EX-99 5 jd6-5ex99_3.txt 99.3 EXHIBIT 99.3 ------------ WESTPOINT STEVENS, INC. Restructuring Proposal JUNE 1, 2003 THIS SUMMARY IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN. SUCH OFFER OR SOLICITATION WILL ONLY BE MADE IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE. This Summary describes the principal terms of a proposed restructuring of the outstanding indebtedness and liabilities of, and equity interests in, WestPoint Stevens, Inc., a Delaware corporation ("WestPoint"), and some or all of WestPoint's subsidiaries (collectively with WestPoint, the "Company"). Certain of the transactions relating to the reorganization described herein include transactions which may be implemented outside a plan of reorganization for the Company under chapter 11 of title 11 of the United States Code, 11 U.S.C. ss.ss. 101 et seq. (the "Bankruptcy Code"). PURSUANT TO FEDERAL RULE OF EVIDENCE 408 AND ANY APPLICABLE STATE RULES OF EVIDENCE, THIS SUMMARY, THE TERMS HEREIN, AND ALL NEGOTIATIONS RELATING THERETO SHALL NOT BE ADMISSIBLE INTO EVIDENCE IN ANY PROCEEDING. Transaction Overview................. The Company will consummate a restructuring of the (i) Second Amended and Restated Credit Agreement, dated as of June 9, 1998 among WestPoint, certain of its foreign subsidiaries named therein, the Banks named therein (the "Banks") and Bank of America as administrative agent for lenders ("BoA") (the "Senior Credit Facility"), (ii) Credit Agreement, dated as of June 29, 2001, among WestPoint, Bankers Trust Company, as administrative agent, and the lenders thereto (the "Second Lien Facility"), (iii) $525,000,000 principal amount of 7 ?% Senior Notes due 2005 and $475,000,000 principal amount of 7 ?% Senior Notes due 2008 (collectively, the "Old Notes"), (iv) Loan and Security Agreement, dated March 28, 2003, among WPS Receivables Corporation, as Borrower, WestPoint Stevens Inc., as Initial Servicer, the lenders party thereto from time to time, and Congress Financial Corporation (Southern), as agent for such lenders (the "Receivables Facility") and (v) the common stock of WestPoint (the "Old Common Stock") and any rights to acquire Old Common Stock (collectively, the "Restructuring"). Reorganization Implementation........ Implementation will be through a plan of reorganization for the Company under the Bankruptcy Code (the "Plan"). Senior Credit Facility............... The Senior Credit Facility will be replaced by an exit bank credit facility with terms acceptable to the Standby Purchasers referred to below (the "New Senior Credit Facility") and the Company. Second Lien Facility ................ Application of the $166.7 million in cash proceeds received by the Company from the exercise of the Rights (described below) will repay and discharge in full the Second Lien Facility. Consideration for Old Notes.......... Holders of the Old Notes will receive an aggregate of: o $175 million principal amount of unsecured subordinated notes of WestPoint ("Junior Subordinated Notes") having the following basic terms: - 8% coupon, payable in kind - maturity date of 12/31/2009 for those Junior Subordinated Notes received in respect of the Old Notes due 2005 (representing 52.5% of total Junior Subordinated Notes) - maturity date of 12/31/2012 for those Junior Subordinated Notes received in respect of the Old Notes due 2008 (representing 47.5% of total Junior Subordinated Notes) - Contractually subordinated to the New Senior Credit Facility and Senior Secured Notes (as defined below); and o 30% of the new common stock of WestPoint as of consummation of the Reorganization ("New Common Stock"); and o The Rights described below. Consideration for Other General Unsecured Creditors.................. To be agreed. 2 Consideration for Old Common Stock and Rights to Acquire Old Common Stock of WestPoint............................ None. Each holder of Old Common Stock and holders of options and any other right to acquire Old Common Stock will not receive or retain any proper on account of such interest. Rights............................... Holders of Old Notes have the right to subscribe in cash for their pro rata share of the following securities (each a "Right" and collectively the "Rights"): o $166.7 million of senior secured notes of WestPoint (the "Senior Secured Notes") having the following basic terms: - 8% coupon, payable in cash; - due 9/30/2009; - secured by a second priority lien on substantially all of the Company's assets; - redeemable at par by WestPoint at any time; and o 70% of the New Common Stock of the Company. Holders who exercise their Rights will be entitled to receive a payment payable by WestPoint (or, alternatively, by a reduction in the subscription price) equal to 1% of the principal amount of Senior Secured Notes for which they subscribe. ESL Investments, GSC Partners and Perry Capital (the "Standby Purchasers"), who currently own in the aggregate more than 60% of the outstanding principal amount of the Old Notes will provide standby commitments for the exercise of the Rights, whereby they will agree to exercise the Rights received by them and exercise the Rights not exercised by the third party holders of the Old Notes and will be entitled to receive a payment payable by WestPoint (or, alternatively, by a reduction in the subscription price) equal to 2% of the amount of their respective standby commitments. Each of the Standby Purchasers will be entitled to reimbursement by the Company for the reasonable fees and expenses of outside counsel engaged by any or all of the Standby Purchasers in connection with their standby commitments. 3 Debtor-In-Possession Financing....... The Company shall obtain debtor-in-possession financing in an amount not to exceed $300 million (the "DIP Credit Facility"). Registration Rights.................. Certain holders of New Common Stock will enter into a customary registration rights agreement providing demand registration rights and piggyback registration rights, subject to customary restrictions. Chairman/C.E.O....................... Current Chairman and C.E.O. of WestPoint will resign as soon as practicable after the entry of a bankruptcy court order approving the financial and other arrangements with respect to his resignation summarized below. The Standby Purchasers will support the motion to approve such financial and other arrangements with respect to the resignation of the current Chairman and C.E.O. From and including the date of such resignation, the Board will appoint an interim C.E.O. of WestPoint who shall be reasonably acceptable to the Standby Purchasers. The Standby Purchasers confirm that the Company's current Chief Operating Officer, Chip Fontenot, would be acceptable to them as interim C.E.O. Two members of the current Board of the Company and one representative of each of the Standby Purchasers shall, as soon as practicable, form a search committee (the "Search Committee") to identify and nominate one or more qualified candidates for the position of C.E.O. of WestPoint. As part of the search process, the Search Committee will consider current employees of the Company as well as any other individuals it deems appropriate. Any action or determination by the Search Committee shall require the affirmative vote of a majority of its members. The then current board will select and appoint the new C.E.O. from the nominee or nominees as determined by the Search Committee. Upon the resignation of the current Chairman and C.E.O., but only if the Interim Board (as defined below) shall have been constituted in accordance with the provisions hereof, he shall be entitled to receive a severance payment of $1 million (payable in cash) and will enter into a separation agreement (as set out below) with WestPoint with a 4 term from the date of such resignation through December 31, 2005, under which he will be obliged to make himself available to the Company at the Company's request. Under the separation agreement, the current Chairman and C.E.O. will be entitled to additional cash payments in the amounts of $425,000 for the balance of 2003, $475,000 for 2004 and $475,000 for 2005 (to be paid in equal semi-monthly installments). In addition the Company will forgive any monetary obligations owed by HTG Corp. to the Company with respect to any losses reflected in any of the Company's capital account balances arising from the Falcon 2000 jet aircraft transactions. The current Chairman and C.E.O. shall be entitled to no further payment or benefits whatsoever, other than an amount limited to $50,000 for reimbursement of tax, legal or related costs incurred by him in relation to the Restructuring. Following his resignation, the current Chairman and C.E.O. shall receive a general release from the Company for all claims that the Company may have against him arising out of or in connection with his service as an officer or director of the Company. Interim Board........................ The board of directors of WestPoint (the "Board") will take such actions as are necessary to reconstitute itself such that at least a majority of its members are newly-appointed independent directors acceptable to the Standby Purchasers (such reconstituted Board, the "Interim Board"), provided that the size of the Interim Board will not exceed 11 members. The reconstitution of the Board will take place as soon as reasonably practical. New Board............................ Upon consummation of the Plan, the Interim Board shall be replaced by a new Board (the "New Board") composed of the nominees of the Standby Purchasers, together with the then C.E.O. 5 Key Employee Retention............... The Standby Purchasers will work with the Company to consider alternatives to retain key employees during the chapter 11 case and a stock option plan to be effective after chapter 11. The Company agrees it shall not implement any such alternative or stock option plan without the prior approval of the Interim Board. Modifications........................ Economically neutral modifications shall be made to address tax, securities law and other issues arising in or as a result of the implementation of this restructuring proposal. Notwithstanding the foregoing, at the election of the Standby Purchasers, this restructuring proposal shall be modified to enhance the tax efficiencies of the Restructuring to the Company or to any of the Standby Purchasers. Press Releases....................... All press releases shall be provided to the Standby Purchasers reasonably in advance of release for their review and comment. Shareholders Agreement............... Terms to be agreed. Legal Fees .......................... WestPoint will reimburse the Standby Purchasers for all fees of outside legal counsel incurred in connection with this proposal for the Restructuring by wire transfer of immediately available funds to Stroock & Stroock & Lavan as soon as practicable but in no event later than the date of the filing of the petition for relief under chapter 11 of the Bankruptcy Code. Change of Control ................... Any acceleration, vesting or similar change of control rights under employment, benefit or other arrange- ments triggered by the consummation of the Plan shall be waived or otherwise cancelled under the Plan. Timing............................... As soon as practicable. Conditions........................... Other than the sections hereof under the headings "Chairman/C.E.O", "Interim Board" and "New Board", the reorganization contemplated herein is subject to (i) final documentation, including a chapter 11 plan and disclosure statement, acceptable to the relevant parties, (ii) negotiations with the banks, (iii) obtaining appropriate exit financing, and (iv) the limitations and requirements of applicable law. 6