326-2000
If to the Equity Committee, to:
Andrews & Kurth LLP
600 Travis, Suite 4200
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Houston, Texas 77002
Attn: John Lee, Esq.
(713) 220-4260
If to P&G, to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114-1190
Attn: David Heiman, Esq.
(216) 586-7715
If to K-C, to:
Sidley & Austin
Bank One Plaza
Ten South Dearborn
Chicago, IL 60603
Attn: Shalom Kohn, Esq.
(312) 853-7756
If to Wellspring, provided the Wellspring Stock Purchase Agreement has
been consummated, to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Robert Drain, Esq.
(212) 373-3236
Any of the above may, from time to time, change its address for future notices
and other communications hereunder by filing a notice of the change of address
with the Bankruptcy Court. Any and all notices given to such parties under the
Plan shall be effective when received.
15.14. AUTHORIZATION OF CORPORATE ACTION. The entry of the
Confirmation Order shall constitute authorization for the Debtor and Reorganized
Paragon to take or cause to be taken any corporate action necessary or
appropriate to consummate the provisions of the Plan prior to and through the
Effective Date (including, without limitation, the filing of or amending or
restating of the Restated Certificate of Incorporation), and all such actions
taken or caused to be taken shall be deemed to have been authorized and approved
by the Bankruptcy Court. All matters provided for under the Plan involving the
corporate structure of the Debtor and/or Reorganized Paragon in connection with
the Plan, and any corporate action required by the Debtor and/or Reorganized
Paragon in connection with the Plan, shall be deemed to have occurred and shall
be in effect pursuant to any applicable state law and the Bankruptcy Code,
without any requirement of further action by the stockholders or directors of
the Debtor and/or Reorganized Paragon. On the Effective Date, the appropriate
officers of Reorganized Paragon and members of the New Board are authorized and
directed to execute and deliver the relevant agreements, documents and
instruments contemplated by the Plan and the Disclosure Statement in the name of
and on behalf of Reorganized Paragon.
15.15. CONTINUED CONFIDENTIALITY OBLIGATIONS. Notwithstanding
anything to the contrary contained herein, pursuant to the terms thereof,
members of and advisors to any Committee, any other holder of a Claim
or Interest and
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their
respective predecessors and successors shall continue to be obligated and bound
by terms of any confidentiality agreement executed by them in connection with
the Chapter 11 Case or the Debtor, to the extent that such agreement, by its
terms, may continue in effect after the Confirmation Date.
XVI.
RETENTION OF JURISDICTION
16.1. RETENTION OF JURISDICTION. The Bankruptcy Court shall retain
and have exclusive jurisdiction over the Chapter 11 Case for, INTER ALIA, the
following purposes:
(a) CLAIMS. To determine the amount, allowability,
classification, or priority of Claims against or Interests in the Debtor and to
allow, disallow, estimate, liquidate or determine any Claim or Interest and to
enter or enforce any order requiring the filing of any Claim or Interest before
a particular date;
(b) INJUNCTION ETC. To issue injunctions or take such other
actions or make such other orders as may be necessary or appropriate to restrain
interference with the Plan or its execution or implementation by any Person, to
construe and to take any other action to enforce and execute the Plan, the
Confirmation Order, or any other order of the Bankruptcy Court, to issue such
orders as may be necessary for the implementation, execution, performance and
consummation of the Plan and all matters referred to herein, and to determine
all matters that may be pending before the Bankruptcy Court in the Chapter 11
Case on or before the Effective Date with respect to any Person;
(c) VESTING. To protect the property of the Estate revesting
in Reorganized Paragon from claims against, or interference, with such property,
including actions to quiet or otherwise clear title to such property, to
determine ownership of claims and causes of action retained under the Plan or to
resolve any dispute concerning liens, security interest or encumbrances on any
property of Reorganized Paragon;
(d) PRIORITY CLAIMS. To determine any Priority Tax Claims,
Priority Non-Tax Claims, Administrative Claims, Fee Claims, DIP Claims, or any
other request for payment of Claims or fees or expenses;
(e) DISPUTE RESOLUTION. To resolve any and all disputes
concerning, arising under or related to the Plan, the P&G Settlement Agreement
and P&G Settlement Order, the K-C Settlement Agreement and K-C Settlement Order,
and the making of distributions hereunder and thereunder (PROVIDED, HOWEVER,
that the Bankruptcy Court shall not retain jurisdiction with respect to disputes
arising under or related to the licenses granted in connection with the P&G
Settlement Agreement and the K-C Settlement Agreement);
(f) LEASES AND EXECUTORY CONTRACTS. To determine any and all
matters relating to the rejection, assumption, or assignment of executory
contracts or unexpired leases of the Debtor, or to determine any motion to
reject an executory contract or unexpired lease of the Debtor, where (a) the
parties cannot resolve the cure amount therefor, or (b) the Debtor mistakenly
had determined that any such agreement was not an executory contract or
unexpired lease, and to determine the allowance of any Claims resulting from the
rejection of executory contracts and unexpired leases;
(g) WELLSPRING STOCK PURCHASE AGREEMENT. To hear and determine
any and all matters, claims or disputes arising from or relating to the
Wellspring Stock Purchase Agreement or any other document between the Debtor and
Wellspring that was executed in connection with this Plan;
(h) ACTIONS. To determine all applications, motions, adversary
proceedings, contested matters, actions, and any other litigated matters
instituted prior to the closing of the Chapter 11 Case, including any remands;
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(i) GENERAL MATTERS. To determine such other matters, and for
such other purposes, as may be provided in the Confirmation Order or as may be
authorized under provisions of the Bankruptcy Code;
(j) PLAN MODIFICATION. To modify the Plan under section 1127
of the Bankruptcy Code, and/or remedy any defect, cure any omission, or
reconcile any inconsistency in the Plan or the Confirmation Order so as to carry
out its intent and purposes;
(k) AID CONSUMMATION. To issue such orders in aid of
consummation of the Plan and the Confirmation Order notwithstanding any
otherwise applicable non-bankruptcy law, with respect to any Person, to the full
extent authorized by the Bankruptcy Code;
(l) LITIGATION. To enable the Litigation Claims Representative
to prosecute any Litigation Claims to Final Order and to enable the Debtor to
prosecute any and all proceedings which have been brought to set aside liens or
encumbrances and, if commenced prior to the Effective Date, to recover any
transfers, assets, properties or damages to which the Debtor may be entitled
under applicable provisions of the Bankruptcy Code or any other federal, state
or local laws except as may be waived pursuant to the Plan;
(m) IMPLEMENTATION OF CONFIRMATION ORDER. To enter and
implement such orders as may be appropriate in the event the Confirmation Order
is for any reason stayed, revoked, modified or vacated;
(n) RESOLVE DISPUTES. To resolve any disputes concerning
whether a Person had sufficient notice of the Chapter 11 Case, an Applicable Bar
Date, the hearing to consider approval of the Disclosure Statement, the
Confirmation Hearing, and for the purpose of determining whether a Claim or
Interest is discharged hereunder or for any other purpose;
(o) ORDERS. To enter such orders as may be necessary or
appropriate to implement or consummate the provisions of the Plan and all
contracts, instruments, releases, or other agreements or documents created in
connection with the Chapter 11 Case or the Plan and to resolve any dispute or
matter arising under or in connection with any order of the Bankruptcy Court
entered in the Chapter 11 Case;
(p) CONTROVERSIES. To resolve controversies and disputes
regarding interpretation, implementation, enforcement and consummation of the
Plan, the K-C Settlement Agreement, the P&G Settlement Agreement, or any other
exhibit to the Plan or related document (PROVIDED, HOWEVER, that the Bankruptcy
Court shall not retain jurisdiction with respect to disputes arising under or
related to the licenses granted in connection with the P&G Settlement Agreement
and the K-C Settlement Agreement);
(q) DETERMINE TAX LIABILITY. To determine any tax liability
pursuant to sections 346, 505 and/or 1146 of the Bankruptcy Code;
(r) RESERVES. To resolve disputes concerning any reserves with
respect to Disputed Claims or the administration thereof;
(s) VALIDITY. To hear and resolve claims or actions
challenging the validity or enforceability of any provision of the Plan; and
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(t) FINAL DECREE. To enter a final decree closing the Chapter
11 Case.
Respectfully submitted,
Dated: Norcross, Georgia
January 13, 2000
PARAGON TRADE BRANDS, INC.
By: /s/ Alan J. Cyron
---------------------
Alan J. Cyron
Chief Financial Officer
Dated: Atlanta, Georgia
January 13, 2000
THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF
PARAGON TRADE BRANDS, INC.
By: /s/ John T. Seeds
---------------------
John T. Seeds
Wachovia Bank of Georgia, N.A.
As Chairman of the Creditors'
Committee
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LIST OF EXHIBITS
Exhibit A Summary of Wellspring Plan Warrants
Exhibit B Summary of Standalone Plan Warrants
Exhibit C Wellspring Commitment
Exhibit D Wellspring Rights Offering Procedures
Exhibit E Wellspring Stock Purchase Agreement
