SETTLEMENT AGREEMENT
This Settlement Agreement is made and entered into as of March
19, 1999, between Paragon Trade Brands, Inc., a Delaware corporation, debtor and
debtor in possession ("Paragon") and Xxxxxxxx-Xxxxx Corporation, a Delaware
corporation ("K-C").
W I T N E S S E T H:
WHEREAS, Paragon and K-C are parties to an action entitled
XXXXXXXX-XXXXX CORPORATION V. PARAGON TRADE BRANDS, INC., Case No. 3:95-cv-2574
(N.D. Tex.) filed by K-C on or about October 25, 1995, in the United States
District Court for the Northern District of Texas (the "Action");
WHEREAS, Paragon has denied liability in the Action and asserted
counterclaims therein;
WHEREAS, on January 6, 1998, Paragon filed a voluntary petition
for relief under chapter 11 of title 11 of the United States Code with the
United States Bankruptcy Court for the Northern District of Georgia, Atlanta
Division, which chapter 11 case currently is pending;
WHEREAS, on or about June 5, 1998, K-C filed a proof of claim in
Paragon's chapter 11 case asserting, among other things, unsecured prepetition
claims in excess of approximately $890 million (without trebling) against
Paragon in respect of Paragon's alleged infringement of certain K-C patents (as
further defined in Section 1.31 hereof, the "K-C Proof of Claim");
WHEREAS, on or about June 5, 1998, K-C filed the Withdrawal
Motion (as defined below) seeking withdrawal of the reference to the United
States Bankruptcy Court for the Northern District of Georgia, Atlanta Division,
with respect to all matters relating to the K-C Proof of Claim;
WHEREAS, Paragon and K-C have agreed to effectuate a settlement
of all claims, counterclaims and disputes asserted or assertable by and against
the other, including, but not limited to, the Action and the K-C Proof of Claim,
in accordance with the terms and conditions set forth herein; and
WHEREAS, this Settlement Agreement is essential to Paragon's
efforts to emerge successfully from its chapter 11 case;
NOW, THEREFORE, for good and valuable consideration, and in order
to settle all claims and disputes between Paragon and K-C, and to facilitate
Paragon's expeditious and effective reorganization, the parties hereto agree as
follows:
1. DEFINITIONS. In addition to such other terms as are defined in other
sections of this Settlement Agreement, the following terms (which appear in the
Settlement Agreement as capitalized terms) have the following meanings as used
in the Settlement Agreement:
1.1. "Action" shall have the meaning ascribed to such term in the
first "WHEREAS" clause of this Settlement Agreement.
1.2. "Administrative Expense Claim" means a Claim for costs and
expenses of administration which is entitled to administrative expense
priority under sections 503(b) and 507(a)(1) of the Bankruptcy Code.
1.3. "Affiliate" means any Person that is (a) an affiliate as
such term is defined in section 101(2) of the Bankruptcy Code, (b) an
existing or future direct or indirect subsidiary or parent corporation of
Paragon or K-C (as the case may be), or (c) an existing or future joint
venture or general or limited partnership governed by any applicable law in
which (i) Paragon or K-C (as the case may be) or any existing or future
direct or indirect subsidiary or parent corporation of Paragon or K-C (as
the case may be) is a joint venturer or general or limited partner or (ii)
a joint venture or general or limited partnership governed by any
applicable law in which Paragon or K-C (as the case may be) is a joint
venturer or general or limited partner, as the case may be. The defined
term "Affiliate" also includes all successors and assigns of each of the
foregoing.
1.4. "Allowed Claim" means a Claim which is finally allowed in
the Chapter 11 Case and is not subject to further allowance or disallowance
by the Bankruptcy Court or an objection being filed by any party in
interest.
1.5. "Ancillary Agreements" means the K-C License Agreement
annexed hereto as Exhibit A, the Paragon License Agreement annexed hereto
as Exhibit B, the Paragon Release annexed hereto as Exhibit C, and the K-C
Release annexed hereto as Exhibit D.
1.6. "Appeal" means that certain appeal taken by K-C from the
April 10th Order.
1.7. "April 10th Order" means (a) that certain order of the
Bankruptcy Court, dated April 10, 1998, and entered on the Bankruptcy
Court's docket on April 10, 1998, as evidenced by docket number 619,
together with (b) that certain order of the Bankruptcy Court, dated June
17, 1998, and entered on the Bankruptcy Court's docket on June 18, 1998, as
evidenced by docket number 841, denying K-C's motion for reconsideration of
the order referenced in clause (a) of this definition.
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1.8. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978,
11 U.S.C. xx.xx. 101, ET seq., as the same was in effect on the Petition
Date, as amended by any amendments applicable to the Chapter 11 Case.
1.9. "Bankruptcy Court" means the United States Bankruptcy Court
for the Northern 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.
1.10. "Bankruptcy Court Approval Order" means an order (which, if
not previously entered as a separate order despite Paragon's reasonable
good faith efforts, may be a Confirmation Order) of the Bankruptcy Court,
in form and substance acceptable to Paragon and K-C, approving this
Settlement Agreement, the Paragon Release and the K-C Release; PROVIDED,
that if the Bankruptcy Court Approval Order also is a Confirmation Order,
(i) only those provisions relating to approval of this Settlement Agreement
must be in form and substance acceptable to K-C, and (ii) K-C shall have
the right to object to the other provisions of any such Confirmation Order.
1.11. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure, effective August 1, 1991, in accordance with the provisions of
28 U.S.C. ss. 2075, as now in effect or hereafter amended.
1.12. "Business Day" means any day, other than a Saturday, Sunday
or "legal holiday" (as such term is defined in Bankruptcy Rule 9006(a)).
1.13. "Chapter 11 Case" means Paragon's case pending in the
Bankruptcy Court pursuant to chapter 11 of the Bankruptcy Code and
administered under case number 98 - 60390 (Xxxxxx, J.).
1.14. "Claim" means a claim as such term is defined in section
101(5) of the Bankruptcy Code.
1.15. "Confirmation Date" means the date on which the Bankruptcy
Court enters an order confirming, pursuant to section 1129 of the
Bankruptcy Code, a Plan for Paragon.
1.16. "Confirmation Order" means an order of the Bankruptcy Court
confirming a Plan pursuant to section 1129 of the Bankruptcy Code.
1.17. "Creditors' Committee" means the Official Committee of
Unsecured Creditors in the Chapter 11 Case, as appointed by the Office of
the United States Trustee for the
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Xxxxxxxx Xxxxxxxx xx Xxxxxxx, Xxxxxxx Division, as reconstituted from time
to time.
1.18. "Debtor" means Paragon.
1.19. "Effective Date" means the first Business Day that the Plan
becomes effective in accordance with its terms.
1.20. "Estate" means the estate created in the Chapter 11 Case
for Paragon by section 541 of the Bankruptcy Code.
1.21. "Federal Circuit Court" means the United States Court of
Appeals for the Federal Circuit, or, to the extent that such court ceases
to exercise jurisdiction over the P&G Appeal, such other court or adjunct
thereof that exercises jurisdiction over the P&G Appeal.
1.22. "Final Order" means an order or judgment which 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 which 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.
1.23. "Georgia District Court" means the United States District
Court for the Northern District of Georgia, Atlanta Division, or, to the
extent that such court ceases to exercise jurisdiction over the Appeal or
the Withdrawal Motion, such other court or adjunct thereof that exercises
jurisdiction over the Appeal or Withdrawal Motion, as applicable.
1.24. "Impaired" means impaired within the meaning of section
1124 of the Bankruptcy Code.
1.25. "K-C Allowed Administrative Claim" shall have the meaning
set forth in Section 2.1 hereof.
1.26. "K-C Allowed Claims" means, collectively, the K-C
Conditionally Allowed Claim, the K-C Fixed Allowed General Unsecured Claim
and the K-C Allowed Administrative Claim.
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1.27. "K-C Conditionally Allowed Claim" shall have the meaning
set forth in Section 2.1 hereof.
1.28. "K-C Fixed Allowed General Unsecured Claim" shall have the
meaning set forth in Section 2.1 hereof.
1.29. "K-C License Agreement" means the license agreement annexed
hereto as Exhibit A.
1.30. "K-C Licensed Patents" means the patents identified in
Exhibit E hereto.
1.31. "K-C Proof of Claim" shall have the meaning ascribed to
such term in the fourth "WHEREAS" clause of this Settlement Agreement,
which proof of claim has been assigned claim number 469 in the Chapter 11
Case. As used herein, K-C Proof of Claim also shall include the proof of
claim number 110 filed by K-C in the Chapter 11 Case on or about January
21, 1998.
1.32. "K-C Release" means the general release annexed hereto as
Exhibit D.
1.33. "License Agreements" means the Paragon License Agreement
and the K-C License Agreement.
1.34. "Paragon License Agreement" means the license agreement
annexed hereto as Exhibit B.
1.35. "Paragon Patents" means the patents identified in Exhibit F
hereto.
1.36. "Paragon Release" means the general release annexed hereto
as Exhibit C.
1.37. "Parties" means Paragon and K-C and their respective
successors and assigns, collectively.
1.38. "Person" means any individual, corporation, partnership,
association, indenture trustee, organization, joint stock company, joint
venture, estate, trust, governmental unit or any political subdivision
thereof, the Creditors' Committee, holders of equity interests in and/or
claims against Paragon or any other entity.
1.39. "Petition Date" means January 6, 1998.
1.40. "Plan" means a plan of reorganization for Paragon confirmed
by the Bankruptcy Court pursuant to section 1129 of the Bankruptcy Code in
the Chapter 11 Case, as the same may be amended or modified, relying upon
and/or incorporating and, INTER ALIA, implementing the terms of this
Settlement Agreement.
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1.41. "P&G" means The Procter & Xxxxxx Company, an Ohio
corporation.
1.42. "P&G Appeal" means that certain appeal taken by Paragon
from the P&G Judgment and Rule 59 Denial, which appeal is evidenced by
Paragon's Notice of Appeal, filed July 2, 1998, and Paragon's Amendment to
Notice of Appeal, filed August 4, 1998, which appeal is docketed in the
Federal Circuit Court as No. 98-1480.
1.43. "P&G Judgment" means, collectively, that certain (a)
Opinion and Judgment, issued on December 30, 1997, and entered on the
docket for the United States District Court for the District of Delaware on
January 6, 1998, in favor of P&G and against Paragon; (b) Money Judgment
entered on June 2, 1998; and (c) Permanent Injunction entered on June 2,
1998.
1.44. "P&G Judgment Amount" means one hundred seventy-eight
million four hundred twenty-nine thousand five hundred thirty-six dollars
($178,429,536.00), plus accrued interest thereon, from the date of entry of
the Money Judgment described in the preceding paragraph until the date that
the Litigated Reduction or Consensual Reduction (as defined in Section
2.1(c) hereof) is approved by a Final Order, at the rate applicable to such
Money Judgment.
1.45. "Rule 59 Denial" means that certain Opinion and Order, both
entered August 4, 1998, denying Paragon's motion for relief from the P&G
Judgment pursuant to Federal Rule of Civil Procedure 59.
1.46. "Settlement Effective Date" means the first Business Day
after the Bankruptcy Court Approval Order is entered and is not subject to
any stay.
1.47. "Texas District Court" means the United States District
Court for the District of Texas, or, to the extent that such court ceases
to exercise jurisdiction over the Action, such other court or adjunct
thereof that exercises jurisdiction over the Action.
1.48. "Unimpaired" means not impaired within the meaning of
section 1124 of the Bankruptcy Code.
1.49. "Withdrawal Motion" means that certain motion dated June 5,
1998, filed by K-C in the Georgia District Court, seeking withdrawal of the
reference to the Bankruptcy Court with respect to all matters relating to
the K-C Proof of Claim.
2. ALLOWED AMOUNT AND TREATMENT OF K-C CLAIMS.
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2.1. ALLOWED AMOUNT OF CLAIMS. K-C shall be granted three Allowed
Claims in the Chapter 11 Case (and the K-C Proof of Claim shall be deemed
amended accordingly):
(a) an Allowed Administrative Expense Claim (the "K-C Allowed
Administrative Claim") in an amount equal to the sum of five
million dollars and zero cents ($5,000,000.00);
(b) an Allowed Claim (the "K-C Fixed Allowed General Unsecured
Claim") in an amount equal to the sum of (i) one hundred ten
million dollars and zero cents ($110,000,000.00) plus (ii)
interest on the principal amount of $110,000,000.00 from
April 15, 1999 and through and including the Effective Date
of the Plan; and
(c) an Allowed Claim (the "K-C Conditionally Allowed Claim") in
an amount equal to (i) forty percent (40%) of the amount by
which the P&G Judgment Amount is reduced (the "Litigated
Reduction") by a Final Order as a result of Paragon's
prosecution (if Paragon so elects, in its sole and absolute
discretion, to continue such prosecution) of the P&G Appeal,
minus (ii) twenty million dollars and zero cents
($20,000,000.00). In the event that Paragon and P&G
consensually resolve the P&G Appeal after a decision on the
merits of the P&G Appeal by the Federal Circuit Court, the
K-C Conditionally Allowed Claim shall equal (i) forty
percent (40%) of the amount by which the agreed payment to
P&G on account of the claims which are the subject of the
P&G Judgment is less than the P&G Judgment Amount (the
"Consensual Reduction"), minus (ii) twenty million dollars
and zero cents ($20,000,000.00). In the event that Paragon
and P&G consensually resolve the P&G Appeal prior to the
issuance of any decision on the merits by the Federal
Circuit Court, K-C shall not be entitled to receive the K-C
Conditionally Allowed Claim and such Claim shall be deemed
not to exist.
For purposes of the preceding clause 2.1(b)(ii), to the extent the payment
of same is permitted under applicable law, or either P&G or other holders
of allowed prepetition, general unsecured claims receive payment of
postpetition interest, interest shall accrue at six percent (6%) on a per
annum 365 day year basis (the "Postpetition Interest Rate").
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2.2. TREATMENT OF THE K-C ALLOWED ADMINISTRATIVE CLAIM. The K-C
Allowed Administrative Claim shall be afforded treatment under the Plan as
an Administrative Expense Claim in accordance with section 1129(a)(9)(A) of
the Bankruptcy Code.
2.3. CLASSIFICATION AND TREATMENT OF THE K-C FIXED ALLOWED
GENERAL UNSECURED CLAIM. Paragon shall classify and treat the K-C Fixed
Allowed General Unsecured Claim as a prepetition, general unsecured claim
in any Plan proposed by Paragon, and shall classify such claim in the same
class as all other holders of prepetition, general unsecured Allowed Claims
against Paragon in any such Plan; PROVIDED, HOWEVER, that Paragon may
include a usual and customary "convenience," "small claims" or other
similar class of prepetition, general unsecured Allowed Claims that does
not include the K-C Fixed Allowed General Unsecured Claim in its Plan if
Paragon determines it is necessary or appropriate.
2.4. CLASSIFICATION AND TREATMENT OF THE K-C CONDITIONALLY
ALLOWED CLAIM. Paragon shall classify and treat the K-C Conditionally
Allowed Claim, to the extent that the Litigated Reduction or the Consensual
Reduction occurs, in the same manner under its Plan as the K-C Fixed
Allowed General Unsecured Claim. In the event that the Confirmation Date of
a Plan proposed by Paragon is before the date on which the K-C
Conditionally Allowed Claim is determined, Paragon shall establish under
such Plan an adequate reserve, as agreed to by the Parties and/or
determined by the Bankruptcy Court, to provide for the treatment of the K-C
Conditionally Allowed Claim provided for herein as and when the amount, if
any, of such Allowed Claim is determined. The principal amount due to K-C
with respect to the K-C Conditionally Allowed Claim shall, to the extent
the payment of same is permitted under applicable law, or either P&G or
other holders of allowed prepetition, general unsecured claims receive
payment of postpetition interest, bear interest at the Postpetition
Interest Rate from the date on which the Litigated Reduction or Consensual
Reduction, as applicable, is approved by a Final Order or, in the event
Bankruptcy Court approval is not required, otherwise becomes binding upon
Paragon and K-C (the "Interest Commencement Date") until and through (a)
the Effective Date, if the Interest Commencement Date occurs prior to the
Effective Date, or (b) the date upon which Paragon effects its distribution
to K-C on account of the K-C Conditionally Allowed Claim under the Plan, if
the Interest Commencement Date occurs after the Effective Date.
2.5. CONVERSION OF CHAPTER 11 CASE. Notwithstanding anything to
the contrary contained herein, in the event the Chapter 11 Case is
converted to a case under chapter 7 of the Bankruptcy Code, each K-C
Allowed
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Claim shall (a) have all the rights of any other claim of equal priority
against Paragon that shall have become an Allowed Claim prior to the date
of such conversion, and (b) be treated as an Allowed Claim in any such
chapter 7 case.
2.6. DISMISSAL OF CHAPTER 11 CASE. Notwithstanding anything to
the contrary contained herein, in the event that the Chapter 11 Case is
dismissed, the K-C Allowed Claims shall be deemed obligations of Paragon
following dismissal of the Chapter 11 Case, and (a) in the case of the K-C
Allowed Administrative Claim and the K-C Fixed Allowed General Unsecured
Claim, such claims shall become due and payable on the date the Chapter 11
Case is dismissed, and (b) in the case of the K-C Conditionally Allowed
Claim, such claim shall become due and payable on the first date that is on
or after the date that both (i) the Chapter 11 Case is dismissed and (ii)
the Litigated Reduction or the Consensual Reduction shall have been
approved by a Final Order.
3. DISMISSAL OF THE ACTION, THE APPEAL AND THE WITHDRAWAL MOTION.
3.1. By Order of the Georgia District Court dated February 18,
1999, the Appeal, Paragon's motion to dismiss the Appeal, and the
Withdrawal Motion were dismissed without costs and without prejudice to the
right, of either Party within sixty (60) days, to re-open such proceedings
if settlement of such proceedings is not consummated. If the Bankruptcy
Court denies approval of this Settlement Agreement, the Parties shall
cooperate with one another to take such steps as are necessary and
appropriate to ensure that these proceedings are re-opened.
3.2. Within five (5) Business Days after the Settlement Effective
Date: (a) K-C shall dismiss with prejudice (i) the Action, (ii) the Appeal
and (iii) the Withdrawal Motion; and (b) Paragon shall dismiss with
prejudice its counterclaims in the Action. From and after the Settlement
Effective Date, Paragon shall not contest any Valid Claim (as defined in
the K-C License Agreement) held or asserted by K-C.
4. LICENSES.
4.1. Contemporaneously with the execution of this Settlement
Agreement, K-C shall execute and deliver to Paragon the K-C License
Agreement.
4.2. In consideration for the payments to K-C set forth in this
Settlement Agreement, and subject to the truth of the representation and
warranties of Paragon described on Exhibit G hereto, K-C, on behalf of
itself and Xxxxxxxx-Xxxxx Worldwide, Inc. (who K-C represents and warrants
are
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the only holders of patents issued as of March 1, 1999, including any
reissues and reexaminations thereof, in the United States or Canada,
including any territories thereof, as to which K-C or any of its current
Affiliates has any right to assert or prosecute against an alleged
infringer), covenants not to xxx Paragon or its wholly-owned Canadian
subsidiary for infringement of any of its current patents which have been
issued as of March 1, 1999, including any reissues and reexaminations
thereof, in the United States or Canada (collectively, including any
territories of any of the foregoing, the "Approved Countries") with respect
to the specific products attached hereto as Exhibits H-1 through H-12,
including dual cuff versions of any of Exhibits H-1 through H-9 where the
only product change is the replacement of the single leg cuff feature on
such products with the dual leg cuff feature found on Exhibits H-10 through
H-12 (the "Approved Products"). Notwithstanding the foregoing and subject
to the K-C Release, (X) K-C covenants not to xxx Paragon or its
wholly-owned Canadian subsidiary for infringement of U.S. patent number
5,879,341 issued on March 9, 1999 in the name of Odorzynski, with respect
to products of Paragon that are made, used or sold on or before June 7,
1999 (provided that such covenant not to xxx shall not apply to products of
Paragon that are made, used or sold after June 7, 1999, other than products
made on or prior to June 7, 1999 but sold thereafter), and (Y) K-C shall be
entitled to assert or prosecute against Paragon and/or its Affiliates: (a)
claims under (i) U.S. patent number B1 5,147,343 issued on March 17, 1998
to Xxxxxxxxxxxx, (ii) U.S. patent number 5,601,542 issued on February 11,
1997 to Xxxxxx, and (iii) U.S. patent number 5,843,056 issued on December
1, 1998 to Good, to the extent that Paragon's products do not remain within
the respective "safe harbors" described in Exhibit I hereto; and (b) claims
related to patents owned by K-C or as to which K-C has any right to assert
or prosecute against an alleged infringer with respect to (i) products
other than the Approved Products, (ii) process/method patents claims, (iii)
patents issued under the laws of countries other than the Approved
Countries, or (iv) U.S. patent number 5,176,671 issued on January 5, 1993
in the name of Xxxxxxxx et al., with respect to products of Paragon
(including the Approved Products attached hereto as Exhibits H-1, H-5 and
H-11) that are made, used or sold on and after the date that is two years
after the date of execution of this Settlement Agreement; and nothing in
the covenant not to xxx contained in this Section 4.2, which was issued in
exchange for good and valuable consideration, shall be admissible against
K-C in connection with any patent claim which it has preserved the right to
bring under this Section.
4.3. Subject to the occurrence of the Settlement Effective Date,
Paragon agrees that in any future dispute regarding a Valid Claim (as such
term is defined in the K-C License Agreement), Paragon shall not contest
the validity of the K-C
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Licensed Patents and the validity of such patents shall be presumed.
Subject to the occurrence of the Settlement Effective Date, the entry of
the Bankruptcy Court Approval Order shall be deemed to be a judgment
binding upon Paragon and K-C as to the provisions of this Settlement
Agreement, including this Section 4.3.
4.4. Contemporaneously with the execution of this Settlement
Agreement, Paragon shall execute and deliver to K-C the Paragon License
Agreement.
4.5. On or before the date hereof, Paragon shall have changed the
superabsorbent material in its products to fit within the
Xxxxxxxxxxxx/Xxxxxx "safe harbor" described in Exhibit I hereto.
5. RELEASES.
5.1. Contemporaneously with the execution of this Settlement
Agreement, Paragon shall execute and hold in escrow the Paragon Release.
Paragon shall release and deliver to K-C the Paragon Release within five
(5) Business Days after the Settlement Effective Date.
5.2. Contemporaneously with the execution of this Settlement
Agreement, K-C shall execute and hold in escrow the K-C Release. K-C shall
release and deliver to Paragon the K-C Release within five (5) Business
Days after the Settlement Effective Date.
6. REPRESENTATIONS OF THE PARTIES.
6.1. K-C represents and warrants that (a) it has not filed any
proofs of claim in the Chapter 11 Case other than the K-C Proof of Claim,
and (b) it has not acquired or transferred or entered into any agreement to
acquire or transfer any proofs of claim, including the K-C Proof of Claim,
filed against Paragon in the Chapter 11 Case. K-C represents, warrants and
covenants that it (a) has not and will not amend, modify or supplement, or
seek to amend, modify or supplement the K-C Proof of Claim and, (b) shall
not acquire any claims asserted against Paragon by any Person in the
Chapter 11 Case without Paragon's prior written consent.
6.2. Paragon represents and warrants that the statements
contained in Exhibit G hereto are true and correct.
7. RESTRICTIONS ON TRANSFER OF K-C ALLOWED CLAIMS. Unless Paragon, in its
sole and absolute discretion, otherwise agrees in writing, K-C shall not sell or
otherwise transfer all or any portion of the K-C Allowed Claims for a period of
ninety
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(90) days following the date of execution of this Settlement Agreement.
Following such ninety (90) day period, K-C shall not sell or otherwise transfer
all or any portion of the K-C Allowed Claims to any Person or Persons unless
such Person or Persons (i) agree(s) to be bound to the terms and conditions of
this Settlement Agreement, and (ii) sign(s) an agreement that specifically
provides that Paragon is an intended third party beneficiary of such Person(s)'
agreement to be so bound to, and subject to the enforcement of, the terms and
conditions of this Settlement Agreement. Notwithstanding any assignment or
transfer by K-C of all or any portion of the K-C Allowed Claims in accordance
with the terms hereof, K-C shall continue to remain bound by each of the
provisions of this Settlement Agreement, including, but not limited to, K-C's
obligations to execute, deliver and perform its obligations under each of the
Ancillary Agreements. In the event that X-X xxxxx or otherwise transfers all or
any portion of the K-C Proof of Claim or the K-C Allowed Claims, and
notwithstanding any provisions contained herein or in the K-C License Agreement
to the contrary, the K-C License Agreement, if not previously terminated
pursuant to its terms, shall remain in full force and effect notwithstanding (a)
the lack, if any, of entry of the Bankruptcy Court Approval Order on or before
July 31, 1999, or (b) the reversal or modification of such order on appeal.
8. EXCLUSIVITY AND PLAN CONFIRMATION.
8.1. If Paragon complies with its obligations under this
Settlement Agreement, K-C shall not oppose any requests by Paragon for
extensions of its exclusive periods to file a plan of reorganization and to
solicit acceptances thereto (collectively, the "Exclusive Periods") under
section 1121 of the Bankruptcy Code through and including May 31, 1999 and
July 31, 1999, respectively, as long as it appears reasonably probable that
the Effective Date can occur on or before July 31, 1999.
8.2. Notwithstanding the provisions of section 8.1 hereof, K-C
shall have the right to object to (a) any motion filed by Paragon seeking
an extension of the Exclusive Periods if Paragon is not diligently pursuing
final approval of this Settlement Agreement (including its obligations
under Section 19 below), or (b) confirmation of any Plan proposed in the
Chapter 11 Case.
9. AMENDMENT. This Settlement Agreement may not be amended except by an
instrument in writing signed by both Parties hereto after prior written notice
to counsel to the Creditors' Committee and, if such amendment constitutes a
material modification of this Settlement Agreement, approval of the Bankruptcy
Court if the Effective Date has not yet occurred.
10. NOTICES. Any notices or other communications hereunder or in connection
herewith shall be in writing and shall
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be deemed to have been duly given when delivered in person, by facsimile
transmission or by registered or certified mail (postage prepaid, return receipt
requested) addressed, as follows:
If to Paragon, to:
Paragon Trade Brands, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chairman of the Board
Attention: General Counsel
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxx & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-474-3700
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 404-881-7777
Attention: Xxxx Xxxxxx, Esq.
O'Melveny & Xxxxx LLP
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
If to K-C, to:
Xxxxxxxx-Xxxxx Corporation
X.X. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
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Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
O'Melveny & Xxxxx LLP
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
or such other address as shall be furnished in writing pursuant to these notice
provisions by any Party. A notice of change of address shall not be deemed to
have been given until received by the addressee.
11. EFFECT ON LITIGATION. Neither this Settlement Agreement, the Ancillary
Agreements, nor any of the terms hereof or thereof, nor any negotiations,
documents, pleadings, proceedings or public reports in respect of any of the
foregoing, shall constitute or be construed as or be deemed to be evidence of an
admission on the part of either Paragon or K-C of any liability or wrong doing
whatsoever, or of the truth or untruth of any of the claims made by either
Paragon or K-C in their disputes or of the merit or lack of merit of any of the
defenses thereto; nor shall this Settlement Agreement (including the Ancillary
Agreements), or any of the terms hereof, or any negotiations, documents,
pleadings, proceedings or public reports in respect of any of the foregoing, be
offered or received in evidence or used or referred to in any such proceeding
against either Paragon or K-C or used or referred to in any such proceeding for
any purpose whatsoever except with respect to (i) effectuation and enforcement
of this Settlement Agreement or the Ancillary Agreements and the discontinuance
of the Action, the Appeal or the Withdrawal Motion, or (ii) with respect to
proceedings in the Chapter 11 Case to authorize and approve this Settlement
Agreement and the execution and delivery hereof, and to confirm the Plan.
12. EQUITABLE REMEDIES. The Parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Settlement Agreement
were not performed in accordance with its specific terms or otherwise were
breached. It accordingly is agreed that the Parties shall be entitled to
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specific enforcement of the terms and provisions hereof and to injunctive and
other equitable relief in the Bankruptcy Court or any other court of the United
States or any state thereof having jurisdiction in addition to any other remedy
to which they are entitled to at law or in equity. To the extent such injunctive
or other equitable relief requires the posting of a bond or other similar
requirement, each Party expressly waives the satisfaction of such requirement by
the other Party.
13. HEADINGS. The descriptive headings of the several sections of this
Settlement Agreement are inserted for convenience of reference only and do not
constitute a part of this Settlement Agreement, nor in any way affect the
interpretation of any provisions hereof.
14. APPLICABLE LAW. This Settlement Agreement shall be governed in all
respects, including validity, interpretation and effect, by the Bankruptcy Code
and the laws of the State of New York, without giving effect to the principles
of conflicts of law thereof.
15. COUNTERPARTS. This Settlement Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. ENTIRE SETTLEMENT. This Settlement Agreement (including the other
documents referred to herein) (a) constitutes the entire settlement, and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof, and (b) except as
otherwise expressly provided herein, is not intended to confer upon any other
person any rights or remedies hereunder.
17. RULES OF CONSTRUCTION.
17.1. Any term used in this Settlement Agreement that is not
defined herein, 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 Settlement Agreement, unless superseded herein.
17.2. The words "herein", hereof," "hereto," "hereunder" and
others of similar import refer to the Settlement Agreement as a whole and
not to any particular section, subsection or clause contained in this
Settlement Agreement, unless the context requires otherwise.
17.3. Any reference in this Settlement Agreement to an existing
document or
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exhibit means such document or exhibit as it may be amended, modified or
supplemented by the Parties.
17.4. 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.
17.5. In computing any period of time prescribed or allowed by
this Settlement Agreement, the provisions of Bankruptcy Rule 9006(a) shall
apply.
18. CONDITIONS. As an express condition precedent to the obligations of
Paragon and K-C under this Settlement Agreement:
18.1. BANKRUPTCY COURT APPROVAL. An order shall have been entered
approving this Settlement Agreement in all respects, which order shall not
be subject to any stay. In the event that the Bankruptcy Court Approval
Order is not entered, the terms of this Settlement Agreement and the
Ancillary Agreements shall not be binding on any of the Parties hereto,
except that (a) Sections 11 and 24 hereof shall remain binding, and (b) the
License Agreements shall continue to be effective and terminable by the
Parties in accordance with the terms thereof.
18.2. EXECUTION OF THE LICENSE AGREEMENTS. Contemporaneously with
the execution hereof, Paragon and K-C shall execute and deliver each of the
License Agreements.
19. AGREEMENT TO COOPERATE. As soon as reasonably practicable after the
date of execution of this Settlement Agreement, Paragon shall take reasonable
good faith steps to promptly obtain the entry of the Bankruptcy Court Approval
Order through the filing of a motion pursuant to, INTER ALIA, Bankruptcy Rule
9019, and K-C shall take such steps as reasonably requested by Paragon in good
faith to obtain entry of the Bankruptcy Court Approval Order.
20. REQUISITE AUTHORITY. Each of the undersigned Parties represents and
warrants that, except as affected by the requirements of the Bankruptcy Code for
the approval of, and subject to the terms of, this Settlement Agreement, (a)
this Settlement Agreement and all other documents executed or to be executed by
such Party in accordance with this Settlement Agreement are valid and
enforceable in accordance with their terms, (b) such Party has taken all
necessary corporate action required to authorize the execution, performance and
delivery of this Settlement Agreement and the related documents, and (c) upon
this Settlement Agreement being approved by an order of the Bankruptcy Court, it
will perform this Settlement Agreement and consummate all of the transactions
contemplated hereby.
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21. ANNOUNCEMENTS. All press releases by any Party regarding this
Settlement Agreement shall be approved by both Paragon and K-C prior to the
issuance thereof; provided that any Party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing Party shall advise the other Party prior to making such disclosure
and provide such other Party an opportunity to review and comment on the
proposed disclosure). Paragon's filing of a motion with the Bankruptcy Court
seeking approval of this Settlement Agreement shall not be considered a public
announcement requiring K-C's approval for purposes of this Section 21.
22. JURISDICTION. Unless and until the Chapter 11 Case is closed or
dismissed, the Bankruptcy Court shall retain exclusive jurisdiction, and the
Parties consent to such exclusive jurisdiction, to hear and determine any and
all matters, claims or disputes arising from or relating to the interpretation
and/or implementation of this Settlement Agreement; PROVIDED, HOWEVER, that the
Bankruptcy Court shall not retain jurisdiction following the Effective Date to
determine matters, claims and disputes concerning the interpretation and
enforcement of the License Agreements.
23. CONFIDENTIALITY. Nothing contained in this Settlement Agreement
modifies, or is intended to modify, the obligations of K-C and/or its employees,
advisors and agents under any confidentiality agreements that such Entities have
executed with Paragon.
(REST OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, each of the Parties hereto has caused this
Settlement Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
PARAGON TRADE BRANDS, INC.
Debtor and Debtor in Possession
By: /S/ B.V. XXXXXXX
--------------------------------
Title: Chairman and CEO
XXXXXXXX-XXXXX CORPORATION
By: /S/ O. XXXXXX XXXXXXXX
--------------------------------
Title: Senior Vice President -
Law and Government
Affairs
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