Paragon Announces Settlement Agreement With Kimberly-

Clark Corporation / Resolution of Patent Litigation Issues PavesWay for Paragon's Emergence From Bankruptcy Norcross, Ga. (ots-PRNewswire) - Paragon Trade Brands, Inc.(NYSE: PTB) today announced that it has finalized a settlementagreement with Kimberly-Clark Corporation and will shortly file amotion with the United States Bankruptcy Court for the NorthernDistrict of Georgia seeking approval of the settlement. Theagreement provides for resolution of all of K-C's claims pendingin Paragon's bankruptcy proceeding, including issues surroundinga patent dispute that was the subject of litigation in the UnitedStates District Court for the Northern District of Texas. OnFebruary 2, 1999, Paragon filed a motion with the BankruptcyCourt to approve a similar settlement with The Procter & GambleCompany. A hearing to consider the proposed P&G settlement isscheduled to take place today. The agreement with K-C addresses all of K-C's outstandingclaims against the Company. The K-C agreement, coupled with thepreviously announced P&G agreement, will serve as the cornerstonefor a consensual plan of reorganization for Paragon. Paragonreiterated that its goal is to emerge from chapter 11 quickly,positioned to produce the highest quality store brand absorbentproducts and poised to achieve its long-range strategic goals. Under the K-C agreement, Paragon grants K-C a prepetitionunsecured claim in the amount of $110 million and anadministrative claim in the amount of $5 million. K-C hadpreviously filed a proof of claim in Paragon's bankruptcyproceedings listing claims ranging from approximately $893million to $2.4 billion. The parties have agreed that payments ofthe agreed-upon amounts pursuant to a plan of reorganization willbe in full settlement of any and all claims K-C and Paragon haveasserted against each other through the date of the settlementagreement. The parties will exchange mutual general releases tothat effect. As part of the agreement, K-C is granting licenses to Paragonin the U.S. and Canada which give Paragon the freedom underenumerated K-C patents to market its dual cuff diaper andtraining pant products which enjoy wide consumer acceptance. Inexchange for this right, Paragon has agreed to pay K-C runningroyalties on net sales of the licensed products equal to: 2.5% ofthe first $200 million of net sales of the covered diaperproducts and 1.5% of such net sales in excess of $200 million ineach calendar year commencing January 1999 through November 2004.In addition, Paragon has agreed to pay K-C running royalties of5% of net sales of the covered training pant products for thesame period. The parties have agreed that, once the K-C settlement isapproved by an unstayed order of the Bankruptcy Court, K-C willdismiss with prejudice its complaint in the Texas Action, as wellas its related filings in the Federal District Court in Georgia.Simultaneously, Paragon will dismiss with prejudice itscounterclaims in the Texas Action. Paragon further disclosed that the K-C settlement will resultin a material net loss for the fiscal year ending December 27,1998. Commenting on the agreement with K-C, Bobby Abraham, ChiefExecutive Officer of Paragon, stated, "We are very pleased to beable to put the K-C claims behind us and turn toward quicklyfinalizing our plan of reorganization, emerging from bankruptcyand capitalizing on the opportunities we have for growingParagon's business. The K-C license, together with the P&Glicenses, will permit Paragon greater freedom to optimize theperformance of our diaper and training pant products. While theroyalties are a significant added cost, we believe Paragon'sstore brand competitors will pay similar royalties for equivalentpatent rights. Thanks to our scale and consistent investments inproductivity, we believe Paragon is the most efficient storebrand manufacturer. We remain dedicated to providing our retailcustomers with the best quality products at lower prices than thenational brands." Paragon Trade Brands is the leading manufacturer of storebrand infant disposable diapers in the United States and Canada.Paragon manufactures a line of premium and economy diapers,training pants, and feminine care and adult incontinenceproducts, which are distributed throughout the United States andCanada, primarily through grocery and food stores, massmerchandisers, warehouse clubs, toy stores and drug stores thatmarket the products under their own store brand names. Paragonhas also established international joint ventures in Mexico,Argentina, Brazil and China for the sale of infant disposablediapers and other absorbent personal care products. Statements made in this press release, other than thoseconcerning historical information, should be considered forward-looking statements. Such statements are subject to certain risksand uncertainties that could cause actual results to differmaterially from those expressed in the Company's forward-lookingstatements. Factors which could affect the Company's financialresults, including, but not limited to: the Company's Chapter 11filing; increased raw material prices; new product and packagingintroductions by competitors; increased price and promotionpressure from competitors; new competitors in the market; Year2000 compliance issues; and patent litigation, are described inthe Company's Annual Report on Form 10-K filed with theSecurities and Exchange Commission. Readers are cautioned not toplace undue reliance on the forward-looking statements containedherein, which speak only as of the date hereof, and which aremade by management pursuant to the "safe harbor" provisions ofthe Private Securities Litigation Reform Act of 1995. otsOriginal Text Service: Paragon Trade Brands, Inc. Internet:http://www.newsaktuell.de Contact: Kurt P. Ross or Guy B.Lawrence, both of K.P. ROSS, INC. (USA) 212-308-3333, or email,kpross1@msn.com, or Alan J. Cyron, Executive Vice President andChief Financial Officer of Paragon Trade Brands, Inc., (USA) 678-969-5200

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