Paragon Trade Brands, Inc. (OTC Bulletin Board: PGNFQ) today announced that it has accepted a commitment by Wellspring Capital Management LLC ("Wellspring") to acquire Paragon as part of a plan of reorganization (the "Wellspring Commitment") and has filed, along with its Official Committee of Unsecured Creditors (the "Creditors' Committee"), as a co-proponent, an amended plan of reorganization (the "Plan") and disclosure statement (the "Disclosure Statement") in the United States Bankruptcy Court for the Northern District of Georgia. The Plan filed today by Paragon and the Creditors' Committee incorporates the terms of the Wellspring Commitment. Paragon reported that the filing is the culmination of a Bankruptcy Court-approved bidding process that began July 13, 1999 and auction process that commenced on September 21, 1999. Paragon, after consultation with the Creditors' Committee, the Official Committee of Equity Security Holders (the "Equity Committee") representing Paragon's shareholders, The Procter & Gamble Company ("P&G") and Kimberly-Clark Corporation ("K-C"), determined that Wellspring had submitted the best bid of those received by the Company. The Plan also contemplates that if, for some reason, the Wellspring transaction is not consummated, the proponents may pursue confirmation of a stand-alone plan of reorganization. The Creditors' Committee, as a co- proponent, strongly supports the Plan. The Wellspring Commitment provides for a $100 million equity investment in Paragon by Wellspring in return for 84.1% of the new common stock of the reorganized entity ("Reorganized Paragon") to be issued pursuant to the Plan, subject to dilution and diminution as a result of a rights offering for up to 19.1% of additional new common stock (the "Rights Offering") and warrants for up to 5% of the new common stock (the "Warrants"). The Wellspring Commitment also provides for Reorganized Paragon's issuance of approximately $160 million of 10% senior subordinated notes (the "New Notes") and obtaining new third party working capital financing for Reorganized Paragon in the amount of at least $75 million (the "New Financing"). Alternatively, the Wellspring Commitment provides the option of issuing $150 million in New Notes with a coupon based upon prevailing market rates for high yield notes rated "B." Under either alternative, the distributable value contemplated in the Wellspring Commitment would be insufficient to satisfy unsecured claims against Paragon in full. However, upon confirmation of a plan of reorganization, all prepetition claims against Paragon will be discharged. Wellspring's obligation to close the transaction is subject to (i) the completion of a mutually acceptable definitive stock purchase agreement, (ii) Bankruptcy Court approval of the Disclosure Statement incorporating the Wellspring Commitment by November 26, 1999, (iii) confirmation of the Plan by January 15, 2000, (iv) all conditions precedent to closing the New Financing having been satisfied and (v) other conditions precedent standard in a transaction of this nature. The Plan contemplates that substantially all of Paragon's current senior management will continue with the Company. Paragon has filed a motion requesting the Bankruptcy Court to set a date to consider approval of the Disclosure Statement. Paragon further reported that, in connection with the New Financing requirement, Paragon has accepted a commitment from Citicorp USA, Inc. for a $75 million working capital facility (the "Citicorp Commitment") for Reorganized Paragon. The Citicorp Commitment is also available to Paragon should it pursue confirmation of a stand-alone plan of reorganization as provided under the Plan. The Citicorp Commitment is subject to the completion of legal due diligence, execution by the parties of definitive documents and approval by the Bankruptcy Court. In the event the Wellspring transaction is consummated, holders of allowed unsecured claims will receive distributions in amounts equal to their pro rata share of (i) cash, (ii) New Notes, (iii) new common stock of Reorganized Paragon (the "New Common Stock"), as may be adjusted by the Rights Offering, (iv) if the current shareholders vote to reject the Plan, the Warrants, and (v) a portion of the proceeds, if any, of a litigation trust to be established under the Plan (the "Litigation Trust"). If the Wellspring transaction is not consummated and Paragon is reorganized on a stand-alone basis, holders of allowed unsecured claims will receive distributions in amounts equal to their pro rata share of the New Common Stock. Under either scenario, current shareholders (provided they vote to accept the Plan) will receive their pro rata share of the Warrants and their pro rata share of fifty percent of the proceeds, if any, of the Litigation Trust. If current shareholders vote to reject the Plan, they will not receive any Warrants and will only be entitled to receive their pro rata share of that portion, if any, of the proceeds from the Litigation Trust remaining after satisfaction in full of all allowed unsecured claims. Commenting on the Plan and the Wellspring Commitment, Bobby Abraham, Chief Executive Officer of Paragon, stated, "We are delighted to have concluded our auction process and, as a result, to have finalized our agreement with Wellspring and to have filed our amended plan of reorganization with the Bankruptcy Court. We are also very pleased to have the support of the Creditors' Committee as a co-proponent of our Plan. These events are major milestones in our progress toward emergence from Chapter 11. We now look forward to moving ahead with completing the transaction with Wellspring and exiting Chapter 11 as expeditiously as possible." Wellspring Capital Management LLC manages a private investment partnership focused on investing in companies where it can create substantial value by contributing management expertise, innovative operating and financial strategies and capital. The partnership's capital is provided by investors who are among the largest and most respected public and private pension funds, corporations and financial institutions in the U.S. and Canada, as well as from the principals of Wellspring. Paragon Trade Brands 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 press release, other than those concerning historical information, should be considered forward- looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the Company's forward-looking statements. Factors which could affect the Company's financial results, including, but not limited to: the Company's Chapter 11 filing; increased raw material prices 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. ots Original Text Service: Paragon Trade Brands, Inc. Internet: http://www.newsaktuell.de Contact: Alan J. Cyron, Executive Vice President and Chief Financial Officer of Paragon Trade Brands, Inc., 678-969-5200, or Kurt P. Ross or Guy B. Lawrence, 212-308-3333, both of K.P. Ross, Inc., or email, email@example.com , for Paragon Trade Brands, Inc.