Exhibit 99.1

THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN.
ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A
DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT.
THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL
BUT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------X
IN RE :
: CHAPTER 11 CASE NO.
WESTPOINT STEVENS INC., ET AL., : 03-13532 (RDD)
: (JOINTLY ADMINISTERED)
:
DEBTORS. :
- ------------------------------------X

DISCLOSURE STATEMENT FOR
DEBTORS' AMENDED JOINT PLAN
---------------------------

WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000

Dated: June 10, 2005

TABLE OF CONTENTS

PAGE

I. Introduction.....................................................................................................5

II. Treatment of Creditors and Stockholders Under the Plan...........................................................7

A. Summary of Classification and Treatment................................................................8

B. Description of the Classes For the Debtors.............................................................9

1. Priority Non-Tax Claims (Class A)............................................................9

2. Other Secured Claims (Class B)...............................................................9

3. First Lien Lender Claims (Class C)..........................................................10

4. Second Lien Lender Claim (Class D)..........................................................10

5. General Unsecured Claims (Class E)..........................................................12

6. Noteholder Claims (Class F).................................................................12

7. PBGC Claims (Class G).......................................................................13

8. Litigation Claims (Class H).................................................................14

9. Intercompany Claims of the Debtors (Class I)................................................14

10. Securities Litigation Claims (Class J)......................................................14

11. Punitive Damage Claims (Class K)............................................................14

12. Equity Interests (Class L)..................................................................15

C. Administrative Expenses...............................................................................15

1. Paid or Provided for On the Effective Date..................................................16

2. Assumed Administrative Expense Claims.......................................................16

3. Non-Assumed Administrative Expense Claims...................................................16

D. Priority Tax Claims...................................................................................17

E. Tort Claims...........................................................................................18

F. Reservation of "Cram Down" Rights.....................................................................18

III. Voting Procedures and Requirements..............................................................................18

A. Vote Required for Acceptance by a Class...............................................................19

B. Classes Not Entitled to Vote..........................................................................19

C. Voting................................................................................................19

IV. Projections and Valuation Analysis..............................................................................20

A. Introduction..........................................................................................20

B. Projections...........................................................................................20

C. Going Concern Valuation...............................................................................20

V. Business Description and Reasons for Chapter 11.................................................................20

A. The Debtors' Businesses...............................................................................20

1. Products....................................................................................21

2. Trademarks and Licenses.....................................................................22

3. Marketing...................................................................................22

4. Customers...................................................................................23

5. Manufacturing...............................................................................23

6. Sourcing....................................................................................24

7. Raw Materials...............................................................................24

8. Seasonality; Cyclicality; Inventory.........................................................24

9. Competition.................................................................................25

10. Other Operations............................................................................25

11. Environmental Matters.......................................................................25

B. Prepetition Indebtedness..............................................................................26

1. The First Lien Lender Agreement.............................................................26

2. The Second-Lien Lender Agreement............................................................26

3. The Senior Notes............................................................................26

C. Events Leading to the Commencement of the Chapter 11 Cases............................................27

D. Pending Litigation and Other Proceedings..............................................................27

1. The Geller Action...........................................................................27

2. The Clark Action............................................................................28

3. The Hemmer Action...........................................................................28

4. The Pillowtex Action........................................................................28

5. The Reparation Class Actions................................................................29

6. Other Legal Issues..........................................................................29

VI. Significant Events During the Chapter 11 Case...................................................................30

A. Filing and First Day Orders...........................................................................30

B. Appointment of the Creditors Committee................................................................31

C. DIP Credit Agreement..................................................................................32

D. Adequate Protection...................................................................................33

E. The Resignation of Holcombe T. Green Jr...............................................................34

F. Employee Wage and Benefit Issues......................................................................35

1. Key Employee and Key Executive Retention Program............................................35

2. Termination of Pension Obligations..........................................................35

G. Claims Process and Bar Date...........................................................................36

1. Schedules and Statements....................................................................36

2. Bar Date....................................................................................36

H. Omnibus Claims Objection Motions......................................................................36

I. Sale of International Operations......................................................................37

J. Assumption of Significant Executory Contracts and Other Significant Motions...........................37

1. Disney......................................................................................37

2. Ralph Lauren................................................................................38

3. E.I. du Pont De Nemours and Company.........................................................39

4. Payment of Licensing and Business Fees......................................................39

5. Lease Plan U.S.A............................................................................40

6. Reckson 1185 Avenue of the Americas, LLC....................................................41

7. Extension of Period During Which the Debtors May Assume or Reject Unexpired Leases of
Nonresidential Real Property................................................................41

8. Approval of Funding of Defense Costs for Certain Officers and Directors.....................41

K. Retention of Kurt Salmon Associates...................................................................42

L. Exclusivity...........................................................................................42

M. Asset Dispositions....................................................................................42

N. Entry Into A Stalking Horse Agreement and Approval of Bidding Procedures..............................43

O. Avoidance Actions.....................................................................................44

VII. Sale Process....................................................................................................44

VIII. Means of Implementation.........................................................................................45

A. Sale of the Debtors...................................................................................45

B. Issuance and Resale of New Securities Under the Plan..................................................45

C. Establishment of the Liquidating Trust and Appointment of a Liquidating Trustee.......................45

1. Creation of Beneficial Interests in the Liquidating Trust...................................45

2. Nontransferability of Liquidating Trust Interests...........................................46

3. Appointment of a Liquidating Trustee........................................................46

4. Execution of the Liquidating Trust Agreement................................................46

5. Purpose of the Liquidating Trust............................................................46

6. Assignment of Trust Assets..................................................................46

7. Role of the Liquidating Trustee.............................................................46

8. Distribution of Liquidating Trust Assets....................................................47
9. Retention of Professionals by the Liquidating Trustee.......................................47

10. Income Tax Reporting of the Liquidating Trust...............................................47

11. Compensation and Indemnification of the Liquidating Trustee.................................49

12. Dissolution of the Liquidating Trust........................................................49

13. Closing of the Chapter 11 Cases.............................................................50

IX. Other Aspects of the Plan.......................................................................................50

A. Distributions.........................................................................................50

1. Distributions Through Agents................................................................50

2. Timing and Conditions of Distributions......................................................51

3. Procedures for Treating Disputed Claims Under the Plan......................................51

B. Treatment of Executory Contracts and Unexpired Leases.................................................52

1. Contracts and Leases Not Expressly Assumed are Rejected....................................52

2. Assigned Contracts and Leases...............................................................52

3. Cure of Defaults............................................................................53

4. Rejection Claims............................................................................53

C. Corporate Action......................................................................................53

D. Claims Administration, Prosecution, and Plan Distributions............................................53

E. Dissolution...........................................................................................54

F. Governance of NewCo...................................................................................54

1. Board of Directors..........................................................................54

2. Senior Management...........................................................................54

G. Conditions Precedent to Confirmation and the Effective Date...........................................54

1. Conditions Precedent to Confirmation........................................................54

2. Conditions Precedent to the Effective Date..................................................54

3. Failure of Conditions.......................................................................55

4. Satisfaction of Conditions..................................................................55

H. Effect of Confirmation................................................................................55

1. Vesting of Assets...........................................................................55

2. Discharge of Claims and Termination of Equity Interests.....................................55

3. Discharge of Debtors........................................................................55

4. Terms of Injunctions or Stays...............................................................56

5. Exculpation.................................................................................56

6. Retention of Causes of Action/ Reservation of Rights........................................56

I. Retention of Jurisdiction.............................................................................56

J. Releases..............................................................................................58

K. Miscellaneous Provisions..............................................................................58

X. Certain Factors to Be Considered................................................................................58

A. Certain Bankruptcy Considerations.....................................................................58

B. Securities Law Matters................................................................................59

1. Issuance and Resale of New Securities.......................................................59

3. Registration Rights.........................................................................61

4. Legends.....................................................................................61

C. Risks Relating to the Securities Issued in Connection with the Sale...................................61

1. Variances from Projections..................................................................61

2. Significant Holders.........................................................................62

3. Lack of Trading Market......................................................................62

D. Risks Associated with the Business....................................................................62

XI. Confirmation of the Plan........................................................................................62

A. Confirmation Hearing..................................................................................62

B. General Requirements of Section 1129..................................................................63

C. Best Interests Tests..................................................................................64

D. Liquidation Analysis..................................................................................65

E. Feasibility...........................................................................................66

F. Section 1129(b).......................................................................................66

1. No Unfair Discrimination....................................................................66

2. Fair and Equitable Test.....................................................................66

XII. Alternatives to Confirmation and Consummation of this Plan......................................................67

A. Liquidation Under Chapter 7...........................................................................67

B. Alternative Plan......................................................................................67

XIII. Certain Federal Income Tax Consequences of the Plan.............................................................67

A. Consequences to Debtors...............................................................................68

B. Consequences to Holders of Certain Claims.............................................................68

1. Gain or Loss................................................................................69

2. Distributions in Discharge of Accrued but Unpaid Interest...................................69

3. Tax Treatment of Liquidating Trust and Holders of Beneficial Interests......................70

4. Information Reporting and Withholding.......................................................72

XIV. Conclusion......................................................................................................73

Exhibits

Exhibit "A" Amended Joint Plan
Exhibit "B" 2004 Annual Review
Exhibit "C" Financial Statements for Quarter Ended March 31, 2005

GLOSSARY

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Administrative Expense Claim Any expense relating to the administration of
the chapter 11 cases, including actual and
necessary costs and expenses of preserving the
Debtors' estates and operating the Debtors'
businesses, any indebtedness or obligations
incurred or assumed during the chapter 11
cases, allowances for compensation and
reimbursement of expenses to the extent Allowed
by the Bankruptcy Court, Claims arising under
the DIP Credit Agreement, and certain statutory
fees chargeable against the Debtors' estates.

Asset Purchase Agreement or APA The Asset Purchase Agreement entered into by
and among the Debtors and the Purchaser in
accordance with the Bidding Procedures Order
for the sale of all or substantially all of the
Debtors' assets, which will be approved by the
Bankruptcy Court at the Purchaser Selection
Hearing. A copy of the APA will be filed as an
exhibit to the Plan after the Purchaser
Selection Hearing.

Assigned Contracts & Leases The executory contracts and unexpired leases
that will be assumed and assigned in accordance
with section 8 of the Plan and the APA.

Assumed Administrative Expense
Claim Any Administrative Expense Claim that is being
assumed by the Purchaser pursuant to the APA.

Avoidance Actions All Claims and/or causes of action arising
under or authorized by sections 510, 542
through 551, and 553 of the Bankruptcy Code
that belong to the Debtors, the Debtors in
Possession and the Debtors' estates.

Bankruptcy Code Title 11 of the United States Code.

Bankruptcy Court The United States Bankruptcy Court for the
Southern District of New York.

Beneficial Interests Collectively, Series A Beneficial Interests,
Series B Beneficial Interests, and Series C
Beneficial Interests in the Liquidating Trust.

Bidding Procedures The procedures for bidding for all or
substantially all of the Debtors' assets set
forth in the Bidding Procedures Order.

Bidding Procedures Order The order approving the Bidding Procedures and
forms of notice in connection therewith in
connection with the sale of substantially all
of the Debtors' assets free and clear of all
liens, Claims, encumbrances, and other
interests, which was entered by the Bankruptcy
Court on April 22, 2005.

Business Day Any day other than a Saturday, a Sunday, or any
other day on which banking institutions in New
York, New York are required to close by law or
executive order.

Cash Legal tender of the United States of America.

Claim Has the meaning set forth in section 101 of the
Bankruptcy Code.

Closing The date designated for the consummation of the
sale as set forth in the APA.

Collateral Substantially all the assets of the Debtors
granted to secure the Claims arising under the
First Lien Lender Agreement and the Second Lien
Lender Agreement.

Commencement Date The date the Debtors' chapter 11 cases were
commenced (June 1, 2003). Confirmation Date The
date on which the Clerk of the Bankruptcy Court
enters the Confirmation Order.

Confirmation Hearing The hearing to be held by the Bankruptcy Court
regarding confirmation of the Plan, as such
hearing may be adjourned or continued from time
to time.

Confirmation Order The order of the Bankruptcy Court confirming
the Plan pursuant to section 1129 of the
Bankruptcy Code.

Creditors Committee The statutory committee of unsecured creditors
appointed in the Debtors' chapter 11 cases, as
constituted from time to time.

Debtors WestPoint Stevens Inc., WestPoint Stevens Inc.
I, J.P. Stevens & Co., Inc., J.P. Stevens
Enterprises, Inc. and WestPoint Stevens Stores
Inc.

DIP Credit Agreement That certain Debtor-In-Possession Credit
Agreement, dated as of June 5, 2003, as
amended, among the Debtors, Bank of America, as
Administrative Agent, Wachovia Bank, National
Association, as Syndication Agent, and the
other lenders who are parties thereto.

Disbursing Agent Any entity (including any applicable Debtor or
the Liquidating Trustee, if it acts in such
capacity) acting in its capacity as a
disbursing agent under Section 6.5 of the Plan.

Disclosure Statement This document together with the annexed
exhibits and schedules.

Disclosure Statement Hearing The hearing to approve the Disclosure Statement
which will be held before the Bankruptcy Court
on July 12, 2005 (as such hearing may be
adjourned from time to time).

Distribution Record Date Confirmation Date.

Effective Date A Business Day selected by the Debtors on or
after the Confirmation Date on which the
conditions to the effectiveness of the Plan
have been satisfied or waived and on which
there is no stay of the order confirming the
Plan in effect. The Debtors expect that the
Effective Date will be no later than 120 days
after entry of an order confirming the Plan.

Equity Interest The interest of any holder of an equity
security of any of the Debtors represented by
any issued and outstanding shares of common or
preferred stock or other instrument evidencing
a present ownership interest in any of the
Debtors, whether or not transferable, or any
option, warrant, or right, contractual or
otherwise, to acquire any such interest.

First Lien Lender Beal Bank (as successor to Bank of America
Administrative Agent N.A.), as administrative agent under the First
Lien Lender Agreement and any successor agent
thereto.

First Lien Lender Agreement That certain Second Amended and Restated Credit
Agreement, dated as of June 9, 1998, among
WestPoint Stevens Inc., as Borrower, WestPoint
Stevens (U.K.) Limited and WestPoint Stevens
(Europe) Limited, as Foreign Borrowers, Bank of
America, N.A., as Issuing Lender, Swingline
Lender, and Administrative Agent, and the
several banks and other financial institutions
from time to time parties thereto.

First Lien Lender Claim The Claims against any of the Debtors arising
under the First Lien Lender Agreement
(inclusive of post-petition interest) up to the
value of the Collateral, net of all Cash
payments made by the Debtors to the holders of
such Claims on or after the Commencement Date.

General Unsecured Claim Any general unsecured Claim against the Debtors
(other than a Litigation Claim).

Icahn Carl Icahn and his affiliates.

Indenture Trustee HSBC Bank USA (as successor to the Bank of New
York) as indenture trustee under the Indentures
(as described in section V.B.3).

Intercompany Claim Any Claim held by a wholly-owned Debtor against
another wholly-owned Debtor.

Liquidating Trust The liquidating trust described in section
VIII.C hereof.

Litigation Claim Any Claim related to a personal injury,
property damage, products liability, wrongful
death, patent liability, environmental damage,
antitrust, asbestos, or other similar Claim
against any of the Debtors.

NewCo The entity formed to be the parent company of
the Purchaser of all or substantially all of
the Debtors' assets.

Non- Assumed Administrative
Expense Claim Any Administrative Expense Claim that is not
assumed by Purchaser pursuant to the APA.

Noteholder Claim Any Claim against any of the Debtors arising
under or in connection with the Indentures (as
defined in section V.B.3).

Other Secured Claim Any Claim secured by collateral that is not a
DIP, First Lien Lender Claim, or Second Lien
Lender Claim.

PBGC Claim Any Claim of the Pension Benefit Guaranty
Corporation against any of the Debtors.

Plan The Debtors' Amended Joint Plan Under Chapter
11 of the Bankruptcy Code, annexed as Exhibit
"A" to this Disclosure Statement.

Plan Supplement A Supplemental appendix to the Plan that will
contain the draft form of the documents to be
executed, delivered, assumed, and/or performed
in conjunction with the consummation of the
Plan on the Effective Date to be filed prior to
the Confirmation Hearing.

Priority Tax Claim A Claim of a governmental entity for taxes that
are entitled to priority in payment under the
Bankruptcy Code.

Purchaser The successful bidder selected in accordance
with the Bidding Procedures Order and approved
by the Bankruptcy Court at the Purchaser
Selection Hearing.

Purchaser Selection Hearing The hearing held by the Bankruptcy Court to
confirm the results of the auction held in
accordance with the Bidding Procedures at which
the Purchaser will be approved.

Purchaser Selection Order The order entered by the Bankruptcy Court at
the Purchaser Selection Hearing approving the
Purchaser.

Sale Order The order approving the APA and the
transactions contemplated thereunder including,
without limitation, the sale of all or
substantially all of the Debtors' assets free
and clear of all liens, Claims, encumbrances,
and other interests. If the Confirmation Order
is entered, it shall be deemed the Sale Order.

Sale Proceeds The proceeds received pursuant to the APA in
connection with the sale of all or
substantially all of the Debtors' assets which
may include, among other forms of
consideration, Cash, stock and/or rights. A
detailed exhibit setting forth the specific
form of Sale Proceeds to be distributed to
creditors pursuant to the Plan and the
procedures governing such distribution,
including, if applicable, a description of any
rights offering to be held in connection with
the sale and confirmation of the Plan will be
filed as an exhibit to the Plan after the
Purchaser Selection Hearing.

Second Lien Lender
Administrative Agent Wilmington Trust Company as administrative
agent under the Second Lien Lender Agreement,
or any successor agent thereto.

Second Lien Lender Agreement That certain Second Lien Credit Facility, dated
as of June 29, 2001 (and any amendments
thereto), among WestPoint, as Borrower,
Wilmington Trust Company (as successor to
Deutsche Bank Trust Company Americas (f/k/a
Bankers Trust Company)), as Administrative
Agent, and the banks and other financial
institutions from time to time parties thereto.

Second Lien Lender Claim The Claims arising under the Second-Lien Lender
Agreement up to the value of the Collateral
less the amount of the First Lien Lender
Claims, net of all Cash payments (including
post-petition adequate protection payments)
made by the Debtors to the holders of such
Claims on or after the Commencement Date, and
limited to the extent of the value of their
Collateral. Any other Claims arising under the
Second Lien Lender Agreement will be treated as
Administrative Expense Claims or Class E
General Unsecured Claims, as determined by the
Bankruptcy Court.

Securities Litigation Claim Any Claim against the Debtors, whether or not
the subject of an existing lawsuit, arising
from the rescission of a purchase or sale of
shares or notes of any of the Debtors, for
damages arising from the purchase or sale of
any security, or for reimbursement or
contribution allowed under section 502 of the
Bankruptcy Code on account of any such Claim.

Series A, B, and C Beneficial
Interests The Beneficial Interests in the Liquidating
Trust to be distributed to holders of Second
Lien Lender Claims (Series A), unpaid (and
unassumed) priority and Administrative Expense
Claims (Series B), and General Unsecured
Claims, Noteholder Claims and PBGC Claims
(Series C) as detailed in Section II.B below.

Steering Committee Certain institutions acting as a steering
committee of holders of First Lien Claims
(Contrarian Funds, LLC, Satellite Senior Income
Fund, LLC, CP Capital Investments, LLC, Wayland
Distressed Opportunities Fund I-B, LLC, and
Wayland Distressed Opportunities Fund I-C, LLC)
owning or controlling approximately 51% of the
First Lien Lender Claims

Tax Code Title 26 of the United States Code.

Voting Agent See section I of this Disclosure Statement for
contact information.

Voting Deadline August 5, 2005, which is the last date for the
actual receipt of ballots to accept or reject
the Plan.

WestPoint, WPSTV or the Company WestPoint Stevens Inc., a Delaware corporation,
the parent debtor or debtor in possession, as
the context requires.
- --------------------------------------------------------------------------------

INTRODUCTION

WestPoint Stevens Inc. and its subsidiaries listed on
Exhibit "A" to the Plan are soliciting votes to accept or reject the Plan. A
copy of the Plan is attached as Exhibit "A" to this Disclosure Statement. Please
refer to the Glossary set forth herein and in the Plan for definitions of most
terms used in this Disclosure Statement. Some terms that are used only in a
specific section may be defined in that section.

The Plan is based on the sale of substantially all the
assets of the Debtors to the Purchaser pursuant to the terms of the APA. As
described below, proceeds from the sale will be distributed first to creditors
whose Claims are secured by such property. The majority of administrative
expenses will be assumed by the Purchaser or will be paid on the Effective Date.
Any property remaining with the Debtors after the sale will be liquidated and
distributed to holders of unpaid and unassumed administrative expenses and
priority Claims and unsecured creditors, as described below. See section VII for
a description of the APA and the proceeds to be received by creditors.

The Plan constitutes a motion seeking entry of an order
pursuant to sections 105(a), 362, 363, 365, 1123, and 1129 of the Bankruptcy
Code, (a) approving the Debtors' entry into the APA with the Purchaser, (b)
authorizing the sale to the Purchaser of substantially all of the assets of the
Debtors as specified in the APA and (c) authorizing the assumption by the
Debtors and the assignment to the Purchaser of certain executory contracts and
unexpired leases of the Debtors specified in the APA. In the event that the
requirements for confirming a chapter 11 plan cannot be satisfied or the
Bankruptcy Court denies confirmation of the Plan at the Confirmation Hearing,
the Debtors may request that the Confirmation Hearing constitute a Sale Hearing
to consider authorization for the Debtors to sell their assets, pursuant to the
APA, free and clear of all liens, Claims, encumbrances, and other interests to
the Purchaser pursuant to sections 363 and 365 of the Bankruptcy Code. See
section X for a description of factors that could affect whether the Plan will
be confirmed.

The purpose of this Disclosure Statement is to provide
information of a kind and in sufficient detail to enable the creditors of the
Debtors who are entitled to vote on the Plan to make an informed decision on
whether to accept or reject the Plan. In summary, this Disclosure Statement
includes or describes:

- --------------------------------- ---------------------------------------------------------------------------------
SECTION SUMMARY OF CONTENTS
- --------------------------------- ---------------------------------------------------------------------------------

II the treatment of creditors and stockholders of the Debtors under the Plan
- --------------------------------- ---------------------------------------------------------------------------------
III which parties in interest are entitled to vote

how to vote to accept or reject the Plan
- --------------------------------- ---------------------------------------------------------------------------------
IV summary of projections and valuation
- --------------------------------- ---------------------------------------------------------------------------------
V the businesses of the Debtors

why the Debtors commenced their chapter 11 cases
- --------------------------------- ---------------------------------------------------------------------------------
VI significant events that have occurred in the chapter 11 cases
- --------------------------------- ---------------------------------------------------------------------------------
VII description of the sale process and the APA
- --------------------------------- ---------------------------------------------------------------------------------
VIII means of implementation of the Plan

establishment and implementation of the Liquidating Trust
- --------------------------------- ---------------------------------------------------------------------------------

- --------------------------------- ---------------------------------------------------------------------------------
IX how distributions under the Plan will be made

how disputed Claims will be resolved
- --------------------------------- ---------------------------------------------------------------------------------
X certain factors creditors should consider before voting
- --------------------------------- ---------------------------------------------------------------------------------
XI the procedure for confirming the Plan

a liquidation analysis
- --------------------------------- ---------------------------------------------------------------------------------
XII alternatives to the Plan
- --------------------------------- ---------------------------------------------------------------------------------
XIII certain tax consequences
- --------------------------------- ---------------------------------------------------------------------------------

Please note that if there is any inconsistency between the Plan (including the
attached exhibits and any supplements to the Plan) and the descriptions in the
Disclosure Statement, the terms of the Plan (and the attached exhibits and any
supplements to the Plan) will govern.

Additional financial and other information about the
Debtors can be found in the annual report on Form 10-K for the year ended
December 31, 2003, which was filed by WPSTV with the Securities and Exchange
Commission (the "SEC") on March 15, 2004, the quarterly reports on Form 10-Q for
the quarters ended March 31, 2004, June 30, 2004, and September 30, 2004, which
were filed by WPSTV on May 10, 2004, August 9, 2004, and November 9, 2004,
respectively, WPSTV's 2004 Annual Review annexed hereto as Exhibit "B", which
includes its unaudited financial statements for the fiscal year ended December
31, 2004, and WPSTV's unaudited financial statements for the quarter ended March
31, 2005, annexed hereto as Exhibit "C." Copies of the SEC filings may be
obtained over the internet at www.sec.gov or on the Company's website at
www.westpointstevens.com. The Debtors' monthly operating reports are available
on the Bankruptcy Court's Electronic Case Filing System which can be found at
www.nysb.uscourts.gov, the official website for the Bankruptcy Court. See
section IV for important information that should be considered when reviewing
WPSTV's financial information.

This Disclosure Statement and the Plan are the only
materials creditors should use to determine whether to vote to accept or reject
the Plan.

-------------------------------------------------------------------
THE LAST DAY TO VOTE TO ACCEPT OR REJECT THE PLAN IS AUGUST
5, 2005. TO BE COUNTED, YOUR BALLOT MUST BE ACTUALLY
RECEIVED BY THE VOTING AGENT BY THIS DATE.

THE RECORD DATE FOR DETERMINING WHICH CREDITORS MAY VOTE ON
THE PLAN IS JULY 12, 2005.
-------------------------------------------------------------------

The Plan was developed in connection with certain rulings
and after receiving instructions from the Bankruptcy Court at the Bidding
Procedures Hearing. The Debtors believe that approval of the Plan is their best
chance to maximize recoveries for their creditors.

-------------------------------------------------------------------
RECOMMENDATION: The Debtors urge creditors to vote to accept
the Plan.
-------------------------------------------------------------------

Additional copies of this Disclosure Statement are
available upon request made to the Voting Agent, at the following address:

------------------------------------------------------------------------------------
VOTING AGENT
------------------------------------------------------------------------------------

FOR VOTING CLASSES A, B, C, D, E, AND G: FOR VOTING CLASS F:

Bankruptcy Services, LLC
757 Third Avenue Financial Balloting Group LLC
3rd Floor 757 Third Avenue
New York, NY 10017 3rd Floor
(Attn: WestPoint Stevens Inc.) New York, NY 10017
(Attn: WestPoint Stevens Inc.)
------------------------------------------------------------------------------------

The summaries of the Plan and other documents related to
the restructuring of the Debtors are qualified in their entirety by the Plan,
its exhibits, and the documents and exhibits contained in the Plan Supplement.
The Plan Supplement will be filed with the Bankruptcy Court prior to the
Confirmation Hearing, but no later than 5 days before the Voting Deadline.
Documents to be included in the Plan Supplement will also be posted at
www.westpointstevens.com as they become available, but no later than 5 days
before the Voting Deadline. The financial and other information included in this
Disclosure Statement are for purposes of soliciting acceptances of the Plan and
are being communicated for settlement purposes only.

The Bankruptcy Code provides that only creditors who vote
on the Plan will be counted for purposes of determining whether the requisite
acceptances have been attained. Failure to timely deliver a properly completed
ballot by the Voting Deadline will constitute an abstention (i.e. will not be
counted as either an acceptance or a rejection). Any improperly completed or
late ballot may not be counted.

THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR
230, HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE HEREBY NOTIFIED THAT: (A) ANY
DISCUSSION OF FEDERAL INCOME TAX ISSUES CONTAINED OR REFLECTED IN THIS
DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED,
BY ANY HOLDER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE
HOLDER UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN TO
SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED
HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

II.

TREATMENT OF CREDITORS AND STOCKHOLDERS
UNDER THE PLAN

The Plan governs the treatment of Claims against and Equity
Interests in each of the five separate Debtors in the chapter 11 cases. The
table listed in section II.A below summarizes the treatment under the Plan for
each class. The table is followed by a description of the types of Claims or
Equity Interests in each class and a description of the property to be
distributed under the Plan. Sections X.B and C discuss certain legal issues
affecting the trading of securities issued pursuant to or in connection with the
sale of the Debtors' assets and the Plan.

A. SUMMARY OF CLASSIFICATION AND TREATMENT

The following table divides the Claims against and Equity
Interests in the Debtors into separate classes and summarizes the treatment for
each class. The table also identifies which classes are entitled to vote on the
Plan, based on rules set forth in the Bankruptcy Code. Finally, the table
indicates an estimated recovery for each class. IMPORTANT NOTE: As described in
Section V.C. below, the textile industry is in a state of great flux. Increased
foreign competition has resulted in numerous uncertainties. These uncertainties
and other risks related to the Debtors make it difficult to determine a precise
value for the Debtors and the equity interests that may be distributed in
connection with the sale of the Debtors' assets to the Purchaser. The recoveries
described in the following table represent the Debtors' best estimates of those
values, given the information available at this time. These estimates do not
predict the potential trading prices for securities issued in connection with
the sale of the Debtors' assets to the Purchaser. Unless otherwise specified,
the information in the following table and in the sections below are based on
calculations as of May 31, 2005. The estimation of recoveries makes the
following assumptions:

o The Effective Date is assumed to occur on
August 31, 2005.

o The estimated aggregate amount of Allowed
unsecured Claims (including General Unsecured
Claims, Noteholder Claims, and PBGC Claims)
against the Debtors is $1,294 million - see the
discussion below on the estimated amounts and
types of Claims comprising these classes.

DIP Claims Paid In Full. No $113,137,000 100%
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
-- Assumed Administrative No 100%
Expense Claims Assumed, performed, and paid in full when due by
Purchaser.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
-- Non-Assumed Paid in full (or as otherwise agreed) to the extent No N/A 100%
Administrative Expense funds are available. If insufficient funds are
Claims available, the Debtors will distribute any available
Cash and Sale Proceeds, as well as the Series B
Priority Non-Tax Claims Beneficial Interests in the following order of priority Yes
(distributed pro rata within each level of priority):
- Non-Assumed Administrative Expense Claims No
Priority Tax Claim - Priority Non-Tax Claims
- Priority Tax Claims
A
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
B Other Secured Claims Assumed and paid in full by Purchaser over a six-month Yes $311,851 100%
period following the Effective Date.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
C First Lien Lender Claims Yes $483,897,447 tbd
Sale Proceeds.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
D Second Lien Lender (i) Sale Proceeds remaining after the First Lien Lender Yes $165,000,000 tbd
Claims Claims have been paid in full and (ii) the Series A
Beneficial Interests.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
E General Unsecured Claims Yes $43,576,283 tbd
A pro rata distribution of (i) the Sale Proceeds
Noteholder Claims remaining (if any) after the First Lien Lender Claims,
F Second Lien Lender Claims, and all other priority and $1,036,312,500
PBGC Claims Administrative Expense Claims have been paid in full or
G assumed and (ii) the Series C Beneficial Interests. $214,000,000(1)
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------

- --------------------
1 Reflects the amount the PBGC has asserted in its proofs of claim.

- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
ENTITLED TO AMOUNT OF ESTIMATED
CLASS DESCRIPTION TREATMENT VOTE CLAIM(S) RECOVERY
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
H Litigation Claims See section IX.A.3. No tbd
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
I Intercompany Claims Yes 0%
See section II.B.9.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
J Securities Litigation No 0%
Claims No Distribution.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
K Punitive Damage Claims No 0%
No Distribution.
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------
L Equity Interests No Distribution. No 0%
- ----- ------------------------- ------------------------------------------------------- ----------- ------------------- ------------

B. DESCRIPTION OF THE CLASSES FOR THE DEBTORS

Unless otherwise indicated, the characteristics and amount
of the Claims or Equity Interests in the following classes are based on the
books and records of the Debtors. Each subclass is treated as a separate class
for purposes of the Plan and the Bankruptcy Code. Only Claims that are "allowed"
under the Bankruptcy Code or by the Bankruptcy Court will receive any
distribution under the Plan.

1. Priority Non-Tax Claims (Class A).

The Claims in Class A are the types identified in
subsections 507(a)(3) - (a)(7) and 507(a)(9) of the Bankruptcy Code. For the
Debtors, these Claims relate primarily to prepetition wages and employee benefit
plan contributions outstanding on the Commencement Date, except to the extent
paid after the Commencement Date pursuant to an order entered by the Bankruptcy
Court. The Debtors estimate that the amount of Claims in Class A as of August
31, 2005 will be $___.

If not otherwise assumed by the Purchaser under the APA,
each holder of a Class A Priority Non-Tax Claim shall be paid in full in Cash
(to the extent available) on the later of (i) the Effective Date, (ii) the date
such Claim becomes Allowed, and (iii) as otherwise agreed by the parties. If
insufficient funds exist to make such Cash payments, the Debtors intend to use
(i) Cash and Sale Proceeds not otherwise distributed to holders of Claims in
Class C and Class D and holders of Non-Assumed Administrative Expense Claims
(described below) and (ii) Series B Beneficial Interests not otherwise
distributed to holders of Non-Assumed Administrative Expense Claims to make a
pro rata distribution to holders of Claims in Class A.

To the extent the Claims in Class A are not assumed by the
Purchaser under the APA, it is likely that such Claims will receive little, if
any, recovery under the Plan. However, if the Plan is not confirmed, it is
certain that such Claims will receive no recovery. The failure to object to
confirmation of the Plan by a holder of a Priority Non-Tax Claim prior to any
deadline set by the Bankruptcy Court shall be deemed as such holder's consent
and agreement to receive a treatment for such Claim that is different from that
set forth in section 1129(a)(9) of the Bankruptcy Code, which otherwise requires
payment in full.

Class A is impaired and the holders of Claims in Class A
are entitled to vote to accept or reject the Plan.

2. Other Secured Claims (Class B).

This class consists of the Claims of miscellaneous
creditors secured under equipment leases, mechanics and tax liens, liens of
landlords, or similar Claims. The Debtors estimate that the Claims in this class
total $311,851.

Allowed Class B Other Secured Claims will be paid in full
by the Purchaser over a six-month period following the Effective Date. The
Debtors and the Purchaser maintain the right to challenge the validity, nature,
and perfection of, and to avoid pursuant to the provisions of the Bankruptcy
Code and other applicable law, any purported liens related to the Other Secured
Claims.

Class B is impaired and the holders of Claims in Class B
are entitled to vote to accept or reject the Plan.

3. First Lien Lender Claims (Class C).

Class C consists of the First Lien Lender Claims which are
based on amounts owed by WestPoint under the First Lien Lender Agreement. The
obligations of the Debtors are secured by a lien on the Collateral.

Pursuant to that certain Final Order Pursuant to Sections
361, 363, and 364(d)(1) of the Bankruptcy Code and Rule 4001 of the Federal
Rules of Bankruptcy Procedure Providing the Pre-Petition Secured Lenders
Adequate Protection, dated as of June 18, 2003 (the "Adequate Protection
Order"), the Debtors have paid holders of First Lien Lender Claims (the "First
Lien Lenders") $89,350,930 in adequate protection payments.

The following table shows the calculation of the net Claims
arising under the First Lien Lender Agreement, assuming the accrual of
postpetition interest and the application of adequate protection payments
against all accrued interest:

----------------------------------------------------------- -------------------
Instrument Amount
----------------------------------------------------------- -------------------
Principal $489,344,450
----------------------------------------------------------- -------------------
Foreign Currency Loans Repricing into US$ $1,344,425
----------------------------------------------------------- -------------------
Prepetition Interest $6,287,334
----------------------------------------------------------- -------------------
Outstanding Letters of Credit $35,190,000
----------------------------------------------------------- -------------------
Postpetition Interest $92,052,157
----------------------------------------------------------- -------------------
Less:
----------------------------------------------------------- -------------------
Adequate protection payments $(98,339,491)
----------------------------------------------------------- -------------------
Replacement of letters of credit $(35,190,000)
----------------------------------------------------------- -------------------
Proceeds from Asset Sales $(6,791,428)
----------------------------------------------------------- -------------------
Total $483,897,447
----------------------------------------------------------- -------------------

The net Claims described in this table are Class C Claims
to the extent of the value of the Collateral. Any excess will be General
Unsecured Claims in Class E (see below).

The holders of Claims in Class C will receive their pro
rata share of the Sale Proceeds, subject in all respects to the carve-out
approved by the Bankruptcy Court in the Final DIP Order and the Adequate
Protection Order. Proceeds remaining, if any, after full payment to Class C will
be distributed to other holders of Claims as described below. The Sale Proceeds,
to the extent available, will be distributed in the following order: (i) Cash,
until all Cash has been distributed, (ii) stock, until all stock has been
distributed, and (iii) rights, until all rights have been distributed.

Class C is impaired and the holders of Claims in Class C
are entitled to vote to accept or reject the Plan.

4. Second Lien Lender Claim (Class D).

Class D consists of the Second Lien Lender Claims which are
based on amounts owed by WestPoint under the Second Lien Lender Agreement. The
obligations of the Debtors are secured by a second lien on the Collateral.

Pursuant to the Adequate Protection Order, the Debtors paid
holders of the Second Lien Lender Claims (the "Second Lien Lenders") $51,625,797
in adequate protection payments. In accordance with an agreement reached between
the First Lien Lenders and the Second Lien Lenders, as of August 31, 2004, all
adequate protection payments due to be paid to the Second Lien Lenders under the
Adequate Protection Order after such date have been paid into an escrow account.
Approximately $18,492,767 has been paid into the escrow account. On May 10,
2005, the Second Lien Lender Administrative Agent, on behalf of itself and the
Second Lien Lenders, filed a motion with the Bankruptcy Court requesting the
dissolution of the escrow account, payment of the escrowed amounts to the Second
Lien Lenders, and the reinstatement of direct payment of the adequate protection
payments to the Second Lien Lenders. Certain of the Second Lien Lenders have
joined in the motion. The motion is currently scheduled to be heard by the
Bankruptcy Court on June 24, 2005.

The following table shows the calculation of the net Claims
arising under the Second Lien Lender Agreement, assuming the accrual of
postpetition interest and the application of adequate protection payments
against all accrued interest:

-------------------------------------------------------- ----------------------
Instrument Amount
-------------------------------------------------------- ----------------------
Principal $165,000,000
-------------------------------------------------------- ----------------------
Prepetition Interest $4,271,918
-------------------------------------------------------- ----------------------
Postpetition Interest $52,416,327
-------------------------------------------------------- ----------------------
Less:
-------------------------------------------------------- ----------------------
Adequate protection payments $(33,133,030)
-------------------------------------------------------- ----------------------
Adequate protection payments (in escrow) $(23,555,215)
-------------------------------------------------------- ----------------------
Total $165,000,000
-------------------------------------------------------- ----------------------

The Claims described in this table are Class D Claims to
the extent that the value of the Collateral exceeds the amount of the Claims in
Class C (the First Lien Lender Claims, see above). Any portion of the Claims
arising under the Second Lien Lender Agreement that are not part of Class D will
be either (i) superpriority expenses of administration (based on any decline in
the value of the Collateral as provided in the Adequate Protection Order and to
the extent determined by the Bankruptcy Court) or (ii) General Unsecured Claims
in Class E (see below).

The Bankruptcy Court will determine (i) the amount of the
Claims in Class D, (ii) the amount of any Claim for a superpriority expense of
administration, (iii) the application of adequate protection payments actually
received by the Second Lien Lenders, and (iv) whether the adequate protection
payments held in escrow should be distributed to the holders of the First Lien
Lender Claims (Class C) or the holders of the Second Lien Lender Claims (Class
D).

The holders of Class D Claims will receive their pro rata
portion of the Sale Proceeds remaining (if any) after payment in full of the
First Lien Lender Claims, until such Second Lien Lender Claims have been paid or
otherwise satisfied in full, and, to the extent such Claims have not been
satisfied in full from the Sale Proceeds, their pro rata portion of the Series A
Beneficial Interests. Proceeds remaining, if any, after full payment to Class D
will be distributed to other holders of Claims, as described below. The Sale
Proceeds, to the extent available, will be distributed in the following order:
(i) Cash, until all Cash has been distributed, (ii) stock, until all stock has
been distributed, and (iii) rights, until all rights have been distributed.

The Series A Beneficial Interests will be distributed to
Second Lien Lenders only if the Bankruptcy Court determines that the Second Lien
Lenders are entitled to a superpriority Administrative Expense Claim on account
of a decline (if any) in value from the Commencement Date of the Collateral. In
the event the value of the Liquidating Trust Assets does not exceed the amount
of the superpriority Administrative Expense Claim awarded to the Second Lien
Lenders by the Bankruptcy Court, there will be no Liquidating Trust created.
Instead, the Avoidance Actions and other assets designated for the Liquidating

Trust will be assigned directly to the Second Lien Lender Administrative Agent
for distribution to holders of Second Lien Lender Claims only. If the proceeds
being distributed to the Second Lien Lenders are more than sufficient to repay
the Second Lien Lender Claims in full, any additional proceeds will be
distributed to junior classes as described below. All distributions to Second
Lien Lenders under the Plan are subject in all respects to the carve-out
approved by the Bankruptcy Court in the Final DIP Order and the Adequate
Protection Order.

Class D is impaired and the holders of Claims in Class D
are entitled to vote to accept or reject the Plan.

5. General Unsecured Claims (Class E).

Class E consists of the Claims of suppliers and other
vendors, landlords with prepetition rent Claims and/or Claims based on rejection
of leases, and/or property damage claimants to the extent not covered by
insurance, parties to contracts with the Debtors that are being rejected,
Litigation Claims, and miscellaneous other prepetition unsecured Claims. The
aggregate amount of General Unsecured Claims timely filed against the Debtors,
excluding Noteholder Claims in Class F and PBGC Claims in Class G, exceeds
$157,250,892. Based on prior orders of the Bankruptcy Court, agreements with
certain parties and estimates of potential damages from the rejection of
prepetition executory contracts (see section IX.B below), the Debtors estimate
that the Claims in this class will be $43,576,283.

Holders of General Unsecured Claims (Class E) that are
Allowed by the Bankruptcy Court and holders of Claims in Class F (Noteholder
Claims) and Class G (PBGC Claims) will share, on a pro rata basis, (i) any
portion of the Sale Proceeds remaining after payment in full of all Claims
arising under the First Lien Lender Agreement (Class C), the Second Lien Lender
Agreement (Class D), and all priority and Administrative Expense Claims, and
(ii) the Series C Beneficial Interests. The Sale Proceeds, to the extent
available, will be distributed in the following order: (i) Cash, until all Cash
has been distributed, (ii) stock, until all stock has been distributed, and
(iii) rights, until all rights have been distributed.

Series C Beneficial Interests will be distributed only if
the value of the Liquidating Trust Assets exceeds the amount of any
superpriority Administrative Expense Claim awarded to the holders of the Second
Lien Lender Claims. Distribution of the Liquidating Trust Assets will be made
first to holders of Series A Beneficial Interests (superpriority Administrative
Expense Claims) and then to holders of Series B Beneficial Interests (unpaid
priority and Administrative Expense Claims), and then, only if any assets
remain, to holders of Series C Beneficial Interests.

Class E is impaired and the holders of Claims in Class E
are entitled to vote to accept or reject the Plan.

6. Noteholder Claims (Class F).

The Claims in this class (the Noteholder Claims) total
$1,036,312,500 and are based on amounts WPSTV owes under the following
instruments and agreements:

-------------------------------------------------------- ------------------------------------
Issue and Indenture Outstanding Principal
-------------------------------------------------------- ------------------------------------

7-7/8% senior unsecured notes due 2005 $525,000,000
----- -------------------------------------------------- ------------------------------------
Indenture, dated as of June 9, 1998, between
WestPoint Stevens Inc. and HSBC Bank USA (as
successor to The Bank of New York), as Trustee.
-------------------------------------------------------- ------------------------------------
7-7/8% senior unsecured notes due 2008 $475,000,000
----- -------------------------------------------------- ------------------------------------
Indenture, dated as of June 9, 1998, between
WestPoint Stevens Inc. and HSBC Bank USA (as
successor to The Bank of New York), as Trustee.
-------------------------------------------------------- ------------------------------------
Total Principal $1,000,000,000
-------------------------------------------------------- ------------------------------------
Plus: Accrued Pre-Petition Interest $36,312,500
-------------------------------------------------------- ------------------------------------

-------------------------------------------------------- ------------------------------------
Total $1,036,312,500.
-------------------------------------------------------- ------------------------------------

Holders of Noteholder Claims (Class F), General Unsecured
Claims (Class E) that are Allowed by the Bankruptcy Court, and Class G (PBGC
Claims) will share, on a pro rata basis, (i) any portion of the Sale Proceeds
remaining after payment in full of all Claims arising under the First Lien
Lender Agreement (Class C), the Second Lien Lender Agreement (Class D), and all
priority and Administrative Expense Claims, and (ii) the Series C Beneficial
Interests.

Class F is impaired and the holders of Claims in Class F
are entitled to vote to accept or reject the Plan.

7. PBGC Claims (Class G).

Class G consists of Claims arising out of the Debtors'
termination of their defined benefit pension plan. The PBGC has asserted Claims
of $214,000,000. Under Title IV of the Employee Retirement Income Security Act
of 1974 ("ERISA"), the PBGC guarantees the payment of certain pension benefits
upon the termination of a single employer pension plan covered by Title IV. Upon
termination of a pension plan, an employer and each member of its control group
become jointly and severally liable to the PBGC for the total amount of the
pension plan's underfunded benefit liabilities.

Holders of PBGC Claims (Class G), General Unsecured Claims
(Class E) that are Allowed by the Bankruptcy Court and holders of Claims in
Class F (Noteholder Claims) will share, on a pro rata basis, (i) any portion of
the Sale Proceeds remaining after payment in full of all Claims arising under
the First Lien Lender Agreement (Class C), the Second Lien Lender Agreement
(Class D), and all priority and Administrative Expense Claims, and (ii) the
Series C Beneficial Interests. The Sale Proceeds, to the extent available, will
be distributed in the following order: (i) Cash, until all Cash has been
distributed, (ii) stock, until all stock has been distributed, and (iii) rights,
until all rights have been distributed.

Expense Claims) and then to holders of Series B Beneficial Interests (unpaid
priority and Administrative Expense Claims), and then, only if any assets
remain, to holders of Series C Beneficial Interests.

Class G is impaired and holders of Claims in Class G are
entitled to vote to accept or reject the Plan.

8. Litigation Claims (Class H).

Class H consists of the Litigation Claims against
WestPoint. All Litigation Claims not previously Allowed by Final Order are
Disputed Claims. At such time as a Disputed Claim becomes an Allowed Claim, the
Disbursing Agent shall distribute to the holder of such Claim such holder's pro
rata share of the property distributable with respect to the Class in which such
Claim belongs.

9. Intercompany Claims of the Debtors (Class I).

Class I consists of the Intercompany Claims of WestPoint's
subsidiaries against WestPoint. Unless the Debtors determine otherwise, the
Intercompany Claims will be eliminated and discharged by offset, the
distribution, cancellation, or contribution of such Claim, or otherwise, as
determined by the Debtors. These Intercompany Claims will not receive any of the
property distributed to other claimholders under the Plan. The Debtors holding
such Claims will vote to accept the Plan.

10. Securities Litigation Claims (Class J).

Class J consists of all Claims under the securities laws
that have been or could have been asserted against WPSTV or any of the other
Debtors. Claims under the securities laws include Claims arising from rescission
of a purchase or sale of a security of any of the Debtors or for damages for the
purchase or sale of such a security. Such Claims also include any Claims for
reimbursement or contribution in connection with such Claims for rescission or
damages. Securities of the Debtors include any note, bond, debenture, or share
of preferred or common stock, whether or not outstanding on the Petition Date.
The only Claims in this class of which the Debtors are aware are three Claims
filed in connection with the Geller Action (for more information on the Geller
Action see section V.D.1. below). As further described below, each of these
Claims is subject to the class action settlement approved by the Bankruptcy
Court on October 28, 2004 and the United States District Court for the District
of Georgia on November 16, 2004.

Section 510(b) of the Bankruptcy Code subordinates all the
Claims in this class to the Claims represented by the underlying securities. The
holders of Security Litigation Claims shall receive no distribution of property
under the Plan and are deemed to reject the Plan.

11. Punitive Damage Claims (Class K).

Class K consists of any Claim against any of the Debtors
for any fine, penalty, forfeiture, or attorneys' fees (but only to the extent
such attorneys' fees are punitive in nature), or for multiple, exemplary, or
punitive damages, to the extent that such fine, penalty, forfeiture, attorneys'
fees, or damages is not compensation for actual pecuniary loss suffered by the
holder of such Claim and not statutorily prescribed. In general, punitive or
exemplary damage Claims are intended to punish or make an example of a
wrongdoer. However, in the context of an insolvent entity, such as the Debtors,
the enforcement of punitive Claims would have the effect of punishing unsecured
creditors by diluting the ultimate recovery to all unsecured creditors.
Moreover, punitive and exemplary damage Claims differ significantly from other
General Unsecured Claims which are based upon pecuniary losses. For these
reasons, such Claims have been classified separately from other unsecured
Claims. The Debtors do not believe that there will be any Allowed Claims in this
class. However, several proofs of claim may have been filed concerning personal

injury or wrongful death Claims that include punitive or exemplary damage
amounts and this class has been included in the Plan for completeness.

To the extent there are any Allowed Claims in this class,
they are subordinated to the Claims in other classes. No property will be
distributed to the holders of any Allowed Claims in this class from the Debtors'
estates. Solely to the extent these Claims are covered by applicable insurance
policies, and such insurance is permitted under state law, holders of Allowed
Claims in this class shall receive insurance proceeds.

Holders of punitive damage Claims in this class will
receive no distribution under the Plan and are deemed to reject the Plan.

12. Equity Interests (Class L).

Class L consists of all Equity Interests in WPSTV
represented by WPSTV's outstanding common stock and rights to acquire common
stock or other equity securities of WPSTV. The holders of Equity Interests in
this class will receive no distribution under the Plan. Class L is deemed to
reject the Plan.

C. ADMINISTRATIVE EXPENSES

In order to confirm the Plan, Allowed Administrative
Expense Claims and Allowed Priority Tax Claims must be paid in full or in a
manner otherwise agreeable to the holders of such Claims. Administrative
expenses are the actual and necessary costs and expenses of the Debtors' chapter
11 cases. Those expenses include, but are not limited to, postpetition salaries
and other benefits for employees, postpetition rent for facilities and offices,
amounts owed to vendors providing goods and services during the chapter 11
cases, tax obligations incurred after the commencement of the chapter 11 cases,
including interest, if applicable, under relevant state law, and certain
statutory fees and expenses. Other administrative expenses include the actual,
reasonable, and necessary professional fees and expenses of the professionals
retained by the Debtors and the Creditors Committee, the obligations outstanding
under the DIP Credit Agreement, and personal injury claims, tort claims or other
similar Litigation Claims arising after the Commencement Date, once liquidated,
to the extent not covered by insurance. Postpetition personal injury claims
covered by insurance, once liquidated, will be paid in the ordinary course of
the Debtors' business.

Administrative Expense Claims will either (i) be paid on
the Effective Date in full and in Cash (or otherwise provided for), (ii) be paid
in some other form agreeable to the holder of such Administrative Expense Claim,
(iii) be assumed by the Purchaser and paid in the normal course of the Debtors'
ongoing business operations, or (iv) remain as Administrative Expense Claims
against the Debtors' estates. In general, Administrative Expense Claims that
remain against the Debtors' estates (the Non-Assumed Administrative Expense
Claims) are those Claims that are not critical to the ongoing operation of the
Debtors' business operations.

If insufficient funds exist to pay Non-Assumed
Administrative Expense Claims in full (or in such amounts as agreed with the
holders of such Claims), the Debtors intend to use Cash available, Sale Proceeds
not otherwise distributed to holders of Claims in Class C and Class D, and
Series B Beneficial Interests to make a pro rata distribution to holders of
Non-Assumed Administrative Expense Claims.

It is likely that the Non-Assumed Administrative Expense
Claims will receive little, if any, recovery under the Plan. However, if the
Plan is not confirmed, it is certain that such Claims will receive no recovery.
The failure to object to confirmation of the Plan by a holder of a Non-Assumed
Administrative Expense Claim prior to any deadline set by the Bankruptcy Court
shall be deemed to be such holder's consent and agreement to receive a treatment

for such Claim that is different from that set forth in section 1129(a)(9) of
the Bankruptcy Code, which otherwise requires payment in full.

1. Paid or Provided for On the Effective Date.

Administrative Expense Claims that will be paid in full and
in Cash on the Effective Date include all outstanding balances under the DIP
Credit Agreement. Outstanding letters of credit under the DIP Credit Agreement
will be backstopped with substitute letters of credit arranged by the Purchaser
or cash collateralized. The Debtors estimate that Claims under the DIP Credit
Agreement will be approximately $110,000,000 as of August 31, 2005. Unpaid
professional fees (see description in section II.C.3(b)) up to an aggregate
amount of $5,000,000 will be included in this category. This category also
includes any Priority Tax Claims (see description in section II.D) secured by
the Collateral.

2. Assumed Administrative Expense Claims.

Based on the proposals received as of the date hereof, the
Assumed Administrative Expense Claims to be assumed by the Purchaser in
accordance with the terms of the APA include normal trade payables, accrued
salaries, and vacation time. Such Claims will be paid by the Purchaser in the
ordinary course of its business operations. The holders of such Claims will have
recourse only to the Purchaser and neither the Debtors, their estates, nor their
respective properties shall be subject to any such Claims.

3. Non-Assumed Administrative Expense Claims.

In general, Non-Assumed Administrative Expense Claims
include Claims that the Purchaser has determined are not critical to the
Debtors' ongoing business operations. Such Claims may include reimbursement of
unpaid professional fees in excess of $5,000,000.

(a) Payments to Employees

The Bankruptcy Court has approved retention programs for
key employees of the Debtors (the "KERP"). Under the KERP, approximately $22.8
million in incentive payments have accrued since the third quarter of 2003 of
which approximately $12.5 million has been paid to employees. Pursuant to the
order of the Bankruptcy Court authorizing the KERP, the Debtors are withholding
50% of payments for incentive bonuses until confirmation of a plan. The Debtors
estimate that an additional $9.39 million under the KERP remains accrued but
unpaid.

Pursuant to an agreement reached between the Debtors and
the First Lien Lenders in connection with the extension of the KERP, the
Debtors' management agreed to establish an escrow account to hold the payments
due to the members of Group 1A (as defined by the KERP) until confirmation of a
plan. As of May 31, 2005, $960,330 is being held in that escrow account for the
benefit of Group 1A employees. This amount is to be paid to Group 1A employees
upon confirmation of a chapter 11 plan.

(b) Compensation and Reimbursement Claims.

As of January 31, 2005, the Debtors have paid the various
professionals in their chapter 11 cases an aggregate of approximately $37.3
million since the Commencement Date. The Debtors estimate that various
professionals will file fee applications relating to periods subsequent to May
31, 2005 for approximately $6.3 million, assuming the effective date of the Plan
is August 31, 2005.

Pursuant to that certain Administrative Order For Interim
Compensation and Reimbursement of Expenses of Chapter 11 Professionals, dated
June 18, 2003 (the "Interim Compensation Order"), the Debtors were instructed to
withhold, for all professionals other than Rothschild, 20% of each

professionals' monthly fees until the end of the chapter 11 cases (the
"Holdback"). The Debtors may seek authority from the Bankruptcy Court to pay
part or all of the Holdback prior to confirmation of the Plan. In the event the
Debtors do not seek prior Bankruptcy Court approval, then, in connection with
confirmation of a plan, the Debtors professionals and the professionals retained
by the Creditors Committee, will file final fee applications requesting approval
and payment of the Holdback. The Debtors currently estimate that the Holdback
outstanding is in the amount of $3,474,146 as of April 30, 2005. Pursuant to
that certain Interim Order Authorizing the Retention of Rothschild Inc. as
Investment Banker and Financial Advisor for the Debtors, which became a Final
Order on June 18, 2003, in addition to its monthly fee, Rothschild is entitled
to a completion fee of $6,000,000 upon the consummation of a restructuring
transaction. Fifty percent (50%) of Rothschild's monthly fee (above the first
$300,000) is to be credited against the completion fee. The Debtors estimate
that, as of May 31, 2005, the amount of the completion fee has been reduced to
$3,750,000.

Allowed compensation and reimbursement Claims
("Compensation and Reimbursement Claims") relating to compensation of
professionals retained by the Debtors or the Creditors Committee, or for the
reimbursement of expenses for certain members of the Creditors Committee, unless
otherwise agreed by the claimant, will be paid on the later of the Effective
Date and the date on which an order allowing such Compensation and Reimbursement
Claim is entered.

Pursuant to the Final DIP Order and the Adequate Protection
Order, the Debtors have established a $5,000,000 Carve-Out Reserve (as such term
is defined therein) to provide funds for the payment of final professional fees.
The Compensation and Reimbursement Claims will first be satisfied from the
proceeds of the Carve-Out Reserve. Any remaining portion will be a Non-Assumed
Administrative Expense Claim.

D. PRIORITY TAX CLAIMS

Tax Claims described in section 507(a)(8) of the Bankruptcy
Code (generally, unsecured income, property, wage, or excise taxes) are also
entitled to priority under the Bankruptcy Code and, if assumed by the Purchaser,
will be paid either in full on the later of the Effective Date and the first
business day after the date that is thirty (30) days after the date such Claim
becomes Allowed, or equal annual Cash payments, together with interest at a
fixed annual rate of six percent (6%) over a period not exceeding six (6) years
from the date of assessment of the tax. It is anticipated that the Purchaser
will assume those taxes which are treated as held by the Debtors in trust for
the relevant taxing authority and those taxes for which the Debtors' officers,
directors, or employees could have potential personal liability were they to
remain unpaid. If such Claims are not assumed by the Purchaser, the Debtors
intend to use Cash and Sale Proceeds not otherwise distributed to holders of
Claims in Class C and Class D and holders of Non-Assumed Administrative Expense
Claims (described above) and Series B Beneficial Interests not otherwise
distributed to holders of Non-Assumed Administrative Expense Claims and holders
of Claims in Class A to make a pro rata distribution to holders of Priority Tax
Claims.

To the extent the Priority Tax Claims are not assumed by
the Purchaser under the APA, it is likely that such Claims will receive little,
if any, recovery under the Plan. However, if the Plan is not confirmed, it is
certain that such Claims will receive no recovery. The failure to object to
confirmation of the Plan by a holder of a Priority Tax Claim prior to any
deadline set by the Bankruptcy Court shall be deemed to be such holder's consent
and agreement to receive treatment for such Claim that is different from that
set forth in section 1129(a)(9) of the Bankruptcy Code, which otherwise requires
payment in full.

Taxes secured by valid liens on the Collateral are not
affected by the Plan and will be paid or otherwise assumed as described in
section II.C.1. above.

E. TORT CLAIMS

Personal injury claims, tort claims, or other similar
Litigation Claims arising after the Commencement Date are not subject to the
discharge injunction and may be liquidated in the ordinary course of business
without further order of the Bankruptcy Court. Personal injury claimants, tort
claimants, or other similar litigation claimants whose Claims arose after the
Commencement Date shall not be required to file an application for payment of an
administrative expense and shall not be subject to any deadline to file
applications for payment of administrative expenses.

F. RESERVATION OF "CRAM DOWN" RIGHTS

The Bankruptcy Code permits the Bankruptcy Court to confirm
a chapter 11 plan over the dissent of any class of claims or equity interests as
long as the standards in section 1129(b) are met. This power to confirm a plan
over dissenting classes - often referred to as "cram down" - is an important
part of the reorganization process. It assures that no single group (or multiple
groups) of claims or interests can block a restructuring that otherwise meets
the requirements of the Bankruptcy Code and is in the interests of the other
constituents in the case.

The Debtors each reserve the right to seek confirmation of
the Plan, notwithstanding the rejection of the Plan by any class entitled to
vote. In the event a class votes to reject the Plan, the Debtors will request
the Bankruptcy Court to rule that the Plan meets the requirements specified in
section 1129(b) of the Bankruptcy Code with respect to such class. The Debtors
will also seek such a ruling with respect to each class that is deemed to reject
the Plan.

III.

VOTING PROCEDURES AND REQUIREMENTS

Detailed voting instructions are provided with the ballot
accompanying this Disclosure Statement. For purposes of the Plan, the following
classes are the only ones entitled to vote.

CLASS DESCRIPTION
------------------------------------------------------------
A Priority Non-Tax Claims
B Other Secured Claims
C First Lien Lender Claims
D Second Lien Lender Claims
E General Unsecured Claims
F Noteholder Claims
G PBGC Claims
I Intercompany Claims

If your Claim is not in one of these classes, you are not entitled to vote on
the Plan and you will not receive a ballot with this Disclosure Statement. If
your Claim is in one of these classes, you should read your ballot and follow
the listed instructions carefully. Please use only the ballot that accompanies
this Disclosure Statement.

- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS CONCERNING THE BALLOT, YOU MAY CONTACT THE VOTING
AGENT AT THE TELEPHONE NUMBER BELOW:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FOR VOTING CLASSES A, B, C, D, E, AND G: (646) 282-2500

FOR VOTING CLASS F: (646) 282-1800
- --------------------------------------------------------------------------------

A. VOTE REQUIRED FOR ACCEPTANCE BY A CLASS

Under the Bankruptcy Code, acceptance of a Plan by a class
of claims is determined by calculating the number and the amount of claims
voting to accept, based on the actual total Allowed claims voting. Acceptance
requires an affirmative vote of more than one-half of the total Allowed claims
voting and two-thirds in amount of the total Allowed claims voting.

B. CLASSES NOT ENTITLED TO VOTE

Under the Bankruptcy Code, creditors are not entitled to
vote if their contractual rights are unimpaired by the Plan. In addition,
classes of Claims or Equity Interests that are not entitled to receive property
under the Plan are deemed not to have accepted the Plan. Based on this standard,
for example, the holders of Intercompany Claims, Securities Litigation Claims,
and Punitive Damage Claims are not receiving any property and are therefore
deemed to have rejected the Plan. Similarly, stockholders of WPSTV are not
entitled to vote because they are not receiving any property under the Plan.
Stockholders are deemed to have rejected the Plan. For a summary of the classes
entitled to vote, see the charts in sections II.A and III.

C. VOTING

In order for your vote to be counted, your vote must be
actually RECEIVED by the Voting Agent at the following address before the Voting
Deadline of 5:00 p.m., Eastern Time, on August 5, 2005:

--------------------------------------------------------------
VOTING AGENT:

FOR VOTING CLASSES A, B, C, D, E, AND G:

Bankruptcy Services, LLC
757 Third Avenue
3rd Floor
New York, NY 10017
(Attn: WestPoint Stevens Inc.)

FOR VOTING CLASS F:

Financial Balloting Group LLC
757 Third Avenue

3rd Floor
New York, NY 10017
(Attn: WestPoint Stevens Inc.)
--------------------------------------------------------------

If the instructions on your ballot require you to return
the ballot to your bank, broker, or other nominee, or to their agent, you must
deliver your ballot to them in sufficient time for them to process it and return
it to the Voting Agent before the Voting Deadline. If a ballot is damaged or
lost, you may contact the Debtors' Voting Agent at the number set forth above.
Any ballot that is executed and returned but which does not indicate an
acceptance or rejection of the Plan may not be counted.

IV.

PROJECTIONS AND VALUATION ANALYSIS

A. INTRODUCTION

This section includes projections for NewCo (as successor
to the Debtors) and an estimate of a going concern valuation for the Debtors,
based on information available at the time of the preparation of this Disclosure
Statement.

The projections assume an Effective Date of August 31,
2005, with Allowed Claims treated in accordance with the provisions set forth in
the Plan. Expenses incurred as a result of the reorganization cases are assumed
to be paid on the Effective Date. If the sale proposed in the Plan does not
occur as currently scheduled, additional Administrative Expense Claims will be
incurred until such time as a plan of reorganization is confirmed and becomes
effective. These Administrative Expense Claims could significantly impact the
Debtors' cash flows.

It is important to note that the projections and estimates
of values described below may differ from actual performance and are highly
dependent on significant assumptions concerning the future operations of these
businesses. These assumptions include the growth of certain lines of business,
labor and other operating costs, inflation, and the level of investment required
for capital expenditures and working capital Please refer to section X, below,
for a discussion of many of the factors that could have a material effect on the
information provided in this section.

The estimates of value are not intended to reflect the
values that may be attainable in public or private markets. They also are not
intended to be appraisals or reflect the value that may be realized if assets
are sold.

B. PROJECTIONS

A copy of NewCo's pro forma balance sheet and projected
financial performance will be filed with the Bankruptcy Court prior to the
Disclosure Statement Hearing.

C. GOING CONCERN VALUATION

A copy of the Debtors' going concern valuation will be
filed with the Bankruptcy Court prior to the Disclosure Statement Hearing.

BUSINESS DESCRIPTION AND REASONS FOR CHAPTER 11

A. THE DEBTORS' BUSINESSES

WestPoint is a leading manufacturer, marketer and
distributor of an extensive range of bed and bath products ("Home Fashions"),
which include bath rugs, bath towels, bedspreads, comforters and duvet covers,
decorative throw pillows, sheets, pillowcases and blankets. For almost 200
years, WestPoint has been bringing quality, comfort and style to American homes.
WestPoint's family tree includes three of the most famous textile makers of the
past - J.P. Stevens & Co., Inc., Pepperell Manufacturing Company, and West Point
Manufacturing Company.

WestPoint's products are marketed through leading
department stores, mass merchants, specialty stores, and institutional channels
located throughout the United States as well as in Australia, Canada, Mexico,
the Middle East, and the Far East. WestPoint also owns or leases 34 of its own

stores from which it sells its products directly to the consumer. As of the
Commencement Date, WestPoint employed approximately 14,600 employees. As of May
31, 2005, WestPoint employs approximately 9,730 employees. Management is aware
of the growing need for an international presence in the home textiles market.
Low cost labor and manufacturing overseas has severely impacted the domestic
textile markets. In addition to a domestic rationalization, the Debtors are
continuing to explore opportunities to move considerable operations overseas to
take advantage of these cost savings.

WestPoint operates an extensive network of manufacturing
and distribution facilities located in Alabama, Florida, Georgia, Maine, North
Carolina, and South Carolina, and uses its New York office as the principal
showroom for its extensive line of Home Fashions. WestPoint has one of the
largest market shares in both the domestic sheet and pillowcase market and the
domestic bath market. As a result of the acquisition of the Chatham Consumer
Products Division of CM Industries in January 2001, WestPoint now has the
largest market share in domestic blankets. As of March 31, 2005, WestPoint's
assets and liabilities, as reflected in its unaudited consolidated financial
statements, were $1,020,346 and $2,125,933, respectively.

As of the Commencement Date, WestPoint had approximately
49,897,409 shares of common stock outstanding. As of April 20, 2005, there were
approximately 3,700 registered holders. WestPoint's common shares were traded on
the New York Stock Exchange until January 30, 2003, and then were traded on the
Over the Counter Bulletin Board under the ticker symbol "WSPTQ.OB" and
subsequently under the ticker symbol "WSPQE.OB" until May 6, 2005. WestPoint's
common shares are currently eligible for trade reporting on the Automated
Confirmation Transaction Service ("ACT") under the ticker symbol "WSPTO.PK"
effective May 9, 2005. WPSTV's common shares have most recently closed at a
price of $0.01 per share.

The following is a brief description of WestPoint's
operations. Additional detail on WestPoint's operations and businesses can be
found in its Form 10-K for the year ended December 31, 2003, which was filed by
WPSTV with the Securities and Exchange Commission on March 15, 2004, the
quarterly reports on Form 10-Q for the quarters ended March 31, 2004, June 30,
2004, and September 30, 2004 which were filed by WPSTV on May 10, 2004, August
9, 2004, and November 9, 2004, respectively, WPSTV's 2004 Annual Review annexed
hereto as Exhibit "B", which includes its unaudited financial statements for the
fiscal year ended December 31, 2004, and WPSTV's unaudited financial statements
for the quarter ended March 31, 2005, annexed hereto as Exhibit "C." Copies of
the SEC filings may be obtained over the internet at www.sec.gov or on the
Company's website at www.westpointstevens.com. The Debtors' monthly operating
reports are available on the Bankruptcy Court's Electronic Case Filing System
which can be found at www.nysb.uscourts.gov, the official website for the
Bankruptcy Court.

1. Products.

WestPoint markets a broad range of manufactured and sourced
bed, bath and basic bedding products.

"Bed and Bath Products" include:

bath accessories;
bath rugs;
bath towels;
beach towels;
bedskirts;
bedspreads;
comforters and duvet covers;
decorative throw pillows;
drapes and valances;

quilts;
sheets and pillowcases;
shower curtains; and
table covers.

"Basic Bedding Products" include:

bed pillows;
flocked blankets;
mattress pads;
natural fill pillows, comforters and featherbeds;
woven blankets and throws; and
heated blankets and mattress pads.

WestPoint's products are made from a variety of fabrics,
such as chambray, twill, sateen, flannel, linen, cotton, and cotton blends and
are available in a wide assortment of colors and patterns. WestPoint has
positioned itself as a single-source supplier to retailers of bed and bath
products, offering a broad assortment of products across multiple price points.
Such product and price point breadth allows WestPoint to provide a comprehensive
product offering for each major distribution channel.

2. Trademarks and Licenses.

WestPoint's products are marketed under well-known and
firmly established trademarks, brand names, and private labels. WestPoint uses
trademarks, brand names, and private labels as merchandising tools to assist its
customers in coordinating their product offerings and differentiating their
products from those of their competitors. Registered trademarks include ATELIER
MARTEX(R), CHATHAM(R), GRAND PATRICIAN(R), MARTEX(R), PATRICIAN(R), UTICA(R),
STEVENS(R), LADY PEPPERELL(R), BABY MARTEX(R), SEDUCTION(R), and VELLUX(R). In
2004, WestPoint recognized $2.0 million in revenues for licensing its trademarks
to third party manufacturers who produced complementary Home Fashion products.
In addition, products are manufactured and sold pursuant to licensing agreements
under designer and brand names that include, among others, Ralph Lauren Home,
Disney Home, Charisma, and Glynda Turley. A portion of WestPoint's sales are
derived from licensed designer brands. The license agreements for WestPoint's
designer brands generally are for a term of two or three years. Some of the
licenses are automatically renewable for additional periods, provided that
certain sales thresholds set forth in the license agreements are met. No single
license has accounted for more than 13.5% of WestPoint's total sales volume
during any of the five fiscal years ending on December 31, 2004. The loss of a
significant license could have an adverse effect upon the Company's business,
which effect could be material. The licensing agreements with fixed expiration
dates are: Ralph Lauren Home, December 31, 2005 (the parties are currently
negotiating the terms of a new agreement to run through December 31, 2008);
Glynda Turley, December 31, 2005; Charisma, March 31, 2010; and Disney Home,
December 31, 2005.

3. Marketing.

WestPoint is committed to developing and maintaining
integral relationships with its customers through "Strategic Partnering," a
program designed to improve customers' operating results by leveraging
WestPoint's merchandising, manufacturing, and inventory management skills.
"Strategic Partnering" includes Electronic Data Interchange ("EDI") direct
electronic entry systems, "Quick Response" and "Vendor Managed Inventory"
customer delivery programs, and point-of-sale processing. WestPoint incorporates
Strategic Partnering into its planning, manufacturing, and shipping systems in
order to enable it to efficiently and economically anticipate and respond to
customers' inventory requirements. As a result, WestPoint is better able to plan
and forecast its own production and inventory requirements. Sales and marketing
of WestPoint's Home Fashion products are conducted through a recently enhanced
organizational format consisting of divisions for Bed and Bath Products and
Basic Bedding Products, each with supporting domestic sales, marketing, and

merchandising teams and international sales and marketing teams. Distribution
specific teams focused on targeted key accounts are linked with product
management, operations, customer service, and distribution to service each
segment of retail.

WestPoint works closely with its major customers to assist
them in merchandising and promoting its products to consumers. In addition,
WestPoint periodically meets with its customers in an effort to maximize product
exposure and sales, and to jointly develop merchandise assortments and plan
promotional events specifically tailored to the customer. WestPoint provides
merchandising assistance with store layouts, fixture designs, advertising, and
point-of-sale displays. A national consumer and trade advertising campaign and
comprehensive internet website have served to enhance brand recognition.
WestPoint also provides its customers with suggested customized advertising
materials designed to increase its product sales. A heightened focus on consumer
research provides needed products on a continual basis.

Approximately 87% of WestPoint's total sales in 2004 were
made to retail establishments in the United States, including catalog retailers,
chain and department stores, mass merchants, specialty bed and bath stores,
warehouse clubs, and WestPoint Stores. Finished products are distributed to
retailers directly from WestPoint's plants. The majority of the remaining
portion of WestPoint's sales of Home Fashion products are through the
institutional channel, which includes hospitality and healthcare establishments,
as well as laundry supply businesses. In addition to domestic sales, WestPoint
distributes its Home Fashion products for eventual sale to certain foreign
markets, principally Australia, Canada, Mexico, Central and South America, the
Middle East, and the Far East. International operations accounted for
approximately 3% of WestPoint's total revenues in 2004.

4. Customers.

WestPoint is always pursuing strategic relationships with
key merchandisers. An important component of WestPoint's strategy is to increase
its share of shelf and floor space by strengthening its partnership with its
customers. WestPoint is working closely with retailers and is sharing
information and business practices with them to improve service and achieve
higher profitability for both the retailer and WestPoint.

WestPoint's Home Fashion products are sold to catalog
retailers, chain stores, mass merchants, department stores, specialty stores,
warehouse clubs, and its own retail stores. WestPoint's six largest customers in
2004, Federated Department Stores, Inc., J.C. Penney Company, Inc., Kmart
Corporation, Sears Roebuck & Co., Inc., Target Corporation, and Wal-Mart Stores,
Inc. accounted for approximately 51% of the net sales of WestPoint during the
fiscal year ended December 31, 2004. In 2004, sales to Target Corporation and
Wal-Mart Stores, Inc. were 13% and 14%, respectively, of the net sales of
WestPoint. Each of such customers has purchased goods from WestPoint in each of
the last 10 years. Representatives of Target Corporation and J.C. Penney
Company, Inc. have indicated that they intend to significantly increase their
direct sourcing of home fashion products from foreign sources. A loss of any of
the largest accounts (or a material portion of any thereof) would have an
adverse effect upon WestPoint's business, which effect could be material.

5. Manufacturing.

WestPoint currently uses the latest manufacturing and
distribution equipment and technologies in its mills. Management therefore
believes WestPoint is one of the most efficient manufacturers in the home
fashions industry. Over the five years ended December 31, 2004, WestPoint has
spent approximately $220 million to modernize its manufacturing and distribution
systems. The capital expenditures have been used to, among other things, replace
projectile looms with faster, more efficient air jet looms and further automate
WestPoint's cut and sew operations. Air jet looms produce at higher speeds than
projectile looms, yielding fewer defects, requiring less maintenance, and
providing cleaner and safer working environments. Using air jet technology,

compressed air propels the filling yarn at high speeds, with robotics handling
the cutting and tucking of the filling yarn. WestPoint (including its
subsidiaries) operates approximately 18 facilities. These facilities are located
primarily in the Southeastern United States.

6. Sourcing.

WestPoint has had a long-standing history of domestic and
international sourcing of selected component products such as specialty yarns
and specialty greige sheeting fabric for use in domestic production of Home
Fashion products. Today, WestPoint views sourcing as a means to drive business
growth and improve profitability by providing products and services that
accelerate product and packaging innovation resulting in a competitive market
advantage. In 2004, WestPoint imported both component and finished products from
22 countries and has established strong relationships in several key export
countries including China, India, and Pakistan. To accelerate speed to market
and improve customer service, WestPoint successfully implemented third party
logistics operations on the East Coast. WestPoint continues to increase the
number of vendors and sourced product categories and estimates that sales from
sourced products accounted for roughly 29% of WestPoint's sales in 2004. Through
global sourcing operations, the categories of product offerings by WestPoint to
its customers has been significantly expanded to increase focus on high growth
product categories such as bath accessories, rugs and quilts.

WestPoint's policy on sourcing prohibits the purchase of
merchandise that is produced in whole or in part by indentured, prison, or
illegal immigrant or child labor. WestPoint requires that vendors certify the
locations used for the production of products it purchases and that the vendors
submit to compliance inspections from WestPoint or its representatives to ensure
that WestPoint does not do business with suppliers who violate human rights.

7. Raw Materials.

The principal raw materials used in the manufacture of Home
Fashions products are cotton of various grades and staple lengths, polyester,
and nylon in staple and filament form. Cotton, polyester, and nylon presently
are available from several sources in quantities sufficient to meet WestPoint's
requirements. WestPoint is not dependent upon any one supplier as a source of
raw materials. Since cotton is an agricultural product, its supply and quality
are subject to weather patterns, disease, and other factors. The price of cotton
is also influenced by supply and demand considerations, both domestically and
worldwide, and by the cost of polyester. Although WestPoint has always been able
to acquire sufficient quantities of cotton for its operations in the past, any
shortage in the cotton supply by reason of weather, disease, or other factors
could adversely affect WestPoint's operations. The price of man-made fibers,
such as polyester and nylon, is influenced by demand, manufacturing capacity and
costs, petroleum prices, cotton prices, and the cost of polymers used in
producing man-made fibers. Any significant prolonged petrochemical shortages
could significantly affect the availability of man-made fibers and cause a
substantial increase in demand for cotton, resulting in decreased availability
and, possibly, increased price. WestPoint also purchases substantial quantities
of dyes and chemicals. Dyes and chemicals have been, and are expected to
continue to be, available in sufficient supply from a wide variety of sources.

8. Seasonality; Cyclicality; Inventory.

Traditionally, the home fashions industry has been
seasonal, with peak sales in the fall. In accordance with industry practice,
WestPoint increases its Home Fashions' inventory levels during the first six
months of the year to meet customer demands for the fall peak season.
WestPoint's commitment to EDI, Quick Response, and Vendor Managed Inventory,
however, has facilitated a more even distribution of products throughout the
calendar year and reduced some of the need to stockpile inventory to meet peak

season demands. WestPoint's increased emphasis on sourcing of products is
anticipated to increase the inventory cycle times to account for transit time
and quick peaks in demand.

The home fashions industry is also cyclical. While
WestPoint's performance may be negatively affected by downturns in consumer
spending, management believes the effects thereof are mitigated by WestPoint's
large market shares and broad distribution base.

9. Competition.

The home fashions industry is highly competitive. WestPoint
competes on the basis of price, quality, design and customer service, among
other factors. In the sheet and towel markets, WestPoint competes primarily with
Springs Industries, Inc. In the other bedding and accessories markets, the
Company competes with many companies, most of which are much smaller in size
than WestPoint. WestPoint has pursued a competitive strategy focused on
providing the best fashion, quality, service, and value to its customers and to
the ultimate consumer. WestPoint believes that there has been an increase in the
sale of imported Home Fashion products in the domestic market and is actively
pursuing its own foreign sourcing opportunities to meet the demand for such
products. WestPoint believes the level of foreign competition has been
increasing. There can be no assurance that foreign competition will not grow to
a level that could have an adverse effect upon WestPoint's ability to compete
effectively.

10. Other Operations.

WestPoint's operations also include Grifftex Chemicals
("Grifftex") which formulates chemicals primarily used in WestPoint's finishing
processes, and WestPoint Stevens Graphics ("Graphics") which prints product
packaging and labeling. Neither Grifftex nor Graphics represent a material
portion of WestPoint's business.

11. Environmental Matters.

WestPoint is subject to various federal, state, and local
environmental laws and regulations governing, among other things, the storage,
handling, usage, discharge, and disposal of a variety of hazardous and
non-hazardous substances and wastes used in, or resulting from, its operations,
including, but not limited to: the Water Pollution Control Act, as amended; the
Clean Air Act, as amended; the Resource Conservation and Recovery Act, as
amended; the Toxic Substances Control Act; and the Comprehensive Environmental
Response, Compensation and Liability Act.

WestPoint's operations also are governed by laws and
regulations relating to employee safety and health, principally the Occupational
Safety and Health Act and regulations thereunder which, among other things,
establish exposure limitations for cotton dust, formaldehyde, asbestos and
noise, and regulate chemical, physical and ergonomic hazards in the workplace.

Although WestPoint does not expect that compliance with any
of the aforementioned laws and regulations will have a material adverse effect
on its capital expenditures, earnings, or competitive position in the
foreseeable future, there can be no assurances that environmental requirements
will not become more stringent in the future or that WestPoint will not incur
significant costs in the future to comply with such requirements.

B. PREPETITION INDEBTEDNESS

WestPoint's significant prepetition indebtedness consists
of the following:

1. The First Lien Lender Agreement.

The First Lien Lender Agreement consists of that certain
Second Amended and Restated Credit Agreement, dated as of June 9, 1998, which is
comprised of the Revolving Loans, the Foreign Currency Loan Subfacility, and the
Letter of Credit Subfacility in the original aggregate principal amount of
$800,000,000, among WPSTV, as Borrower, WestPoint Stevens (UK) Limited and
WestPoint Stevens (Europe) Limited, as Foreign Borrowers, the several banks and
other financial institutions from time to time parties thereto, Bank of America,
N.A., as Issuing Lender, Swingline Lender, and Administrative Agent. As of the
Commencement Date, the principal amount due under the First Lien Lender
Agreement was $490,688,875, plus accrued interest of approximately $6,287,334
and undrawn letters of credit issued under the First Lien Lender Agreement of
approximately $35,190,000.

Pursuant to the Adequate Protection Order, as of May 31,
2005, the Debtors' have paid the First Lien Lenders $98,339,491 in adequate
protection payments.

2. The Second-Lien Lender Agreement.

The Second-Lien Lender Agreement consists of that certain
$165 million Second-Lien Credit Facility, dated as of June 29, 2001, among
WPSTV, as Borrower, the banks and other financial institutions from time to time
parties thereto, and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust
Company), as Administrative Agent. As of the Commencement Date, the principal
amount due under the Second-Lien Facility was $165,000,000, plus accrued
interest of approximately $4,271,918.

Pursuant to the Adequate Protection Order, as of May 31,
2005, the Debtors have paid the Second Lien Lenders $56,688,245 in adequate
protection payments. In accordance with the agreement reached between the First
Lien Lenders and the Second Lien Lenders which was approved by the Bankruptcy
Court on August 23, 2004, all adequate protection payments since August 31,
2004, have been paid into an escrow account. Approximately $23,555,215 has been
paid into the escrow account. On May 10, 2005, the Second Lien Lender
Administrative Agent on behalf of itself and the Second Lien Lenders, filed a
motion with the Bankruptcy Court requesting the dissolution of the escrow
account, payment of the escrowed amounts to the Second Lien Lenders, and the
reinstatement of direct payment of the adequate protection payments to the
Second Lien Lenders. Certain of the Second Lien Lenders have joined in the
motion. The motion is currently scheduled to be heard by the Bankruptcy Court on
June 24, 2005.

3. The Senior Notes.

The senior notes (the "Senior Notes") consist of (i) the
7-7/8 % senior unsecured notes due 2005, issued pursuant to that certain
Indenture, dated as of June 9, 1998, between WPSTV and HSBC Bank USA (as
successor to The Bank of New York), as Trustee, in the original aggregate
principal amount of $525,000,000 and (ii) the 7-7/8 % senior unsecured notes due
2008, issued pursuant to that certain Indenture, dated as of June 9, 1998,
between WPSTV and HSBC Bank USA (as successor to The Bank of New York), as
Trustee, in the original aggregate principal amount of $475,000,000. The Senior
Notes are general unsecured obligations of WPSTV and rank pari passu in right of
payment with all existing or future unsubordinated indebtedness of WPSTV and
senior in right of payment to all subordinated indebtedness of WPSTV. The Senior
Notes bear interest at the rate of 7-7/8% per annum, payable semi-annually on
June 15 and December 15 of each year.

C. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES

The Debtors believe that their financial difficulties are
attributable primarily to their overleveraged debt structure and an increase in
foreign competition. The domestic textile manufacturing industry is in a state
of flux, beset by factors beyond its control. The rapidly increasing ability of
foreign textile competitors to deliver product and service that meet the demands
of domestic customers has led to the closing and liquidation of many domestic
textile manufacturers, the most recent being one of WPSTV's key competitors,
Pillowtex (as described above). WPSTV, like many other domestic textile
manufacturers, was compelled to commence these chapter 11 cases in order to
continue to be able to operate successfully in today's competitive marketplace
and reduce its debt burden and de-lever its balance sheet.

Commencing in the year 2000, WestPoint undertook a
strategic review of its businesses, manufacturing, other facilities, and
products and implemented a restructuring plan. In connection therewith,
WestPoint closed four plants and terminated over 1,700 employees.

On September 20, 2002, WestPoint's board of directors
approved additional restructuring initiatives in an effort to increase asset
utilization, lower manufacturing costs and increase Cash flow and profitability
through reallocation of production assets from bath products to basic bedding
products and through rationalization of West Point Stevens Stores Inc. WestPoint
also closed its Rosemary, North Carolina, towel finishing facility and 3 retail
stores.

Despite these initiatives, WestPoint continued to
experience financial difficulty related primarily to restrictive covenants under
its First Lien Lender Agreement and its existing overleveraged debt structure.
WestPoint therefore entered into negotiations with the First Lien Lenders to
amend the First Lien Lender Agreement to permit certain restructuring,
impairment and other charges and to revise certain financial ratios and minimum
EBITDA covenants in its First Lien Lender Agreement.

Despite the amendments to its First Lien Lender Agreement,
WestPoint continued to experience financial difficulties which led to a default
under its First Lien Lender Agreement and Second-Lien Lender Agreement.
Effective March 31, 2003, the First Lien Lenders and Second Lien Lenders agreed
to amend the First Lien Lender Agreement and Second Lien Lender Agreement and to
refrain from exercising any rights or remedies in respect of WestPoint's failure
to comply with financial covenants until June 10, 2003.

On May 16, 2003, WestPoint's board of directors approved
the retention of Rothschild Inc. ("Rothschild"), an independent financial
advisor, to evaluate alternatives aimed at reducing WestPoint's existing debt
structure and strengthening the balance sheet. After extensive negotiations with
the First Lien Lenders and Second Lien Lenders regarding various alternatives,
WestPoint's board of directors concluded it would be in the best interests of
its creditors and stockholders to effectuate a consensual restructuring under
chapter 11 of the Bankruptcy Code. On June 1, 2003, the Debtors commenced the
chapter 11 cases.

D. PENDING LITIGATION AND OTHER PROCEEDINGS

1. The Geller Action.

On October 5, 2001, a purported stockholder class action
suit, entitled Norman Geller v. WestPoint Stevens Inc., et al. (the "Geller
Action"), was filed against WestPoint and certain of its former officers and
directors in the United States District Court for the Northern District of
Georgia. The actions were consolidated by Order dated January 25, 2002.
Plaintiffs served a Consolidated Amended Complaint (the "Amended Complaint") on
March 29, 2002. The Amended Complaint asserted claims against all defendants
under ss. 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and against WestPoint and defendant Holcombe T. Green, Jr. as
"controlling persons" under ss. 20(a) of the Exchange Act. The Amended Complaint

alleged that, during the putative class period (i.e., February 10, 1999, to
October 10, 2000), WestPoint and certain of its officers and directors caused
false and misleading statements to be issued regarding, inter alia, alleged
overcapacity and excessive inventories of WestPoint's towel-related products and
customer demand for such products, and that certain individual defendants
wrongfully sold or pledged WestPoint stock at inflated prices for their benefit.
The Amended Complaint referred to WestPoint's press releases and quarterly and
annual reports on Securities Exchange Commission Forms 10-Q and 10-K, which
discuss WestPoint's results and forecasts for the fiscal years 1999 and 2000.
The plaintiffs alleged that these press releases and public filings were false
and misleading because they failed to disclose that WestPoint allegedly "knew
sales would be adversely affected in future quarters and years." The plaintiffs
also alleged in general terms that WestPoint materially overstated revenues by
making premature shipments of products.

WestPoint's insurance carrier reached an agreement to
settle the Geller Action at no cost to WestPoint. The settlement was approved by
the Bankruptcy Court and received final approval on November 16, 2004 through a
fairness hearing before the United States District Court for the Northern
District of Georgia.

As a result of the settlement, during the second quarter of
2004, WestPoint recorded a liability of $4,250,000 for its legal obligation to
fund the settlement and a related receivable of $4,250,000 for the reimbursement
from its insurance carrier. The insurance carrier subsequently paid $4,250,000
into the settlement fund.

2. The Clark Action.

On March 11, 2002, a shareholder derivative action,
entitled Gordon Clark v. Holcombe T. Green, Jr., et al. (the "Clark Action"),
was filed against certain of WestPoint's former directors and officers in the
Superior Court of Fulton County, Georgia. The complaint alleged that the named
individuals breached their fiduciary duties by acting in bad faith and wasting
corporate assets. The complaint also asserted claims under Georgia Code Ann.
ss.ss. 14-2-740 to 14-2-747 and 14-2-831. The claims were based on the same or
similar facts as were alleged in the Geller Action.

The Clark Action was voluntarily dismissed by the
plaintiffs on June 28, 2004.

3. The Hemmer Action.

On July 1, 2002, a shareholder derivative action, entitled
John Hemmer v. Holcombe T. Green, Jr., et al. (the "Hemmer Action"), was filed
against Mr. Green and certain of WestPoint's other current and former directors
including Messrs. Hugh M. Chapman, John F. Sorte and Ms. M. Katherine Dwyer in
the Court of Chancery in the State of Delaware in and for New Castle County. The
Complaint alleged that the named individuals breached their fiduciary duties and
knowingly or recklessly failed to exercise oversight responsibilities to ensure
the integrity of WestPoint's financial reporting. The complaint also asserted
that certain of the named individuals used proprietary WestPoint information in
selling or pledging WestPoint stock at inflated prices for their benefit. The
claims were based on the same or similar facts as were alleged in the Geller
Action.

The Hemmer Action was voluntarily dismissed by the
plaintiffs on August 25, 2004.

4. The Pillowtex Action.

Collection, Inc. ("RLH"), and Polo Ralph Lauren Corporation ("PRLC"). Pillowtex
alleges that WestPoint refused to perform its purchase obligation under the
Sales Agreement and was liable to it for $4,800,000 plus potentially significant
other consequential damages. WestPoint believes that the complaint is without
merit and intends to contest the action vigorously. The case is currently stayed
due to WestPoint's bankruptcy filing.

5. The Reparation Class Actions.

WestPoint has been named as a defendant in three separate
purported class action suits seeking reparation for the historic enslavement of
African Americans in the United States. Eddlee Bankhead v. Lloyd's of London, et
al. was filed on September 3, 2002, in the United States District Court for the
Southern District of New York. Timothy Hurdle and Chester Hurdle v. FleetBoston
Financial Corporation, et al. was initially filed in the California Superior
Court for San Francisco County on September 10, 2002, but has since been removed
to the United States District Court for the Northern District of California (San
Francisco). Julie Mae Wyatt-Kerwin v. J.P. Morgan Chase was filed January 21,
2003 in the United States District Court for the Southern District of Texas. All
three cases have been consolidated with related cases in the U.S. District Court
for the Northern District of Illinois. The factual basis for all three suits is
the claim that the defendants profited from the slave labor of the plaintiff
classes' ancestors prior to 1865 and, specifically, that Pepperell
Manufacturing, a predecessor to WestPoint Stevens Inc., utilized cotton from
southern planters who in turn purchased finished product to clothe their slaves.
The California suit alleges that such practices amount to an "unfair business
practice" in violation of the California Business and Professional Code.

The purported class includes all descendants of African
American slaves. The relief sought includes an accounting, the appointment of an
independent historical commission, imposition of a constructive trust,
restitution of the value of slave labor and defendants' unjust enrichment,
disgorgement of illicit profits and compensatory and punitive damages.

On January 26, 2004, the District Court granted defendants'
motion to dismiss without prejudice.

6. Other Legal Issues.

WestPoint is subject to various federal, state, and local
environmental laws and regulations governing, among other things, the discharge,
storage, handling, and disposal of a variety of hazardous and non-hazardous
substances and wastes used in or resulting from its operations and potential
remediation obligations thereunder. Certain of WestPoint's facilities (including
certain facilities no longer owned or utilized by the Company) have been cited
or are being investigated with respect to alleged violations of such laws and
regulations. The Debtors are cooperating fully with relevant parties and
authorities in all such matters. WestPoint believes that it has adequately
provided in its financial statements for any expenses and liabilities that may
result from such matters. WestPoint also is insured with respect to certain of
such matters. WestPoint's operations are governed by laws and regulations
relating to employee safety and health which, among other things, establish
exposure limitations for cotton dust, formaldehyde, asbestos, and noise, and
regulate chemical and ergonomic hazards in the workplace.

Although WestPoint does not expect that compliance with any
of such laws and regulations will adversely affect its operations, there can be
no assurance that such regulatory requirements will not become more stringent in
the future or that WestPoint will not incur significant costs in the future to
comply with such requirements.

VI.

SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE

A. FILING AND FIRST DAY ORDERS

On June 1, 2003, the Debtors filed voluntary petitions for
relief under chapter 11 of the Bankruptcy Code. On June 3, 2003, the Bankruptcy
Court approved certain orders designed to minimize the disruption of the
Debtors' business operations and to facilitate their reorganization.

o Case Administration Orders. These orders: (i) authorized
joint administration of the chapter 11 cases; (ii)
established interim compensation procedures for
professionals (this order was entered on June 18, 2003,
following a final hearing); (iii) granted an extension of
the time to file the Debtors' schedules and statements;
and (iv) approved notice procedures limiting notice on
various matters to only affected parties and authorizing
the Debtors or their agent, to act as agent for the clerk
of the Bankruptcy Court in noticing all matters
customarily noticed by the clerk pursuant to the
Bankruptcy Code.

o Payments on Account of Certain Prepetition Claims. The
Bankruptcy Court authorized the payment of prepetition:
(i) wages, compensation and employee benefits; (ii) sales
and use taxes; (iii) Claims of common carriers and
warehousemen; and (iv) Claims of critical trade vendors.

o Business Operations. The Bankruptcy Court authorized the
Debtors to: (i) comply with certain license and regulatory
agency fee requirements; (ii) continue customer service
programs; (iii) continue prepetition premium obligations
under workers' compensation insurance and all other
insurance policies, and bonds relating thereto; (iv)
maintain existing bank accounts and business forms; (v)
continue their centralized cash management system; (vi)
provide adequate assurance to utility companies and
establish procedures for determining requests for
additional adequate assurance; and (vii) grant
administrative expense status to undisputed obligations
arising from the postpetition delivery of goods ordered in
the prepetition period and make payment of such Claims in
the ordinary course of business.

o Bankruptcy Matters. The Bankruptcy Court authorized the
Debtors to obtain postpetition financing under the DIP
Credit Agreement on a superpriority basis for $300
million.

On August 28, 2003, the English High Court entered an
administration order for the appointment of joint administrators of WestPoint
Stevens (Europe) Limited, an indirect European subsidiary of WestPoint, pursuant
to section 8 of the United Kingdom's Insolvency Act 1986.(2)

This administration order was discharged on August 26, 2004
by the English High Court. Prior to that discharge, joint liquidators were
appointed to WestPoint Stevens (Europe) Limited by the creditors of the company.
The joint liquidators are continuing to manage the company and expect an initial
dividend to be made to creditors in the second quarter of 2005.

An application has been made to England Companies House to
strike-off the WestPoint subsidiary, WestPoint Stevens (UK) Limited, and the
three dormant subsidiaries of WestPoint Stevens (Europe) Limited, from the
register of companies in England. This application is still pending.

- ----------------------
2 The administration of WestPoint Stevens (Europe) Limited was commenced before
the provisions of the United Kingdom's Enterprise Act 2002, amending the
Insolvency Act 1986, came into force.

B. APPOINTMENT OF THE CREDITORS COMMITTEE

On June 11, 2003, the United States Trustee for the
Southern District of New York (the "U.S. Trustee"), pursuant to its authority
under section 1102 of the Bankruptcy Code, appointed a Statutory Committee of
Creditors (the "Creditors Committee") in these bankruptcy cases.

As originally appointed, the Creditors Committee consisted
of the following seven members:

HSBC Bank, USA KOSA
452 Fifth Avenue Charlotte Park Drive
New York, NY 10018 Charlotte, NC 28217
Attn: Robert Conrad, Vice President Attn: Ernest Pepe, Credit Manager
Tel: (212) 525-1314 Tel: (704) 586-7300

Imex Discovery Resources, Inc. ESL Investments
d/b/a Imex Vinyl Packaging 200 Greenwich Avenue
5311 77 Center Drive Greenwich, CT 06830
Suite 95 Attn: William C. Crowley
Charlotte, NC 28217
Attn: Eugene P. Smith, CPA, VP Operations
Tel: (704) 527-1785

Fidelity Research & Management Company GSC Partners
82 Devonshire Street 500 Campus Dr.
Mailzone E31C Florham Park, NJ 07932
Boston, MA 02109 Attn: Robert A. Hamwee
Attn: Nathan H. Van Duzer, Esq. Tel: (973) 737-1010
Tel: (617) 392-8129

Perry Strategic Capital, Inc.
599 Lexington Avenue
New York, NY 10022
Attn: Peter Schweinworth
Tel: (212) 583-4000

Since the appointment of the Creditors Committee, the
Debtors have consulted with the Creditors Committee concerning the
administration of their chapter 11 cases. The Debtors have kept the Creditors
Committee apprised of their business operations and have sought their
concurrence with respect to actions and transactions outside of the ordinary
course of business. The Creditors Committee has actively participated during the
pendency of these chapter 11 cases.

The Creditors Committee currently consists of four members.
The current chair of the Creditors Committee, other members of the Creditors
Committee, and the attorneys and financial advisors retained by the Creditors
Committee, are set forth below:

MEMBERS OF THE CREDITORS COMMITTEE

HSBC Bank, USA Carlisle Investments
452 Fifth Avenue Via Parigi 11 Rome, Italy 00185
New York, NY 10018 Attn: Marco M. Elser
Attn: Robert Conrad, Vice President Tel: +39-335-628-5555
Tel: (212) 525-1314

Imex Discovery Resources, Inc.
d/b/a Imex Vinyl Packaging
5311 77 Center Drive
Suite 95
Charlotte, NC 28217
Attn: Eugene P. Smith, CPA, VP Operations
Tel: (704) 527-1785

Alma and Gabriel Elias & Wholesale Realtors Supply
509 Spring Avenue
Elkins Park, Pa. 19027
Attn: Gabriel Elias
Tel: (215) 635-0305

The Creditors Committee has retained the following
advisors:

Attorneys Financial Advisors

Stroock & Stroock & Lavan LLP Lehman Brothers
180 Maiden Lane 745 Seventh Ave., 19th Floor
New York, NY 10038 New York, NY 10019

E.J. Bird
15 Blazing Star Trail
Landrum, SC 29356

C. DIP CREDIT AGREEMENT

The DIP Credit Agreement is the Post-Petition Credit
Agreement, dated as of June 2, 2003, among WestPoint and certain of its
subsidiaries (collectively, the "Borrowers"), Bank of America, N.A., as
Administrative Agent (the "DIP Agent," or "BofA"), Wachovia Bank, National
Association, as Syndication Agent ("Wachovia" or the "Syndication Agent"), Bank
of America Securities LLC, as Book Manager and Sole Lead Arranger ("BAS") and
the lenders from time to time party thereto (collectively, the "DIP Lenders").
The Debtors entered into the DIP Credit Agreement in order to ensure sufficient
liquidity to fund the expenses associated with their chapter 11 cases. The DIP
Credit Agreement has been amended seven times during the bankruptcy case,
pursuant to orders of the Bankruptcy Court. The Seventh Amendment to the DIP
Credit Agreement (the "Seventh Amendment") extended the term of the DIP Credit
Agreement through the earlier of the consummation of a sale transaction or
December 2, 2005.

The DIP Lenders agreed to provide a total credit facility
of up to $300 million, with a $75 million sublimit for standby and documentary
letters of credit. Availability is subject to a borrowing base (which includes,
among other things, inventory and receivables) defined as equal, at any date, to
(i) the sum of 85% of Borrowers' eligible accounts plus the lesser of (x) $200
million, (y) 65% of the book value of Borrowers' eligible inventory, or (z) 85%
of net orderly liquidation value of Borrowers' eligible inventory, (ii) minus an
amount equal to the Carve Out, as defined below, and any past due license fees.

The DIP Credit Agreement was in effect for an initial
period of one year from June 3, 2003 but Allowed the Debtors to extend on two
separate occasions for six months each, if the Borrowers gave 30 days prior
written notice to the DIP Agent (the "Renewal Periods"). Notice of additional
extensions were given by the Debtors on or about April 28, 2004, and November 1,
2004. Loans outstanding under the DIP Credit Agreement will be required to be
repaid upon the Borrowers' receipt of proceeds of the Collateral and on the
maturity date. Draws under letters of credit will be repayable on the first
business day following each such draw. As described above, pursuant to the
Seventh Amendment, the term of the DIP Credit Agreement was extended to the
earlier of December 2, 2005 or the consummation of a sale of substantially all
of the assets of the Debtors.

Claims of the DIP Agent and the DIP Lenders against the
Debtors are afforded superpriority administrative expense status in each of the
Debtors' chapter 11 bankruptcy cases. That is, they are to be paid before any
other obligations of the Debtors, including administrative expenses and other
Claims entitled to priority under the Bankruptcy Code. Pursuant to section 2.5
of the Plan, all outstanding obligations under the DIP Credit Agreement will be
paid by the Purchaser on the Effective Date, and all outstanding letters of
credit issued under the DIP Credit Agreement will either be backstopped with
substitute letters of credit arranged by the Purchaser or cash collateralized by
the Purchaser.

As of June 3, 2005, $63,190,625 has been drawn and remains
outstanding under the DIP Credit Agreement. In addition, letters of credit in
the approximate aggregate amount of $29,641,229 million have been issued.

The DIP Credit Agreement is secured by perfected first
priority liens on all unencumbered assets of the Debtors, perfected junior liens
on the encumbered assets (other than the encumbered assets subject to priming
liens as described below) of the Debtors which are subject to valid perfected
liens in existence as of the Commencement Date or subject to valid liens in
existence as of the Commencement Date that are perfected subsequent thereto, and
perfected first priority priming liens on the Debtors' assets which shall prime
(x) all of the existing liens in existence as of the Commencement Date granted
to the Prepetition Lenders pursuant to the Prepetition Credit Facilities and (y)
any liens granted after the Commencement Date to provide adequate protection to
the Prepetition Lenders with respect to the Prepetition Credit Facilities.

All liens and superpriority Claims granted in the DIP
Credit Agreement are subject to the Carve Out for professional fees.

As presently amended, borrowings under the DIP Credit
Agreement bear interest at a fluctuating rate per annum equal to LIBOR plus a
margin of 2.50% or prime plus a margin of 0.50%. Each margin is subject to
quarterly adjustment, pursuant to a pricing matrix, based on average
availability, having a range of 2.25% to 3.00% for LIBOR based loans and 0.25%
to 1.00% for Prime based loans. In addition, the margins may be increased by the
DIP Agent and the Syndication Agent, in consultation with the Borrowers, by not
more than 25 basis points in the event the initial DIP Lenders are unable to
successfully syndicate the DIP Facility.

The DIP Credit Agreement provides a carve out (the "Carve
Out") (i) in the event of the occurrence and during the continuance of an event
of default for the payment of Allowed and unpaid professional fees and
disbursements incurred by the Debtors and any statutory committees appointed in
the Debtors' chapter 11 bankruptcy cases, in an aggregate amount not to exceed
$5 million (plus all unpaid professional fees and disbursements incurred prior
to the occurrence of an event of default to the extent Allowed by the Bankruptcy
Court), and (ii) for the payment of unpaid fees due the Clerk of the Bankruptcy
Court.

D. ADEQUATE PROTECTION

As part of the motion filed with the Bankruptcy Court for
approval of the DIP Credit Agreement, the Debtors requested authorization to use
cash collateral and provide adequate protection to their prepetition secured
lenders ("Adequate Protection"). On June 2, 2003, the Adequate Protection Order
was entered by the Bankruptcy Court on an interim basis, pending a final
hearing. The Adequate Protection Order became a Final Order on June 18, 2003.

The Adequate Protection served as an inducement for the
prepetition secured lenders' consent to the priming of their liens and the use
of their cash collateral as part of the DIP Credit Agreement. The Adequate
Protection is designed to protect the Collateral of the prepetition secured
lenders from any diminution in value by providing among other things:

a. a superpriority Claim immediately junior to the Claims
held by the DIP Agent and the DIP Lenders, and post-petition
replacement liens on and security interests in substantially all of
the assets of the Debtors having a priority immediately junior to the
priming and other liens granted in favor of the DIP Agent and the DIP
Lenders (with such liens, Claims and security interests subject, as
between the First Lien Lenders and the Second Lien Lenders, to that
certain Intercreditor and Lien Subordination Agreement, dated as of
June 29, 2001); provided, however, that the liens and security
interests granted for the benefit of the prepetition lenders (i) are
subject to the Carve Out and any valid perfected liens in existence
as of the Commencement Date, and (ii) are subject to valid liens in
existence as of the Commencement Date that are perfected subsequent
thereto pursuant to section 546(b) of the Bankruptcy Code, which are
otherwise senior to the liens of the prepetition lenders;

b. monthly payment of current interest and letter of credit
fees at the applicable non-default rates provided for under the
Prepetition Credit Facilities; and

c. continuation of payment of the fees of the prepetition
agents, including payment of the reasonable fees and disbursements of
the prepetition agents' professionals.

Pursuant to an agreement reached between the First Lien
Lenders and Second Lien Lenders which was approved by the Bankruptcy Court on
August 23, 2004, all adequate protection payments in favor of the Second Lien
Lenders incurred subsequent to August 31, 2005 are being held in escrow (the
"Adequate Protection Escrow"). On May 10, 2005, the Second Lien Lender
Administrative Agent, on behalf of itself and the Second Lien Lenders, filed a
motion with the Bankruptcy Court requesting the dissolution of the escrow
account, payment of the escrowed amounts to the Second Lien Lenders, and the
reinstatement of direct payment of the adequate protection payments to the
Second Lien Lenders. Certain of the Second Lien Lenders have joined in the
motion. The motion is currently scheduled to be heard by the Bankruptcy Court on
June 24, 2005.

E. THE RESIGNATION OF HOLCOMBE T. GREEN JR.

On July 15, 2003, the Debtors filed a motion with the
Bankruptcy Court seeking authorization and approval of their entry into a
separation agreement with Holcombe T. Green Jr., the then Chairman and Chief
Executive Officer of WestPoint (the "Green Separation Agreement"). On August 18,
2003, the Bankruptcy Court entered an order approving the Green Separation
Agreement.

Pursuant to the Green Separation Agreement, Mr. Green
received a $1 million Cash payment immediately upon his resignation rather than
the $4 million Cash payment due under his employment contract. Mr. Green also
agreed to make himself available to WestPoint, as a consultant, through December
31, 2005, for a minimum of 40 hours per month. Mr. Green received payments of
$425,000 for the remainder of 2003, $475,000 for 2004, and he will be paid
$475,000 for 2005. The total Cash payments under the Green Separation Agreement
as severance and services to be rendered through 2005 are approximately
$2,375,000. The Debtors have agreed to release Mr. Green and his related
companies from all obligations due and owing to WestPoint as a result of the
joint venture with HTG Corp., a corporation wholly owned by Mr. Green.

In exchange for his entry into the Green Separation
Agreement, Mr. Green agreed to release and forever discharge WestPoint from any
and all arbitrations, claims, demands, damages, suits, proceedings, actions,
and/or causes of action of any kind and every description, whether known or
unknown, which he may now have, or may have had, for any reason whatsoever.

F. EMPLOYEE WAGE AND BENEFIT ISSUES

1. Key Employee and Key Executive Retention Program.

On September 30, 2003, the Debtors filed a motion with the
Bankruptcy Court seeking approval of the establishment of the KERP to ensure
that certain key employees would continue to provide essential management and
operational services to the Debtors during the pendency of their chapter 11
cases. On October 23, 2003 the Bankruptcy Court entered an order approving the
KERP.

The KERP provides for incentive payments for 245 of the
Debtors' key employees based upon the achievement of certain operating and
performance goals. Provided maximum performance targets are met, the aggregate
payments to be made for incentives will be approximately $4.85 million per
quarter. In addition, the KERP provides for severance payments to the top 22
employees of the Debtors. The severance payments under the KERP are in lieu of
any contractual severance or participation in Company-wide separation plans by
those 22 employees.

On August 12, 2004, the Bankruptcy Court entered an order
extending the KERP to cover those periods through and including the Debtors'
fiscal quarter ending June 30, 2005. For the quarters ending June 30 and
September 30, 2004, the Bankruptcy Court authorized the Debtors to make
aggregate payments of $2,251,395 per quarter in lieu of the KERP payments that
otherwise may have been required for those periods. For the quarters ending
December 31, 2004, March 31, 2005, and June 30, 2005, the Bankruptcy Court set
the "Target" metrics for EBITDA and cash availability at the amounts established
by the Debtors in their 2004 business plan. In addition, pursuant to an
agreement between the Debtors and the First Lien Lenders, the Bankruptcy Court
authorized the establishment of an escrow account for the deposit of KERP
payments due to Group 1A until confirmation of a plan. As described above,
pursuant to the order approving the KERP, fifty percent (50%) of all accrued
incentive payments under the KERP have been deferred until confirmation of a
plan. Those accrued amounts will be paid by the Purchaser on the Confirmation
Date, provided that the KERP is among those obligations assumed by the Purchaser
pursuant to the APA.

2. Termination of Pension Obligations.

The Debtors sponsor and maintain two defined benefit
pension plans, the WestPoint Stevens Hourly Retirement Plan for their hourly
employees (the "Hourly Pension Plan") and the WestPoint Stevens Retirement Plan
for their salaried employees (the "Salaried Pension Plan") (together with the
Hourly Pension Plan, the "Pension Plans"). The Pension Plans have been amended
from time to time, and were most recently amended and restated effective January
1, 2001. The Pension Plans provide retirement and ancillary benefits to eligible
employees and other participants. The Debtors have continued to contribute to
the Pension Plans amounts required pursuant to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of
1986, as amended (the "Tax Code"). On April 15, 2005, the Debtors were due to
make a scheduled contribution to the Pension Plans of approximately $2.5
million. Due to uncertainty surrounding the Debtors' intentions with respect to
the Pension Plans, this payment was not made.

As of the date hereof, the Debtors employ approximately
9,730 employees (the "Employees"). Approximately 1,594 of the Employees are
salaried employees, with the balance of Employees earning wages on an hourly
basis or other similar structure. Approximately 285 Employees of the Debtors'
total Employee population are represented by labor organizations.

In accordance with Title IV of ERISA, 29 U.S.C. ss.ss.
1301-1461, benefits under the Pension Plans are partly guaranteed by the Pension
Benefit Guaranty Corporation ("PBGC"). At retirement, Employees participating in
the Pension Plans are entitled to receive their pension payments in the form of
monthly annuity payments together with, in some instances, payment of a
grandfathered portion in a lump sum distribution. Currently, approximately
10,700 WPSTV retired participants are entitled to receive monthly annuity

payments under the Pension Plans, and such payments have continued to be made in
the ordinary course.

The Debtors estimate that the total amount of unfunded
benefit liabilities under the Pension Plans as of January 1, 2004 is
approximately $173 million, calculated using the Pension Benefit Guaranty
Corporation's interest rate of 4.94% and certain mortality, retirement, and
other assumptions. Over the next five years, minimum funding requirements for
the Pension Plans will be $126.8 million, with the largest burdens falling in
2006 and 2007. The Debtors have notified participants in the Pension Plans that
further benefit accruals under such plans will cease as of December 31, 2004
and, accordingly, that accrued benefits are "frozen" as of such date.

The Debtors and their advisors have met with the PBGC to
discuss the Debtors' financial status, the alternatives available to them, and
their ultimate need to terminate the Pension Plans in order to formulate and
effectuate a chapter 11 Plan. The Debtors do not anticipate the Pension Plans
will be assumed by the Purchaser. Accordingly, the Pension Plans will be
terminated in connection with the sale and confirmation of the Debtors' Plan.

G. CLAIMS PROCESS AND BAR DATE

1. Schedules and Statements.

On August 18, 2003, the Debtors filed with the Bankruptcy
Court a statement of financial affairs, schedules of assets and liabilities and
schedules of executory contracts and unexpired leases and a schedule of equity
security holders. The Debtors and their professionals prepared consolidating
schedules and statements reflecting the individual liabilities of each of the
Debtors.

On October 29, 2004, the Debtors filed amendments to both
their schedules of assets and liabilities and their statements of financial
affairs. Specifically, the Debtors filed amendments to schedule F for WestPoint
Stevens Inc. and J.P. Stevens & Co., Inc. listing certain creditors whom the
Debtors suspect had not received notice of the bar date and giving such
creditors extended time to file proofs of claim in these cases. In addition, the
Debtors filed amended SOFA 3a for WestPoint Stevens Inc., WestPoint Stevens Inc.
I, and WestPoint Stevens Stores Inc. providing a revised list of those entities
who received payments from the Debtors within the ninety (90) days prior to the
filing of the Debtors' chapter 11 petitions.

2. Bar Date.

By order dated August 21, 2003, the Bankruptcy Court fixed
October 3, 2003 at 5:00 p.m. as the last date and time by which proofs of claim
were required to be filed in the Debtors' bankruptcy cases, except that
governmental entities had until November 28, 2003 at 5:00 p.m. to timely file
proofs of claim against the Debtors. In accordance with the order fixing the bar
date, on or about August 29, 2003, notices informing creditors of the last date
to timely file proofs of claims, and a "customized" proof of claim form,
reflecting the nature, amount, and status of each creditor's Claim as reflected
in the schedules of assets and liabilities, were mailed to all creditors listed
on the schedules of assets and liabilities. In addition, consistent with that
order, the Debtors caused to be published in the national editions of the Wall
Street Journal and New York Times on September 8, 2003, and in the Atlanta
Journal Constitution on September 22, 2003, notice of the last date to timely
file proofs of claim. The Debtors have received over 3,400 proofs of claims in
these cases.

H. OMNIBUS CLAIMS OBJECTION MOTIONS

Unsecured Claims in excess of $1,193,563,392 have been
asserted against the Debtors. In an effort to get a more accurate picture of the
true nature and extent of the unsecured Claims, the Debtors commenced objecting
to certain categories of unsecured Claims by filing their First Omnibus

Objection to Claims Against the Debtors and Motion to Disallow and Expunge such
Claims on March 19, 2004. The Debtors have subsequently filed three additional
omnibus claims objection motions, and more will be filed shortly. To date, all
of the omnibus objections which have been decided by the Bankruptcy Court have
been granted, except where the Debtors have agreed to continue or withdraw a
motion as to a particular party.

The omnibus claims objection process has been extremely
successful to date. Through the first three omnibus objections, the Bankruptcy
Court has approved the expungement of 350 Claims in the aggregate amount of
$232,740,739.87. The Debtors anticipate filing several more omnibus claims
objection motions, as well as objections to specific Claims, before and after
any confirmation of a plan.

I. SALE OF INTERNATIONAL OPERATIONS

J. ASSUMPTION OF SIGNIFICANT EXECUTORY CONTRACTS AND OTHER SIGNIFICANT
MOTIONS

1. Disney.

Prior to the Commencement Date, the Debtors entered into
that certain License Agreement, dated as of August 15, 2000 (as amended from
time to time, the "License Agreement"), between WestPoint and Disney
Enterprises, Inc. ("Disney"). The License Agreement allows the Debtors to
produce a full assortment of Disney brand-name bedroom and bathroom home fashion
products targeted to the juvenile market, primarily in the United States and
Canada. Such products feature some of the most well-known Disney characters in
the world. Pursuant to the License Agreement, the Debtors paid Disney licensing
fees, as well as yearly royalty fees (subject to minimums) based on a percentage
of revenue realized by the Debtors from the sale of products which utilize
Disney's trademarked characters.

On or about May 28, 2003, Disney notified WestPoint that it
had not met certain performance goals set forth in the License Agreement and
that Disney was therefore exercising its option to terminate the License
Agreement, effective as of December 31, 2003. The License Agreement originally
had a termination date of December 31, 2005.

After extensive negotiations between the Debtors and
Disney, the parties entered into that certain letter agreement, dated as of
September 12, 2003 (the "Letter Agreement"). The Letter Agreement provided for a
new license agreement, commencing January 1, 2004 (with the prepetition License
Agreement expiring on December 31, 2003), and extended the Debtors' use of the
Disney trademarks for an additional two years until December 31, 2005. The new
license agreement contained terms similar to the existing License Agreement with
certain economic terms significantly more favorable to the Debtors.

- --------------------
3 The administration of WestPoint Stevens (Europe) Limited was commenced before
the provisions of the United Kingdom's Enterprise Act 2002, amending the
Insolvency Act 1986, came into force.

Specifically, the new license agreement provided for a substantial reduction in
the minimum royalty fees due in comparison to the minimums called for under the
old License Agreement. Disney also agreed to a substantial reduction of the
Debtors' anticipated 2003 royalty shortfall payment under the License Agreement,
which was due on December 31, 2003. As consideration for Disney's agreement to
enter into a new license agreement on economic terms beneficial to the Debtors
and to significantly reduce the royalty shortfall payment, the Debtors assumed
the License Agreement and issued a letter of credit for the benefit of Disney as
security under the new license agreement. An order approving the assumption and
entry into the new license agreement was entered by the Bankruptcy Court on
September 30, 2003.

2. Ralph Lauren.

On November 11, 2003, the Debtors filed a motion with the
Bankruptcy Court seeking approval of the assumption of an agreement (the "Ralph
Lauren Agreement"), between WestPoint and Ralph Lauren Home Collection, Inc.,
Polo Ralph Lauren Corporation, and The Polo/Lauren Company, L.P. (collectively,
"Ralph Lauren"), as amended. On December 19, 2003, the Bankruptcy Court entered
an order approving the assumption of the Ralph Lauren Agreement.

The Ralph Lauren Agreement grants the Debtors an exclusive
right to produce a full assortment of Ralph Lauren brand-name bedroom and
bathroom home fashion products throughout the United States, Canada, Mexico, and
most of Europe under certain licensed marks, including Ralph Lauren(R) and Ralph
Lauren Home(R). Products manufactured and sold by the Debtors under the terms of
the Ralph Lauren Agreement include, for example, towels, coordinated bedding
products, blankets, and down comforters.

The Debtors derive great benefits from their relationship
with Ralph Lauren, which is a well-known, respected, and successful company
whose branded products are marketed world-wide through proprietary stores as
well as luxury and discount department stores. The Debtors have been Ralph
Lauren's licensee for approximately twenty years, and were, in fact, the first
manufacturers of the Ralph Lauren Home Collection. Currently, the Debtors are
Ralph Lauren's second most successful license, in terms of revenue. The Ralph
Lauren brand name is the most prestigious in the home fashions industry, and is
a keystone of the Debtors' branding portfolio.

Pursuant to the Ralph Lauren Agreement, the Debtors pay
Ralph Lauren yearly royalty fees based on a percentage of revenue realized by
the Debtors from the sale of products utilizing Ralph Lauren's designs. These
royalty fees are subject to yearly minimums in the aggregate amount of $124.5
million for 2003 through 2005.

The Ralph Lauren Agreement also obligates the Debtors to share in the costs
associated with constructing and/or outbuilding up to four new Ralph Lauren Home
stores in the aggregate amount of $6.4 million, and for WestPoint Stevens
(Europe) Limited, the Debtors' European affiliate, to contribute up to $1
million for construction costs associated with opening a Polo/Ralph Lauren
flagship store in London. Additional obligations of the Debtors under the Ralph
Lauren Agreement include contributions for marketing and advertising costs, in
the aggregate amount of $9.3 million for 2003 through 2005, as well as yearly
contributions in the amount of $125,000 for design and travel costs.

In exchange for the Debtors' assumption of the Ralph Lauren
Agreement, the Debtors obtained a total of $10.4 million in reductions of the
royalty minimums provided for under the Ralph Lauren Agreement for the 2003-2005
periods. In addition, the Debtors obtained a $7.4 million concession with
respect to any potential contribution for construction of new Ralph Lauren Home
stores.(4)

- ----------------------
4 The $7.4 million concession includes a $1 million concession for the
Debtors' European affiliate.

The Ralph Lauren Agreement has a termination date of December 31, 2005. The
parties are currently negotiating the terms of a new agreement to run through
December 31, 2008.

3. E.I. du Pont De Nemours and Company

On November 11, 2003, the Debtors filed a motion seeking
approval of the assumption of (a) that certain contract, as amended, between
WestPoint and E.I. du Pont De Nemours and Company ("DuPont"), effective as of
April 1, 2001 (the "PVA Contract") and (b) that certain DuPont(TM) ARTISTRI(TM)
Ink Purchase Agreement between WestPoint and DuPont, dated August 27, 2001 (the
"Ink Contract," and collectively with the PVA Contract, the "DuPont Contracts").
On November 24, 2003, the Bankruptcy Court entered an order approving the relief
requested in the motion.

Under the DuPont Contracts, the Debtors purchase Polyvinyl
alcohol ("PVA") to size yarn used in the majority of their product lines,
including bath rugs, bath towels, bedspreads, comforters and duvet covers,
sheets, pillowcases, and blankets. Sizing is used to stiffen yarn during the
weaving process to minimize the risk of breakage as the yarn passes through
looms to form a fabric. Sizing products other than PVA are not suitable for the
Debtors' business because such alternatives are too thick and heavy for the
particular yarns used in manufacturing the Debtors' product lines. Because of
its smoother composition, PVA sizing is essential to the Debtors' continued
business operation. Furthermore, PVA can be recovered after use and reused
approximately four times, making PVA the most cost effective option to size yarn
in the Debtors' manufacturing operations.

To ensure an uninterrupted supply of high-quality PVA at
reasonable prices, the Debtors entered into the PVA Contract pursuant to which
DuPont supplies approximately 3.75 million pounds of PVA annually, representing
all of the PVA required for the Debtors' towel manufacturing operations.

Because of the critical need to maintain adequate supplies
of PVA and Printer ink, the Debtors engaged in extensive, good faith,
arm's-length negotiations with DuPont in order to reach an agreement for a
continuation of the DuPont Contracts. In exchange for the Debtors' assumption of
the Dupont Contracts, the Debtors obtained a 15% reduction of the total cure
amount arising from such assumption. The Debtors also secured DuPont's agreement
to amend the PVA Contract to provide for an extension of the term for one year,
through March 31, 2005, and a change in the payment terms favorable to the
Debtors. In the ordinary course of business, the Debtors extended the terms of
the PVA Contract until September 30, 2005.

4. Payment of Licensing and Business Fees.

In connection with the normal operation of their
businesses, the Debtors are required to pay various regulatory fees, including
licensing and business fees, to federal, state, and local regulatory authorities
(the "Regulatory Authorities"). Failure to make these payments in a timely
manner may result in the imposition of fines or require the removal of the
Debtors' products from stores' shelves in the applicable state.

Many states require that manufacturers of various household
products attach "law labels" to their products and require that the
manufacturers register with the states. This requirement arose in the early
1900s, when states began instituting "tagging laws" that required producers to
affix labels to bedding products identifying their contents. The laws were
intended to protect consumers from unwittingly purchasing a secondhand product
that contained unsafe or unsanitary filling materials. The laws also protected
reputable manufacturers selling mattresses containing all-new materials from
competing at a disadvantage with producers selling bedding material with
secondhand materials.

Today, the laws have expanded to require tagging of such
products as mattresses, futons, bed pillows, carseats, comforters, crib bumper
pads, cushions, decorative pillows, upholstered furniture (including chairs and
sofas/loveseats), mattress pads, quilts, sleeping bags, and toys, to name a few.

Many states require some sort of labeling or registration, although some states
do not. In states where registration is required, a Uniform Registry Number
System exists for manufacturers that ship or sell in states or jurisdictions
other than where the product is made so that only one registration number
("RN#") need be shown on the law label. All states or jurisdictions either
require or allow an RN# on law labels and either accept or have formally adopted
this system. Manufacturers that own multiple production facilities or plants
must apply for an RN# for each location. Annual license fees (the "Licensing
Fees") vary from state to state, as do the number of separate registration
numbers issued for one or more company locations. For instance, if a
manufacturer has four locations, a given state or jurisdiction may issue four
separate licenses, while another state or jurisdiction may issue only one.

In addition, 15 U.S.C. ss.ss. 68 (the "Textile Act"), 69
(the "Fur Act") and 70 (the "Wool Act"), along with the federal regulations
issued in conjunction with those Acts (found at 16 C.F.R. Parts 300, 301, and
303, respectively) mandate labeling of covered and filled products with (a) the
name or identifying number of a U.S. business responsible for manufacturing or
marketing the product or the name of a foreign manufacturer, (b) the fiber
content of the product, and (c) the country of origin of the product. The
Federal Trade Commission (the "FTC") issues registered identification numbers
("RN numbers") to U.S. businesses that manufacture, import, distribute, or sell
products covered by the Textile, Wool, and Fur Acts. Businesses are not required
to obtain and use RN numbers, but may use their RN numbers on product labels in
lieu of the company name. The Debtors have applied and use RN number 60873 in
conjunction with these requirements.

On August 27, 2003, the Debtors filed a motion seeking
authority to continue to pay licensing and business fees in the ordinary course
of business. On September 23, 2003, the Bankruptcy Court entered an order
granting the relief requested in the motion.

The Debtors paid approximately $470,000 in business fees in
accordance with the approval of the motion.

5. Lease Plan U.S.A..

On June 11, 2004, the Debtors filed a motion seeking
approval of a certain Vehicle Lease Agreement, dated November 25, 1992 (the
"Lease Plan Contract"), with Lease Plan U.S.A., Inc. ("Lease Plan") to
facilitate the leasing of vehicles necessary to the Debtors' business operations
(the "Vehicles"). On June 25, 2004, the Bankruptcy Court entered an order
approving the relief requested in the motion.

The Vehicles play a crucial role in the efficient operation
of the Debtors' businesses. The Vehicles are used as both executive cars for the
transportation of the Debtors' management and sales force throughout the diverse
offices and plants, and as facility automobiles used for internal transport of
raw materials and products. Absent the Vehicles, the Debtors would incur
significant additional costs associated with the purchase and service of
automobiles as well as the higher costs of reimbursement to management and
salespeople.

Because of the importance of the Vehicles to the Debtors'
operations, the Debtors must be able to lease new Vehicles as the need arises.
Following the Commencement Date, the Debtors were informed by Lease Plan that no
new lines of credit would be available for new leases or trade-ins of older
models unless the Debtors agreed to assume the Lease Plan Contract. Faced with
the inability to continue to lease new Vehicles, the Debtors conducted an
exhaustive search to find possible alternatives to Lease Plan. The Debtors were
unable to identify any alternative equipment lessor who would be able to provide
terms more favorable to the Debtors' than those contained in the Lease Plan
Contracts.

The Debtors engaged in extensive, arms length negotiations
with Lease Plan to ensure the Debtors' ability to continue to lease new Vehicles
pursuant to the Lease Plan Contract. The Debtors and Lease Plan have agreed that
subsequent to the assumption of the Contracts by the Debtors, Lease Plan will
agree to open the Debtors' credit line to allow the leasing of an additional 25
vehicles until April 30, 2005. In exchange, the Debtors will assume the Lease

Plan Contract on slightly modified terms which Lease Plan has insisted are
necessary to remain competitive in the leasing market. The modified terms for
the Lease Plan Contract include (a) an increase in the spread from 30 day LIBOR
+.35% to 30 day LIBOR +2.00%, (b) an increase in the monthly administrative fee
from .055% to .075%, and (c) a shortening of the maximum depreciation from 50 to
45 months. The Debtors have determined that notwithstanding the modifications to
the rates, the Lease Plan Contract continues to provide the best opportunity for
the Debtors to continue to lease the Vehicles.

The Debtors' agreement with Lease Plan expired on April 30,
2005. The parties are currently in negotiations regarding the terms of an
extension of the existing agreement or entry into a new one.

6. Reckson 1185 Avenue of the Americas, LLC.

The Debtors are party to a lease of nonresidential real
property in New York, New York with Reckson 1185 Avenue of the Americas, LLC
("Reckson"). During the course of chapter 11 cases, the Debtors twice modified
the lease (as modified, the "Reckson Lease"). The modifications and assumption
of the Reckson Lease were approved by two orders of the Bankruptcy Court entered
on December 18, 2003 and July 16, 2004, respectively.

Pursuant to the Reckson Lease, the Debtors rent the 9th
through 13th floors, the entire 15th floor, and 10,150 square feet in the
basement of the building (collectively, the "Premises"). In addition, the
Premises is subject to a sublease with Ralph Lauren, under which Ralph Lauren
occupies the entire 9th floor and a portion of the 10th floor. The Premises are
used by the Debtors as their principal headquarters in New York for
administrative, marketing, and other corporate offices. The Debtors are
currently considering their options regarding their future obligations under the
Reckson Lease.

7. Extension of Period During Which the Debtors May Assume or Reject
Unexpired Leases of Nonresidential Real Property.

By order dated July 29, 2003, the Bankruptcy Court
authorized an extension of the Debtors' time period within which to assume or
reject their unexpired leases of nonresidential real property (the "Unexpired
Leases") through and including December 1, 2003 (the "First Extension Order").
By subsequent orders the Bankruptcy Court extended the Debtors' time period
within which to assume or reject their unexpired leases of nonresidential real
property until the earlier of June 30, 2005 or the Confirmation Date
(collectively with the First Extension Order, the "Extension Orders"). All of
the Debtors' unexpired nonresidential real property leases which have not been
assumed and are not being assumed pursuant to the APA, will be deemed rejected
pursuant to section 365(d)(4) of the Bankruptcy Code.

As of the Commencement Date, the Debtors were party to
approximately 82 Unexpired Leases. Since that time, the Debtors have closed
sixteen stores, three offices, two plants, and, where appropriate, rejected the
respective leases at such locations pursuant to orders of the Bankruptcy Court
dated, August 14, September 23, October 23, 2003, and September 28, 2004.
Accordingly, the Debtors have reduced the number of Unexpired Leases in their
estates to approximately 56.

8. Approval of Funding of Defense Costs for Certain Officers and
Directors.

On September 3, 2003, a motion was filed by current and
former officers and directors of WestPoint seeking relief from the automatic
stay and approving defense funding under the Executive and Organization
Liability Insurance Policy issued to the movants and to WestPoint by National
Fire Insurance Co. of Pittsburgh, Pa., a division of American International
Companies. On September 23, 2003, the Bankruptcy Court entered an order granting
the relief requested in the motion.

The Debtors and certain of their officers and directors
have been named as defendants in purported stockholder class action and
derivative suits. The Executive and Organization Liability Insurance Policy
provides direct liability coverage for executives from any loss from a claim or
any wrongful act, including defense costs and crisis loss. In addition, the
policy also provides coverage for losses arising from securities claims.
Accordingly, the movants sought authority for the Debtors' insurance policy to
make payments in connection with the defense of the actions. As set forth in
section V.D. above, these actions have all been either settled or dismissed.

K. RETENTION OF KURT SALMON ASSOCIATES

Upon the completion of the Debtors' 2004 budget review, the
Debtors identified the need to more closely address the threat of lower cost,
foreign competition and revise their long-term business plan accordingly. In
connection therewith, the Debtors retained Kurt Salmon Associates, Inc. ("KSA"),
a recognized expert in developing and implementing sophisticated international
production and sourcing capabilities for large manufacturers and retailers, to
assist in evaluating their options to compete against foreign competition and to
develop an integrated global operations strategy (the "KSA Report"). The KSA
Report was completed and presented to the Debtors' creditor constituencies on
June 30, 2004. KSA's analysis underscored the critical need for the Debtors to
further develop their overseas presence to remain competitive. An increased
overseas presence would provide the Debtors with low cost manufacturing
facilities to ensure competitiveness and selective sourcing to provide marketing
flexibility.

After conducting an extensive analysis of KSA's
recommendations, the Debtors determined that due to immediate capital
constraints, its needs would be best served by initially focusing on domestic
rationalization. In the event WestPoint deems it necessary to pursue a more
aggressive timeline concerning domestic rationalization and foreign transaction
alternatives, an additional near term equity investment of up to approximately
$200,000,000 will be necessary to meet the Cash requirements for such
operational moves.

L. EXCLUSIVITY

On September 23, 2003, the Debtors filed a motion with the
Bankruptcy Court, seeking an extension of the periods within which they can
exclusively file a chapter 11 plan (the "Exclusive Filing Period"), and solicit
acceptances thereof (the "Exclusive Solicitation Period" and together with the
Exclusive Filing Period, the "Exclusive Periods"), for an additional one hundred
eighty (180) days, through March 29, 2004 and May 28, 2004, respectively,
without prejudice to their right to seek additional extensions thereof. On
October 23, 2003, the Bankruptcy Court entered an order approving the extension
of the Exclusive Periods. Subsequent orders were entered extending the Exclusive
Periods through January 20, 2005 and March 21, 2005. On January 20, 2005, the
Debtors filed their initial chapter 11 plan and disclosure statement related
thereto. On April 7, 2005, the Bankruptcy Court entered an order further
extending the Debtors' Exclusive Solicitation Period through and including
August 31, 2005.

M. ASSET DISPOSITIONS

Over the course of the Debtors' chapter 11 cases, WestPoint
has disposed of certain assets unnecessary to their core operations. Pursuant to
that certain Order Approving Expedited Procedures for Sale of De Minimis Assets
and Abandonment of Certain Property dated, August 13, 2003, the Debtors have
sold assets, including miscellaneous machinery and equipment, in the total
amount of approximately $8 million as of August 31, 2004.

In addition, on April 26, 2005, the Debtors filed a motion
seeking entry of an order authorizing the sale of a parcel of real property
located in Roanoke Rapids, North Carolina to Stan Spealman ETUX for a purchase
price of $1.8 million. On May 17, 2005, the Bankruptcy Court entered an order

granting the motion and authorizing the Debtors to consummate the sale. The sale
transaction is scheduled to close in June 2005.

Further, on June 8, 2005, the Debtors filed a motion
seeking entry of an order authorizing the sale of a parcel of real property
located in Hickory, North Carolina to Industrial Realty Group for a purchase
price of $2.8 million. A hearing to consider the relief requested in the motion
is currently scheduled for June 29, 2005.

N. ENTRY INTO A STALKING HORSE AGREEMENT AND APPROVAL OF BIDDING
PROCEDURES

As set forth in more detail in section VI below, on
February 28, 2005, the Debtors entered into an asset purchase agreement (subject
to Bankruptcy Court approval) with New Textile Holding Co., a Delaware
corporation ("NTH"), and New Textile Co., a Delaware corporation and
wholly-owned subsidiary of NTH ("NTC"), for the sale to NTC of substantially all
of the Debtors' assets. NTH is owned by an investor group that consists of WL
Ross & Co. LLC and members of the Steering Committee (collectively, the
"Investor Group").

Under the agreement, the purchase price for the assets
consisted of (i) newly issued units (the "Units") comprised of 50% of the
outstanding shares of common stock of NTH and 50% of the outstanding preferred
stock of NTC, which were to be distributed to the First Lien Lenders, (ii)
rights to acquire additional Units, comprised of the additional 50% of the
outstanding shares of common stock of NTH and 50% of the outstanding preferred
stock of NTC, pursuant to a rights offering for an aggregate purchase price of
$207.5 million, under which all of the First Lien Lenders would have the equal
right to participate, and in certain circumstances, the Second Lien Lenders
could participate, (iii) the payment in full of all outstanding indebtedness
under the DIP Credit Agreement, and (iv) the assumption of certain liabilities.
The equity to be issued under the agreement would be subject to dilution
pursuant to a one year warrant to be issued to WL Ross & Co. LLC to purchase 10%
of the fully diluted common stock of NTH and preferred stock of NTC, at an
exercise price based upon the midpoint of WestPoint's enterprise value as
determined by Rothschild Inc., the Debtors' financial advisor, subject to
certain adjustments.

In connection with the agreement, the Investor Group
entered into a commitment agreement pursuant to which they agreed, among other
things, to purchase any Units not purchased in the rights offering and to
release $10.0 million from the Adequate Protection Escrow to the Second Lien
Lenders if they did not object to the transaction. NTH's and NTC's initial
boards of directors would be comprised of (i) three directors selected by WL
Ross & Co. LLC, (ii) three directors selected by the Steering Committee, (iii)
one director selected by Icahn Associates, and (iv) two directors selected by
mutual agreement of WL Ross & Co. LLC and the Steering Committee.

Shortly after their entry into the agreement with the
Investor Group, the Debtors filed a motion pursuant to section 363(b) of the
Bankruptcy Code seeking Bankruptcy Court approval to enter into the agreement,
subject to higher or better offers, bidding procedures, and the payment of a
break-up fee. At a hearing conducted on April 7, 2005, the Bankruptcy Court
declined to authorize the payment of a break-up fee and therefore denied the
motion. The Debtors terminated the agreement with the Investor Group on April
21, 2005.

At the April 7, 2005 hearing, the Bankruptcy Court
encouraged the Debtors to pursue a sale of substantially all of their assets
pursuant to a chapter 11 plan. Accordingly, on April 15, 2005, the Debtors filed
with the Bankruptcy Court a subsequent motion for approval of revised bidding
procedures in connection with the sale of substantially all of their assets. At
a hearing conducted on April 22, 2005, the Bankruptcy Court granted the motion
and scheduled an auction for June 21, 2005 and the Purchaser Selection Hearing
for June 24, 2005.

O. AVOIDANCE ACTIONS

The Debtors are in the process of commencing a number of
actions to avoid and recover preferential and fraudulent transfers for the
benefit of the Debtors' estates, in accordance with sections 544, 547, 548 and
550 of the Bankruptcy Code. On May 17, 2005, Stein Riso Mantel, LLP, Special
Counsel to the Debtors, filed a motion seeking authorization for the
establishment of procedures to settle adversary proceedings brought in
connection with these Avoidance Actions. The motion is scheduled to be heard by
the Bankruptcy Court on June 15, 2005. The Debtors have filed Avoidance Actions
in the approximate aggregate amount of $31,436,644.77. Recoveries realized in
connection with these proceedings will be distributed to holders of Beneficial
Interests in accordance with the terms of the Plan and the Liquidating Trust.

VII.

SALE PROCESS

Over the course of the their chapter 11 cases, the Debtors
have attempted to reach a consensus with their creditor constituencies on the
terms of a chapter 11 plan of reorganization. Specifically, the Debtors (i)
delivered a revised business plan on August 20, 2004 (the "Revised Business
Plan"), (ii) presented a valuation of the Debtors as a going concern on
September 20, 2004 (the "Valuation Report"), (iii) distributed a term sheet
outlining a potential restructuring plan on October 8, 2004, (iv) distributed a
draft chapter 11 plan on November 30, 2004, (v) distributed a draft disclosure
statement on December 10, 2004, (vi) held extensive discussions with the First
Lien Lenders and Second Lien Lenders throughout this period, and (vii) filed a
"compromise" chapter 11 plan (the "Compromise Plan") and disclosure statement
related thereto prior to the expiration of the Exclusive Filing Period on
January 20, 2005.

The problem facing the Debtors is that the Steering
Committee and Icahn each demand control of the restructured Company and they
each hold a "blocking" position in Class C. The Debtors pursued various
alternatives to attempt to bridge the gap between the two parties, including
filing the Compromise Plan. The Compromise Plan provided for a five-person board
of directors, two of which would be appointed by the Steering Committee, two of
which would be appointed by Icahn, and one of which would be appointed by the
persons investing new equity capital in the Debtors.

In light of the stalemate among the First Lien Lenders, the
Debtors, at the urging of both the Steering Committee and Icahn, concluded to
sell substantially all their assets (i.e., their ongoing business operations) to
a third party and use the proceeds to satisfy the liens that encumber such
assets, with any value in excess of all secured Claims being made available for
distribution to unsecured creditors.

As described in section VI.N, above, the Debtors entered
into a stalking horse contract (the "Stalking Horse Contract") with the Steering
Committee and W.L. Ross LLC. As part of its opposition to approval of the
stalking horse contract, Icahn filed a proposal. Both proposals contemplated the
creation of a newly formed purchaser to acquire substantially all of the
Debtors' assets. Under each proposal, the consideration for the assets would
consist of (i) common stock of a newly formed parent company of the purchaser
(and, in the case of the Stalking Horse Contract, preferred stock of the
purchaser), (ii) rights to acquire additional stock, (iii) the payment in full
of all outstanding indebtedness under the DIP Credit Agreement, and (iv) the
assumption of specified liabilities. In connection with the rights offering,
each proposal included a back-stop commitment to acquire any shares of stock not
purchased in the rights offering.

At a hearing conducted on April 7, 2005, the Bankruptcy
Court denied the Debtors' request for approval of the bidding procedures and
authorization to pay a break-up fee, and directed the Debtors to attempt to
proceed with a sale of substantially all of their assets pursuant to a chapter
11 plan. As a result of the Bankruptcy Court's ruling, on April 21, 2005, the

Stalking Horse Contract was terminated, and the Debtors immediately began
pursuit of a sale of substantially all of their assets in the absence of a
stalking horse agreement or break-up fee and pursuant to a chapter 11 plan.

On April 15, 2005, the Debtors filed with the Bankruptcy
Court a motion to approve revised bidding procedures in connection with the sale
of substantially all the Debtors' assets. At a hearing conducted on April 22,
2005, the Bankruptcy Court entered the Bidding Procedures Order which approved
the revised bidding procedures and scheduled an auction (the "Auction") for June
21, 2005 and the Purchaser Selection Hearing for June 24, 2005. The revised
bidding procedures provide that the successful bidder at the Auction will be
entitled to (a) become a plan sponsor and have the sale consummated pursuant to
an order confirming the Debtors' chapter 11 plan, or (b) have the sale
consummated pursuant to section 363(b) of the Bankruptcy Code. The Debtors held
the Auction on June 21, 2005, and selected [_______________] as the winning bid.
On June 24, 2005, the Bankruptcy Court approved the Debtors' selection. The key
features of the winning bid are as follows:

[to be inserted after June 24]

VIII.

MEANS OF IMPLEMENTATION

A. SALE OF THE DEBTORS

The filing of the Plan constitutes a motion for an order of
the Bankruptcy Court approving, pursuant to Bankruptcy Code sections 363, 365,
1123 and 1129, the APA and the transactions contemplated thereunder, including,
without limitation, the sale of the Debtors' assets free and clear of all liens,
Claims, encumbrances, and other interests and the assumption and assignment of
the Assigned Contracts and Leases thereunder. In the event that the Bankruptcy
Court denies confirmation of the Plan, the Debtors have reserved the right to
request that the Confirmation Hearing constitute a Sale Hearing on the
authorization for the Debtors to sell their assets to the Purchaser pursuant to
sections 363 and 365 of the Bankruptcy Code.

B. ISSUANCE AND RESALE OF NEW SECURITIES UNDER THE PLAN.

The Purchaser is authorized to issue all Plan-related
securities and documents set forth in the APA.

C. ESTABLISHMENT OF THE LIQUIDATING TRUST AND APPOINTMENT OF A
LIQUIDATING TRUSTEE

The Debtors have sought approval to sell all or
substantially all of their assets at an Auction to be held on June 21, 2004 to
the highest or otherwise best bidder. The consideration to be received from the
sale will be distributed to creditors in order of their priority. The Avoidance
Actions and certain other assets not assumed by Purchaser under the APA (for
example, tax refunds) are not being sold pursuant to the APA. Accordingly, the
Debtors are establishing a Liquidating Trust for the benefit of their creditors
to distribute the recoveries from the Avoidance Actions and any remaining assets
which are not being sold pursuant to the APA to their creditors.

1. Creation of Beneficial Interests in the Liquidating Trust.

There will be three sets of Beneficial Interests created
and distributed in connection with the Liquidating Trust. Series A Beneficial
Interests will be created for the benefit of holders of Second Lien Lender
Claims on account of any superpriority Administrative Expense Claim awarded to
the Second Lien Lenders by the Bankruptcy Court. In the event no superpriority
Administrative Expense Claim is awarded to the holders of Second Lien Lender
Claims, no Series A Beneficial Interests shall be distributed. If the value of

the Liquidating Trust Assets exceeds the amount of the superpriority
Administrative Expense Claim awarded to the Second Lien Lenders, or if no such
Claim is awarded, then Series B Beneficial Interests will be created for the
benefit of holders of Non-Assumed Administrative Expense Claims, Compensation
and Reimbursement Claims, Priority Tax Claims, and Priority Non-Tax Claims, and
Series C Beneficial Interests will be created for the benefit of holders of
General Unsecured Claims, Noteholder Claims, and PBGC Claims. If the unpaid
Second Lien Lender Claims exceed the amount of any superpriority Administrative
Expense Claims awarded to the Second Lien Lenders by the Bankruptcy Court, such
excess shall be treated as Class E General Unsecured Claims. In the event the
value of the Liquidating Trust Assets does not exceed the amount of the
superpriority Administrative Expense Claim awarded to the Second Lien Lenders by
the Bankruptcy Court, no Liquidating Trust will be created. Instead, the
Avoidance Actions and other assets designated for the Liquidating Trust will be
assigned directly to the Second Lien Lender Administrative Agent for
distribution to holders of Second Lien Lender Claims only. The Second Lien
Lender Administrative Agent will be responsible for and required to file local,
state, and federal tax returns upon WestPoint's dissolution, request an
expedited determination of the Debtors' tax liability, and represent the Debtors
before the applicable taxing authorities.

2. Nontransferability of Liquidating Trust Interests.

The Beneficial Interests in the Liquidating Trust will not
be certificated and will not be transferable, except by will or the laws of
descent and distribution.

3. Appointment of a Liquidating Trustee.

The Second Lien Lender Administrative Agent shall
designate, with the consent of the Creditors Committee and the Debtors (which
consent shall not be unreasonably withheld), a trustee (the "Liquidating
Trustee") to administer the Liquidating Trust if Series A Beneficial Interests
are issued as described in section VIII.C.1. above. In the event no Series A
Beneficial Interests are issued, the Creditors Committee, with the consent of
the Debtors (which consent shall not be unreasonably withheld), shall designate
the Liquidating Trustee. The Liquidating Trustee's appointment shall be
effective on the Effective Date without the need for a further order of the
Bankruptcy Court.

4. Execution of the Liquidating Trust Agreement.

The Liquidating Trust Agreement shall be executed by the
Liquidating Trustee and the Debtors on the Effective Date.

5. Purpose of the Liquidating Trust.

The Liquidating Trust shall be established for the sole
purpose of liquidating and distributing its assets (the "Liquidating Trust
Assets") in accordance with Treasury Regulation section 301.7701-4(d). The
objective of the Liquidating Trust shall not be to continue or engage in the
conduct of a trade or business.

6. Assignment of Trust Assets.

The Debtors shall transfer, and shall be deemed to have
transferred, the Liquidating Trust Assets on the Effective Date, or as soon
thereafter as practicable, for and on behalf of the beneficiaries of the
Liquidating Trust free and clear of all liens, Claims, encumbrances, and other
interests.

7. Role of the Liquidating Trustee.

In furtherance of and consistent with the purpose of the
Liquidating Trust and the Plan, the Liquidating Trustee shall have the power and
authority to (A) hold, manage, sell, and distribute the Liquidating Trust Assets

to the holders of Beneficial Interests, (B) hold, manage, sell, and distribute
Cash or non-Cash Liquidating Trust Assets obtained through the exercise of its
power and authority, (C) prosecute and resolve, in the names of the Debtors
and/or the name of the Liquidating Trustee, the Avoidance Actions, (D) prosecute
and resolve objections to Disputed Claims, (E) perform such other functions as
are provided in the Plan or the Liquidating Trust Agreement, and (F) administer
the closure of the chapter 11 cases. The Liquidating Trustee shall be
responsible for all decisions and duties with respect to the Liquidating Trust
and the Liquidating Trust Assets. In all circumstances, the Liquidating Trustee
shall act in the best interests of all beneficiaries of the Liquidating Trust
and in furtherance of the purpose of the Liquidating Trust.

The Liquidating Trustee shall have the exclusive right to
enforce any and all Avoidance Actions against any person and the right to
enforce causes of action not enforced by the Debtors. The Liquidating Trustee
may pursue, abandon, settle or release any or all causes of action not pursued
by the Debtors and Avoidance Actions as it deems appropriate, without the need
to obtain approval or any other or further relief from the Bankruptcy Court. The
Liquidating Trustee may offset any Claim with respect to Avoidance Actions and
causes of action not pursued by the Debtors held against a person against any
payment due such person under the Plan, provided, however, that any claims of
the Debtors arising before the Commencement Date shall first be offset against
Claims against the Debtors arising before the Commencement Date.

8. Distribution of Liquidating Trust Assets.

Beginning on the Effective Date, or as soon thereafter as
is practicable, and at least annually, the Liquidating Trustee will distribute
the Liquidating Trust Assets in accordance with the Liquidating Trust Agreement,
except such amounts (i) as would be distributable to a holder of a Disputed
Claim if such Disputed Claim had been Allowed prior to the time of such
distribution (but only until such Claim is resolved), (ii) as are reasonably
necessary to meet contingent liabilities and to maintain the value of the
Liquidating Trust Assets during liquidation, (iii) to pay reasonable expenses
(including, but not limited to, any taxes imposed on the Liquidating Trust or in
respect of the Liquidating Trust Assets), and (iv) to satisfy other liabilities
incurred by the Liquidating Trust in accordance with the Plan or the Liquidating
Trust Agreement.

9. Retention of Professionals by the Liquidating Trustee.

The Liquidating Trustee may retain and reasonably
compensate counsel and other professionals to assist in its duties as
Liquidating Trustee on such terms as the Liquidating Trustee deems appropriate
without Bankruptcy Court approval. The Liquidating Trustee may retain any
professional who represented parties in interest in the chapter 11 cases.

10. Income Tax Reporting of the Liquidating Trust.

The Plan provides for the following tax treatment of the
Liquidating Trust and the holders of Beneficial Interests in the Liquidating
Trust. For additional discussion of such treatment see section XII hereof,
"Certain Federal Income Tax Consequences of the Plan."

(a) Liquidating Trust Assets Treated as Owned by Creditors.

For all federal income tax purposes, all parties
(including, without limitation, the Debtors, the Liquidating Trustee, and the
holders of Beneficial Interests) will treat the transfer of the Liquidating
Trust Assets to the Liquidating Trust for the benefit of the holders of
Non-Assumed Administrative Expense Claims, Compensation and Reimbursement
Claims, Priority Tax Claims, Priority Non-Tax Claims, Second Lien Lender Claims,
General Unsecured Claims, Noteholder Claims and PBGC Claims, whether Allowed on
or after the Effective Date, as (A) a transfer of the Liquidating Trust Assets
directly to the holders of such Claims in satisfaction of such Claims (other
than to the extent allocable to Disputed Claims), followed by (B) the transfer

by such holders to the Liquidating Trust of the Liquidating Trust Assets in
exchange for Beneficial Interests in the Liquidating Trust. Accordingly, the
holders of such Claims will be treated for federal income tax purposes as the
grantors and owners of their respective shares of the Liquidating Trust Assets.
The foregoing treatment will also apply, to the extent permitted by applicable
law, for state and local income tax purposes.

(b) Tax Reporting.

(i) The Liquidating Trustee will file returns for the
Liquidating Trust as a grantor trust pursuant to Treasury Regulation section
1.671-4(a) and in accordance with Section 9.12(b) of the Plan. The Liquidating
Trustee will also annually send to each record holder of a Beneficial Interest a
separate statement setting forth the holder's share of items of income, gain,
loss, deduction, or credit and will instruct all such holders to report such
items on their federal income tax returns or to forward the appropriate
information to the beneficial holders with instructions to report such items on
their federal income tax returns. The Liquidating Trust's taxable income, gain,
loss, deduction, or credit will be allocated (subject to Sections 9.12(b)(iii)
and (iv) of the Plan) to the holders of Series A, Series B, and Series C
Beneficial Interests in accordance with their relative beneficial interests in
the Liquidating Trust.

(ii) As soon as practicable after the Effective Date, the
Liquidating Trustee will make a good faith valuation of the Liquidating Trust
Assets. Such valuation will be made available from time to time, to the extent
relevant, and used consistently by all parties (including, without limitation,
the Debtors, the Liquidating Trustee and the holders of Beneficial Interests)
for all federal income tax purposes. The Trustee will also file (or cause to be
filed) any other statements, returns, or disclosures relating to the Liquidating
Trust that are required by any governmental unit.

(iii) Allocations of Liquidating Trust taxable income will
be determined by reference to the manner in which an amount of Cash equal to
such taxable income would be distributed (without regard to any restrictions on
distributions described herein) if, immediately prior to such deemed
distribution, the Liquidating Trust had distributed all of its other assets
(valued at their tax book value) to the holders of the Beneficial Interests
(treating certain pending disputed Second Lien Lender Claims, Non-Assumed
Administrative Expense Claims, Compensation and Reimbursement Claims, Priority
Tax Claims, Priority Non-Tax Claims, General Unsecured Claims, Noteholder Claims
and PBGC Claims as if they were Allowed Claims; see section VIII.C.10.(b)(iv),
below) in each case up to the tax book value of the assets treated as
contributed by such holders, adjusted for prior taxable income and loss and
taking into account all prior and concurrent distributions from the Liquidating
Trust. Similarly, taxable loss of the Liquidating Trust shall be allocated by
reference to the manner in which an economic loss would be borne immediately
after a liquidating distribution of the remaining Liquidating Trust Assets. The
tax book value of the Liquidating Trust Assets for this purpose shall equal
their fair market value on the Effective Date, adjusted in accordance with tax
accounting principles prescribed by the Tax Code, the applicable tax
regulations, and other applicable administrative and judicial authorities and
pronouncements.

(iv) Absent definitive guidance from the IRS or a court of
competent jurisdiction to the contrary (including the receipt by the Liquidating
Trustee of a private letter ruling if the Liquidating Trustee so requests one,
or the receipt of an adverse determination by the IRS upon audit if not
contested by the Liquidating Trustee), the Liquidating Trustee will (A) treat
any Liquidating Trust Assets allocable to, or retained on account of, Beneficial
Interests that would be distributed to holders of disputed Second Lien Lender
Claims, Non-Assumed Administrative Expense Claims, Compensation and
Reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, General
Unsecured Claims, Noteholder Claims and PBGC Claims if such Claims were Allowed
as held by one or more discrete trusts for federal income tax purposes (the
"Liquidating Trust Claims Reserve"), consisting of separate and independent
shares to be established in respect of each Disputed Claim, in accordance with
the trust provisions of the Tax Code (section 641 et seq.), (B) treat as taxable
income or loss of the Liquidating Trust Claims Reserve, with respect to any
given taxable year, the portion of the taxable income or loss of the Liquidating

Trust that would have been allocated to the holders of such Disputed Claims had
such Claims been Allowed on the Effective Date (but only for the portion of the
taxable year with respect to which such Claims are unresolved), (C) treat as a
distribution from the Liquidating Trust Claims Reserve any increased amounts
distributed by the Liquidating Trust as a result of any such Disputed Claims
resolved earlier in the taxable year, to the extent such distributions relate to
taxable income or loss of the Liquidating Trust Claims Reserve determined in
accordance with the provisions hereof, and (D) to the extent permitted by
applicable law, report consistent with the foregoing for state and local income
tax purposes. In addition, pursuant to the Plan, all holders of Beneficial
Interests are required to report consistently with such treatment.

(v) The Liquidating Trustee will be responsible for
payments, out of the Liquidating Trust Assets, of any taxes imposed on the
Liquidating Trust or the Liquidating Trust Assets, including the Liquidating
Trust Claims Reserve. In the event, and to the extent, any Cash retained on
account of Disputed Claims in the Liquidating Trust Claims Reserve is
insufficient to pay the portion of any such taxes attributable to the taxable
income arising from the assets allocable to, or retained on account of, such
Disputed Claims, such taxes will be (A) reimbursed from any subsequent Cash
amounts retained on account of such Disputed Claims, or (B) to the extent such
Disputed Claims have subsequently been resolved, deducted from any amounts
distributable by the Liquidating Trustee as a result of the resolutions of such
Disputed Claims.

(vi) The Liquidating Trustee may request an expedited
determination of taxes of the Liquidating Trust, including the Liquidating Trust
Claims Reserve, under section 505(b) of the Bankruptcy Code for all returns
filed for, or on behalf of, the Liquidating Trust for all taxable periods
through the dissolution of the Liquidating Trust.

(vii) As of the Effective Date, the Liquidating Trustee
will be authorized and directed to exercise all powers regarding the Debtors'
tax matters, including filing tax returns, to the same extent as if the Trustee
were the Debtor in Possession. The Trustee Liquidating will (A) complete and
file within the applicable time periods proscribed by law, to the extent not
previously filed, the Debtors' final federal, state, and local tax returns, (B)
request an expedited determination of any unpaid tax liability of the Debtors
under section 505(b) of the Bankruptcy Code for all tax periods of the Debtors
ending after the Commencement Date through the liquidation of the Debtors as
determined under applicable tax laws, to the extent not previously requested,
and (C) represent the interest and account of the Debtors before any taxing
authority in all matters, including, but not limited to, any action, suit,
proceeding, or audit.

11. Compensation and Indemnification of the Liquidating Trustee

The costs and expenses of the Liquidating Trust, including
fees and reasonable expenses of its retained professionals, will be paid out of
the Liquidating Trust. Except as provided in the Plan or the Liquidating Trust
Agreement, neither the Liquidating Trustee nor its agents or professionals shall
bear any liability for actions taken or omitted in its capacity as, or on behalf
of, the Liquidating Trustee, and each shall be entitled to indemnification and
reimbursement for fees and expenses in defending any and all of its actions or
inactions in its capacity as, or on behalf of, the Liquidating Trustee. Any
indemnification claim of the Liquidating Trustee (and the other parties entitled
to indemnification under Section 9.14 of the Plan) shall be satisfied from the
Liquidating Trust Assets. The Liquidating Trustee shall be entitled to rely, in
good faith, on the advice of its retained professionals.

12. Dissolution of the Liquidating Trust.

The Liquidating Trustee and the Liquidating Trust will be
discharged or dissolved, as the case may be, at such time as (i) all Disputed
Claims have been resolved, (ii) all Liquidating Trust Assets have been
liquidated, and (iii) all distributions required to be made by the Liquidating
Trustee under the Plan have been made, but in no event shall the Liquidating
Trust be dissolved later than five (5) years from the Effective Date unless the
Bankruptcy Court, upon motion within the six (6) month period prior to the fifth

(5th) anniversary (and, in the case of any extension, within six (6) months
prior to the end of such extension), determines that a fixed period extension
(not to exceed three (3) years, together with any prior extensions, without a
favorable letter ruling from the Internal Revenue Service that any further
extension would not adversely affect the status of the Liquidating Trust as a
liquidating trust for federal income tax purposes) is necessary to facilitate or
complete the recovery and liquidation of the Liquidating Trust Assets or the
dissolution of the Debtors.

13. Closing of the Chapter 11 Cases.

When all Disputed Claims filed against the Debtors have
become Allowed Claims or have been disallowed by Final Order, and all of the
Liquidating Trust Assets have been distributed in accordance with the Plan, the
Liquidating Trustee shall seek authority from the Bankruptcy Court to close the
chapter 11 cases in accordance with the Bankruptcy Code and the Bankruptcy
Rules.

IX.

OTHER ASPECTS OF THE PLAN

A. DISTRIBUTIONS

One of the key concepts under the Bankruptcy Code is that
only claims and equity interests that are "allowed" may receive distributions
under a chapter 11 plan. This term is used throughout the Plan and the
descriptions below. In general, an "allowed" claim or an "allowed" equity
interest simply means that the debtor agrees, or in the event of a dispute, that
the bankruptcy court determines, that the claim or interest, and the amount
thereof, is in fact a valid obligation of the debtor.

Any Claim that is not a Disputed Claim and for which a
proof of claim has been filed is an Allowed Claim. Any Claim that has been
listed by any Debtor in such Debtor's schedules of assets and liabilities, as
may be amended from time to time, as liquidated in amount and not disputed or
contingent is an Allowed Claim in the amount listed in the schedules unless an
objection to such Claim has been filed. If the holder of such Claim files a
proof of claim in an amount different than the amount set forth on the Debtors'
schedules of assets and liabilities, the Claim is an Allowed Claim for the lower
of the amount set forth on the Debtors' schedules of assets and liabilities and
on the proof of claim and a Disputed Claim for the difference. Any Claim that
has been listed in the Debtors' schedules of assets and liabilities as disputed,
contingent, or not liquidated and for which a proof of claim has been timely
filed is a Disputed Claim. Any Claim for which an objection has been timely
interposed is a Disputed Claim. For an explanation of how Disputed Claims will
be determined, see section IX.A.3.

An objection to any Claim may be interposed by the Debtors
or the Liquidating Trustee (or, if the Liquidating Trust is not established, the
Second Lien Lender Administrative Agent) within 120 days after the Effective
Date or such later date as may be fixed by the Bankruptcy Court. Any Claim for
which an objection has been interposed will be an Allowed Claim to the extent
the objection is determined in favor of the holder of the Claim.

1. Distributions Through Agents.

Distributions to the holders of First Lien Lender Claims
(Class C) and Second Lien Lender Claims (Class D) will be made through their
respective agents. All distributions made to holders of Second Lien Lender
Claims pursuant to the Plan will be made in accordance with the terms and
conditions of that certain Intercreditor and Lien Subordination Agreement, dated
June 29, 2001, by and among WestPoint, Bank of America, N.A., and Bankers Trust
Company. Distributions to the holders of Noteholder Claims (Class F) will be
made through the respective indenture trustees for the public debt instruments
representing such Claims. Distributions to holders of General Unsecured Claims

(Class E) and PGBC Claims (Class G) will be made by a representative appointed
by the Debtors or the Liquidating Trustee.

2. Timing and Conditions of Distributions.

(a) Date of Distribution.

Except as otherwise provided for in the Plan, distributions
on account of Allowed Claims will be made on the Effective Date (or as soon
thereafter as is practicable) or within thirty (30) days after the order
allowing a Disputed Claim becomes a Final Order. Disputed Claims will be treated
as set forth below.

(b) Surrender of Certain Securities Necessary for
Distribution.

Plans of reorganization generally require a holder of an
instrument or security of a debtor to surrender such instrument or security
prior to receiving a new instrument or security in exchange therefore under a
plan. This rule avoids disputes regarding who is the proper recipient of
instruments or securities under a plan.

As a condition to receiving any distribution under the
Plan, each holder of a certificated instrument or note must surrender such
instrument or note held by it to the Disbursing Agent or its designee, unless
waived by the Debtors. Any holder of such instrument or note that fails to (i)
surrender such instrument or note, or (ii) execute and deliver an affidavit of
loss and/or indemnity reasonably satisfactory to the Disbursing Agent and
furnish a bond in form, substance, and amount reasonably satisfactory to the
Disbursing Agent before the first anniversary of the Effective Date may be
deemed to have forfeited all rights and Claims and may be deemed unable to
participate in any distribution under the Plan. Any distribution so forfeited
shall become property of the Liquidating Trust.

Holders of Equity Interests shall not be required to
surrender such instruments or securities because they are not receiving a
distribution under the Plan on account of such securities.

In the event the Sale Proceeds consist of common or
preferred stock, no fractional shares, or Cash in lieu thereof, shall be
distributed. For purposes of distribution, any fractional shares shall be
rounded down to the next whole number or zero, as applicable. A detailed
description of the Sale Proceeds to be distributed pursuant to the Plan will be
filed as an exhibit to the Plan after the Purchaser Selection Hearing.

3. Procedures for Treating Disputed Claims Under the Plan.

(a) Disputed Claims.

A Disputed Claim ("Disputed Claim") is a Claim that has not
been Allowed or disallowed pursuant to an agreement by the parties or an order
of the Bankruptcy Court. In addition, all prepetition Litigation Claims not
previously Allowed by the Bankruptcy Court are Disputed Claims. A Claim for
which a proof of claim has been filed but that is listed on the Debtors'
schedules of assets and liabilities as unliquidated, disputed or contingent, and
which has not yet been resolved by the parties or by the Bankruptcy Court, is a
Disputed Claim. If a holder of a Claim has filed a proof of claim that is
inconsistent with the Claim as listed on the Debtors' schedules of assets and
liabilities, such Claim is a Disputed Claim to the extent of the difference
between the amount set forth in the proof of claim and the amount scheduled by
the Debtors. Any Claim for which the Debtors, the Liquidating Trustee, or any
party in interest have interposed (or will interpose) a timely objection is a
Disputed Claim. All Litigation Claims are Disputed Claims.

Pursuant to the proposed Order (I) Approving the Form and
Manner of Notice of the Disclosure Statement Hearing; (II) Approving the
Disclosure Statement (III) Fixing of a Record Date; (IV) Approving the Notice
and Objection Procedures in Respect of Confirmation of the Plan; (V) Approving
Solicitation Packages and Procedures for Distribution Thereof; (VI) Approving
the Forms of Ballot and Establishment of Procedures for Voting on the Plan; and
(VII) Authorization to Utilize Bankruptcy Services LLC as Voting Agent, holders
of Disputed Claims will not be entitled to vote on the Plan.

(b) Objections to Claims

The Debtors or, where applicable, the Liquidating Trustee,
shall be entitled to object to all Disputed Claims or Claims not already
Allowed, as well as to Non-Assumed Administrative Claims, Compensation and
Reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, General
Unsecured Claims, Litigation Claims, and the PBGC Claims. Any objections to
Claims shall be served and filed on or before one hundred and twenty (120) days
after the Effective Date, or such later date as may be fixed by the Bankruptcy
Court.

If any portion of a Claim is a Disputed Claim, no payment
or distribution shall be made on account of such Claim until such Disputed Claim
becomes an Allowed Claim. Pending the allowance or disallowance of the Disputed
Claims, the Debtors or the Liquidating Trustee, where applicable, shall withhold
from the payments and distributions made pursuant to the Plan to the holders of
Allowed Claims the payments and distributions allocable to the Disputed Claims
as if the Disputed Claims had been Allowed Claims.

(d) Distributions After Allowance.

To the extent that a Disputed Claim becomes an Allowed
Claim, the holder of such Allowed Claim shall receive a distribution in
accordance with the provisions of the Plan. As soon as practicable after the
date that the order or judgment of the Bankruptcy Court allowing any Disputed
Claim becomes a Final Order, the Disbursing Agent or the Liquidating Trustee,
where applicable, shall provide to the holder of such Claim the distribution to
which such holder is entitled under the Plan.

To the extent that all or a portion of a Disputed Claim is
disallowed, the holder of such Claim shall not receive any distribution on
account of the portion of such Claim that is disallowed and any property
withheld pending the resolution of such Claim shall be reallocated pro rata to
the holders of Allowed Claims in the same class.

B. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.

1. Contracts and Leases Not Expressly Assumed are Rejected.

As provided in the Plan, all executory contracts and
unexpired leases to which any of the Debtors are parties shall be rejected
effective on the Effective Date except for an executory contract that (i) has
already been assumed or rejected pursuant to Final Order of the Bankruptcy
Court, (ii) is specifically designated as an Assigned Contract or Lease, or
(iii) is the subject of a separate motion to assume or reject filed under
section 365 of the Bankruptcy Code by the Debtors prior to the Confirmation
Date.

2. Assigned Contracts and Leases.

and assignment to the Purchaser of each of the Assigned Contracts and Leases
shall be effective as of the Closing on the terms and conditions set forth in
the APA and the Sale Order. The Debtors will have up to eleven (11) days prior
to the Confirmation Hearing to amend the schedules to the APA by adding any
executory contract or unexpired lease thereto, deleting any Assigned Contract or
Lease therefrom, or amending any cure amount set forth thereon. The Debtors will
provide notice of any amendments to the APA to all parties who are affected by
such an amendment at least ten (10) days prior to the Confirmation Hearing. The
listing of a document on a schedule to the APA shall not constitute an admission
by the Debtors that such document is an executory contract or unexpired lease or
that the Debtors have any liability thereunder.

3. Cure of Defaults.

Section 365(b) of the Bankruptcy Code provides that any
executory contract to be assumed or assigned must be cured of any defaults
relating thereto. Except as otherwise may be agreed to by the parties, at the
Closing, or as promptly thereafter as practicable, the Purchaser shall cure
those defaults under the Assigned Contracts or Leases under the APA on the terms
and subject to the conditions set forth in the APA and the Sale Order by (a)
payment of the undisputed cure amounts or (b) reserving amounts with respect to
the disputed cure amounts.

4. Rejection Claims.

Any person or entity asserting a Claim for damages arising
out of the rejection of a contract or lease must do so within thirty (30) days
of the Confirmation Hearing or as otherwise provided in the Plan. Failure to so
timely file a proof of claim for rejection damages will result in that holder's
Claim being barred and deemed unenforceable against the Debtors, the Debtors'
respective properties or interests in property as agents, successors, or
assigns, or the Liquidating Trust.

C. CORPORATE ACTION

Upon the Effective Date, the Debtors shall perform each of
the actions and effect each of the transfers required by the terms of the Plan
and the APA, in the time period allocated therefor, and all matters provided for
under the Plan and the APA, that would otherwise require approval of the
stockholders, partners, members, directors, or comparable governing bodies of
the Debtors shall be deemed to have occurred and shall be in effect from and
after the Effective Date pursuant to the applicable general corporation law (or
other applicable law) of the states in which the Debtors are incorporated or
organized, without any requirement of further action by the stockholders,
members, or directors (or other governing body) of the Debtors. Each of the
Debtors shall be authorized and directed, following the completion of all
disbursements, other transfers, and other actions required of the Debtors by the
Plan, to file its certificate of cancellation, dissolution, or merger as
contemplated by section 5.11 of the Plan. The filing of such certificates of
cancellation, dissolution, or merger shall be authorized and approved in all
respects without further action under applicable law, regulation, order, or
rule, including, without express or implied limitation, any action by the
stockholders, members, or directors (or other governing body) of the Debtors.

D. CLAIMS ADMINISTRATION, PROSECUTION, AND PLAN DISTRIBUTIONS

The Debtors and, as provided in section 9 of the Plan, the
Liquidating Trustee, shall have the power and authority to prosecute and resolve
objections to Disputed Non-Assumed Administrative Expense Claims, Disputed
Priority Tax Claims, Disputed Priority Non-Tax Claims, Disputed Other Secured
Claims, Disputed Compensation and Reimbursement Claims and Litigation Claims.
The Debtors shall also continue to have the power and authority to hold, manage
and distribute Plan distributions to the holders of Allowed Non-Assumed
Administrative Expense Claims, Allowed Priority Tax Claims, Allowed Priority
Non-Tax Claims, Allowed Other Secured Claims and Allowed Compensation and
Reimbursement Claims.

E. DISSOLUTION

Within thirty (30) days of the completion of all acts
required to be performed by the Debtors under the Plan, or as soon thereafter as
is practicable, each Debtor shall be deemed dissolved for all purposes without
the necessity of any other or further actions to be taken by or on behalf of
each Debtor. Each Debtor will, however, be required to file with the office of
the Secretary of State or other appropriate office for the state of its
organization a certificate of cancellation or dissolution, or alternatively, it
may be merged with and into another Debtor and file an appropriate certificate
of merger.

F. GOVERNANCE OF NEWCO

1. Board of Directors

The initial Board of Directors of NewCo and the Purchaser
will be disclosed at or prior to the Confirmation Hearing.

2. Senior Management

The officers of the Debtors immediately prior to the
Effective Date shall serve as the initial officers of NewCo and Purchaser. After
the Effective Date, the officers of NewCo and Purchaser will be determined by
their respective Boards of Directors.

G. CONDITIONS PRECEDENT TO CONFIRMATION AND THE EFFECTIVE DATE

1. Conditions Precedent to Confirmation.

Entry of the Confirmation Order in a form and substance
reasonably satisfactory to the Debtors and the approval of the Purchaser at the
Purchaser Selection Hearing are conditions precedent to confirmation of the
Plan.

2. Conditions Precedent to the Effective Date.

The Plan shall not become effective unless and until the
following conditions have been satisfied in full or waived:

o The Confirmation Order and the Sale Order, in forms
reasonably acceptable to the Debtors and Purchaser,
are entered by the Bankruptcy Court;

o No stay or injunction is in effect at the time the
other conditions set forth in the Plan are satisfied
or waived;

o The Liquidating Trust Agreement has been executed;

o The Closing has occurred;

o The Debtors have received all authorizations,
consents, regulatory approvals, rulings, letters,
no-action letters, opinions, or documents that are
required to implement the Plan and the APA; and

o All actions, documents, and agreements required to
implement the Plan have been effected or executed.

3. Failure of Conditions.

In the event that one or more of the conditions specified
in section 10.1 or 10.2 of the Plan have not occurred or have not been waived in
accordance with section 10.4 of the Plan, on or before one hundred and twenty
(120) days after the Confirmation Date, (i) the Confirmation Order shall be
vacated, (ii) no distributions under the Plan shall be made (and the
distributions that have been made shall be unwound), (iii) the Debtors and all
holders of Claims and Equity Interests shall be restored to the status quo ante
as of the day immediately preceding the Confirmation Date as though the
Confirmation Date never occurred, and (iv) the Debtors obligations with respect
to Claims and Equity Interests shall remain unchanged and nothing contained in
the Plan shall constitute or be deemed a waiver or release of any Claim or
Equity Interest by or against the Debtors or any other entity or to prejudice in
any manner the rights of the Debtors or any entity in any further proceedings
involving the Debtors.

4. Satisfaction of Conditions.

If the Debtors decide, after consultation with the
Purchaser, that one of the conditions precedent set forth in sections 10.1 and
10.2 of the Plan cannot be satisfied and the occurrence of such condition is not
waived or cannot be waived, then the Debtors shall file a notice of the failure
of the Effective Date with the Bankruptcy Court.

H. EFFECT OF CONFIRMATION

1. Vesting of Assets.

Upon the Effective Date, all property of the Debtors'
estates which has not been sold and transferred to Purchaser under the APA shall
vest in the Debtors free and clear of all liens, Claims, encumbrances, charges,
and other interests. The Liquidating Trust Assets shall be transferred to the
Liquidating Trust free and clear of all liens, Claims, encumbrances, and other
interests.

2. Discharge of Claims and Termination of Equity Interests.

Confirmation of the Plan will discharge all existing debts
and Claims, and terminate all Equity Interests, of any kind, nature or
description whatsoever against or in the Debtors. All holders of existing Claims
against and Equity Interests in the Debtors will be enjoined from asserting
against the Debtors, or any of their assets or properties, any other or further
Claim or Equity Interest based upon any act or omission, transaction, or other
activity that occurred prior to the Effective Date, whether or not such holder
has filed a proof of claim or proof of Equity Interest. In addition, upon the
Effective Date, each holder of a Claim against or Equity Interest in the Debtors
shall be forever precluded and enjoined from prosecuting or asserting any
discharged Claim against or terminated Equity Interests in the Debtors.

3. Discharge of Debtors.

Upon the Effective Date, and in consideration of the
distributions to be made under the Plan, except as otherwise expressly provided
therein, each holder (as well as any trustees and agents on behalf of each
holder) of a Claim or Equity Interest and any affiliate of such holder shall be
deemed to have forever waived, released, and discharged the Debtors, to the
fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any
and all Claims, Equity Interests, rights, and liabilities that arose prior to
the Effective Date. Upon the Effective Date, all such persons shall be forever
precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from
prosecuting or asserting any such discharged Claim against or terminated Equity
Interest in the Debtors. Notwithstanding any provision of the Plan to the
contrary, any valid setoff or recoupment rights held against any of the Debtors
shall not be affected by the Plan and shall be expressly preserved in the
Confirmation Order.

4. Terms of Injunctions or Stays.

Unless otherwise provided, all injunctions or stays arising
under or entered during the chapter 11 cases under section 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 later of the Effective Date and the
date indicated in such order.

5. Exculpation.

The Plan provides that neither the Debtors, the Purchaser,
the Liquidating Trustee, the Disbursing Agent, the Creditors Committee appointed
pursuant to section 1102 of the Bankruptcy Code in the chapter 11 cases, the
First Lien Lender Administrative Agent, the Second Lien Lender Administrative
Agent, the Indenture Trustees, nor any of their respective members, officers,
directors, employees, agents, financial advisors, investment bankers, or
professionals shall have or incur any liability to any holder of any Claim or
Equity Interest for any act or omission in connection with, or arising out of,
the Reorganization Cases, the confirmation of the Plan, the consummation of the
Plan and APA, or the administration of the Plan or property to be distributed
under the Plan, except for willful misconduct or gross negligence.

6. Retention of Causes of Action/ Reservation of Rights.

Except as provided in the APA, nothing contained in the
Plan or the Confirmation Order shall be deemed to be a waiver or the
relinquishment of any rights or causes of action that the Debtors may have or
which the Debtors or Liquidating Trustee, in accordance with section 9 of the
Plan, may choose to assert on behalf of the Debtors' respective estates under
any provision of the Bankruptcy Code or any applicable nonbankruptcy law. On and
after the Effective Date, the Debtors will have the right to enforce any and all
causes of action against any person other than Avoidance Actions. The Debtors
may pursue, abandon, settle, or release any or all causes of action, other than
Avoidance Actions, as they deem appropriate, without the need to obtain approval
or any other or further relief from the Bankruptcy Court. The Debtors may, in
their discretion, offset any claim held against a person, other than Avoidance
Actions, against any payment due such person under the Plan, provided, however,
that any claims of the Debtors arising before the Commencement Date shall first
be offset against Claims against the Debtors arising before the Commencement
Date.

Nothing contained in the Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any claim, cause of action,
right of setoff, or other legal or equitable defense which the Debtors had
immediately prior to the Commencement Date, against or with respect to any Claim
left unimpaired by the Plan. The Debtors and the Liquidating Trustee shall have,
retain, reserve, and be entitled to assert all such claims, causes of action,
rights of setoff, and other legal or equitable defenses which they had
immediately prior to the Commencement Date fully as if the Reorganization Cases
had not been commenced, and all of the Debtors' legal and equitable rights
respecting any Claim left unimpaired by the Plan may be asserted by the Debtors
or the Liquidating Trustee after the Confirmation Date to the same extent as if
the Reorganization Cases had not been commenced.

I. RETENTION OF JURISDICTION

On and after the Effective Date, the Bankruptcy Court shall
retain jurisdiction over all matters arising in, arising under, and related to
the Reorganization Cases for, among other things, the following purposes:

(a) To hear and determine applications for the assumption
or rejection of executory contracts or unexpired leases and the allowance of
Claims resulting therefrom.

(b) To determine any motion, adversary proceeding,
application, contested matter, and other litigated matter pending on or
commenced after the Confirmation Date.

(d) To consider Claims or the allowance, classification,
priority, compromise, estimation, or payment of any Claim, Administrative
Expense Claim, or Equity Interest.

(e) To enter, implement, or enforce such orders as may be
appropriate in the event the Confirmation Order, the Purchaser Selection Order,
or the Sale Order is for any reason stayed, reversed, revoked, modified, or
vacated.

(f) To issue injunctions, enter and implement other orders,
and take such other actions as may be necessary or appropriate to restrain
interference by any person with the consummation, implementation, or enforcement
of the Plan, the Confirmation Order, the Purchaser Selection Order, the Sale
Order, or any other order of the Bankruptcy Court.

(g) To hear and determine any application to modify the
Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any
defect or omission or reconcile any inconsistency in the Plan, the Disclosure
Statement, or any order of the Bankruptcy Court, including the Confirmation
Order, Purchaser Selection Order, and Sale Order, in such a manner as may be
necessary to carry out the purposes and effects thereof.

(h) To hear and determine all applications under sections
330, 331, and 503(b) of the Bankruptcy Code for awards of compensation for
services rendered and reimbursement of expenses incurred prior to the
Confirmation Date.

(i) To hear and determine disputes arising in connection
with the interpretation, implementation, or enforcement of the APA, the Plan,
the Confirmation Order, the Sale Order, any transactions or payments
contemplated by the Plan, or any agreement, instrument, or other document
governing or relating to any of the foregoing.

(j) To take any action and issue such orders as may be
necessary to construe, enforce, implement, execute, and consummate the Plan or
the APA, or to maintain the integrity of the Plan or the APA following
consummation.

(k) To resolve personal injury, employment litigation, and
similar Claims pursuant to section 105(a) of the Bankruptcy Code.

(l) To determine such other matters and for such other
purposes as may be provided in the Purchase Selection Order, the Sale Order, or
the Confirmation Order.

(m) To hear and determine matters concerning state, local,
and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code (including any requests for expedited determinations under
section 505(b) of the Bankruptcy Code).

(n) To hear and determine any other matters related hereto
and not inconsistent with the Bankruptcy Code and title 28 of the United States
Code.

(o) To enter a final decree closing the Reorganization
Cases.

(p) To recover all assets of the Debtors and property of
the Debtors' estates, wherever located.

J. RELEASES

The Plan provides for a release, as of the Effective Date,
of the respective officers, directors, employees, financial advisors,
professionals, accountants, and attorneys of the Debtors, the Creditors
Committee appointed pursuant to section 1102 of the Bankruptcy Code, Beal Bank,
as Administrative Agent under the First Lien Lender Agreement or any successor
agent thereto, Wilmington Trust Company, as Administrative Agent under the
Second Lien Lender Agreement or any successor agent thereto, and the Indenture
Trustees from all claims against them by the Debtors in their capacity as
representatives of the Debtors, the Creditors Committees, the First Lien
Lenders, the Second Lien Lenders, and the Noteholders, as applicable, except as
otherwise expressly provided in the Plan and the Confirmation Order.

The purpose of the release of the representatives of the
other major constituencies in these cases, such as the Creditors Committee and
the administrative agents and advisors for the First Lien Lenders and Second
Lien Lenders, is to protect the chapter 11 process for individuals who have
contributed to the restructuring process.

K. MISCELLANEOUS PROVISIONS

The Plan contains provisions relating to the cancellation
of existing securities, corporate actions, the Disbursing Agent, delivery of
distributions, manner of payment, vesting of assets, binding effect, terms of
injunctions or stays, injunction against interference with the Plan, payment of
statutory fees, dissolution of the Creditors Committee, substantial
consummation, compliance with tax requirements, severability, revocation and
amendment of the Plan, governing law, and timing. For more information regarding
these items, see the Plan attached hereto as Exhibit "A".

CERTAIN FACTORS TO BE CONSIDERED

A. CERTAIN BANKRUPTCY CONSIDERATIONS

There are certain risks associated with confirmation of the
Plan, and the Debtors can provide no assurance that the Bankruptcy Court will
approve confirmation of the Plan. The outcome of the Confirmation Hearing may
depend on the following: (i) whether the First and Second Lien Lenders vote in
favor of the Plan; (ii) whether the Bankruptcy Court will approve cramdown of
the Plan on the First Lien Lenders and Second Lien Lenders in the event they do
not vote in favor of the Plan; and (iii) whether all Administrative Expense
Claims are required to be paid in full in Cash in order to confirm the Plan.

As described in section II.C.2. above, depending on the
amount of consideration received by the Debtors in connection with the sale of
all or substantially all of their assets and the size of the superpriority
Administrative Expense Claim (if any) awarded by the Bankruptcy Court to the
Second Lien Lenders, there may not exist sufficient funds to pay all Non-Assumed
Administrative Expense Claims in full in Cash, as required under the Bankruptcy
Code. Holders of Administrative Expense Claims (which include Priority Tax
Claims, Compensation and Reimbursement Claims, and Priority Non-Tax Claims)
therefore may receive no distribution under the Plan. Similarly, holders of
General Unsecured Claims, Noteholder Claims, and PBGC Claims may also receive no
distribution on account of their Claims under the Plan.

The Plan provides for no distribution to Classes H, J, and
K. The Bankruptcy Code conclusively deems these classes to have rejected the
Plan. Notwithstanding the fact that these classes are deemed to have rejected
the Plan, the Bankruptcy Court may confirm the Plan if at least one impaired
class votes to accept the Plan (with such acceptance being determined without
including the vote of any "insider" in such class). Thus, for the Plan to be

confirmed with respect to each Debtor, one impaired class, among Classes A, B,
C, D, E, F, and G must vote to accept the Plan. As to each impaired class that
has not accepted the Plan, the Plan may be confirmed if the Bankruptcy Court
determines that the Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to these classes. The Debtors believe that the Plan
satisfies these requirements. For more information, see section XI below.

B. SECURITIES LAW MATTERS

Holders of Allowed Non-Assumed Administrative Expense
Claims, Compensation and Reimbursement Claims, Priority Non-Tax Claims, First
Lien Lender Claims, Second Lien Lender Claims, Noteholder Claims, General
Unsecured Claims, and PBGC Claims may receive securities in connection with the
sale of the Debtors' assets to the Purchaser and the Plan. The Debtors and/or
NewCo, as a plan sponsor, may seek authority to issue those securities in
connection with the protections provided by section 1145 of the Bankruptcy Code.
Section 1145 provides certain exemptions from the securities registration
requirements of federal and state securities laws with respect to the
distribution of securities under a plan.

1. Issuance and Resale of New Securities.

Section 1145(a) of the Bankruptcy Code generally exempts
from registration under the Securities Act of 1933 (the "Securities Act") the
offer or sale of securities of a debtor or a successor to a debtor under a
chapter 11 plan if such securities are offered or sold in exchange for a claim
against, or an equity interest in, such debtor, or principally in such exchange
and partly for Cash. The Debtors and/or NewCo, as a plan sponsor, may attempt to
rely on this exemption and seek to have common stock and any rights issued on
the Effective Date exempted from the registration requirements of the Securities
Act. If so authorized, such securities may be resold without registration under
the Securities Act or other federal securities laws pursuant to an exemption
provided by section 4(1) of the Securities Act, unless the holder is an
"underwriter" with respect to such securities, as that term is defined in the
Bankruptcy Code. In addition, such securities generally may be resold without
registration under state securities laws pursuant to various exemptions provided
by the respective laws of the several states. The issuance of the Beneficial
Interests in the Liquidating Trust will also be exempt pursuant to section
1145(a). Recipients of securities issued under the Plan are advised to consult
with their own legal advisors as to the availability of any such exemption from
registration under state law in any given instance and as to any applicable
requirements or conditions to such availability.

Any subscription rights or new stock to be issued upon
exercise thereof generally will also be so exempt pursuant to section 1145(a) if
the value of the Claims held by the holders of the class receiving such rights
exceeds the amount of Cash payable upon exercise of the rights. If the value of
the Claim is less than the exercise price, section 1145(a) would not apply, in
which case the rights will be issued only to those holders of the applicable
class of Claims who are "accredited investors" as defined in Regulation D under
the Securities Act. Any subscription rights or new stock issued upon exercise
thereof would be issued without registration under the Securities Act pursuant
to the exemption therefrom contained in section 4(2) of the Securities Act
relating to issuances which do not constitute a public offering and Regulation D
thereunder. Alternatively, NewCo could register the rights and the new stock
issuable upon exercise thereof pursuant to the Securities Act.

In the event new stock is issued in connection with a
rights offering in accordance with Regulation D, it will not be deemed to be
issued in a public offering. Accordingly, such shares of new stock would be
"restricted securities" and may only be resold by any holder thereof pursuant to
an effective registration statement under section 5 of the Securities Act or an
exemption therefrom, which may include Rule 144 ("Rule 144") promulgated under
the Securities Act.

Rule 144 is a non-exclusive safe harbor that provides a
basis for sellers to claim a trading exemption under section 4(a) of the
Securities Act. Rule 144 will permit the resale of securities received pursuant

to a rights offering subject to applicable holding period requirements, volume
limitations, notice and manner of sale requirements, availability of current
information about the issuer and certain other conditions. Generally, Rule 144
provides that if such conditions are met, specified persons who resell
"restricted securities" or who resell securities that are not restricted but who
are "affiliates" of the issuer of the securities sought to be resold, will not
be deemed to be "underwriters" as defined in section 2(11) of the Securities
Act. Additionally, under Rule 144(k), a person who is not deemed to have been an
affiliate of the issuer at any time during the three months preceding a sale,
and who has beneficially owned the securities proposed to be sold for at least
two years, is entitled to sell such securities without having to comply with the
manner of sale, public information, volume limitation or notice filing
provisions of Rule 144. In the event that securities may be resold in accordance
with Rule 144, such securities generally may be resold by the recipients thereof
without registration under state securities or "blue sky" laws pursuant to
various exemptions provided by the respective laws of the several states.
However, recipients of securities issued pursuant to a rights offering are
advised to consult with their own counsel as to the availability of any such
exemption from registration under state securities laws in any given instance
and as to any applicable requirements or conditions to the availability thereof.

Section 1145(b) of the Bankruptcy Code defines
"underwriter" for purposes of the Securities Act as one who (a) purchases a
claim with a view to distribution of any security to be received in exchange for
the claim other than in ordinary trading transactions, or (b) offers to sell
securities issued under a plan for the holders of such securities, or (c) offers
to buy securities issued under a plan from persons receiving such securities, if
the offer to buy is made with a view to distribution of such securities, or (d)
is a control person of the issuer of the securities or other issuer of the
securities within the meaning of section 2(11) of the Securities Act. The
legislative history of section 1145 of the Bankruptcy Code suggests that a
creditor who owns at least ten percent (10%) of the voting securities of the
issuer may be presumed to be a "control person."

Notwithstanding the foregoing, statutory underwriters may
be able to sell their securities pursuant to the resale limitations of Rule 144
promulgated under the Securities Act. Rule 144 would, in effect, permit the
resale of securities received by statutory underwriters pursuant to a chapter 11
plan, subject to applicable volume limitations, notice and manner of sale
requirements, and certain other conditions. Parties who believe they may be
statutory underwriters as defined in section 1145 of the Bankruptcy Code are
advised to consult with their own legal advisors as to the availability of the
exemption provided by Rule 144.

Whether any particular person would be deemed to be an
"underwriter" with respect to any security issued under or in connection with
the sale and confirmation of the Plan would depend upon the facts and
circumstances applicable to that person. Accordingly, the Debtors express no
view as to whether any particular person receiving distributions in connection
with the sale and confirmation of the Plan would be an "underwriter" with
respect to any security issued in connection with the sale and confirmation of
the Plan.

In view of the complex, subjective nature of the question
of whether a particular person may be an underwriter or an affiliate of NewCo or
the Purchaser, the Debtors make no representations concerning the right of any
person to trade in any new stock that may be distributed in connection with the
sale and confirmation of the Plan. Accordingly, in the event securities are
issued in connection with the sale and confirmation of the Plan, the Debtors
recommend that potential recipients of such securities consult their own counsel
concerning whether they may freely trade such securities.

2. Listing of New Common Stock.

On the Effective Date, any shares of new stock issued
pursuant to the APA or the Plan will not be listed on a national securities
exchange or Nasdaq Stock Market, and neither the Purchaser nor NewCo will be a
reporting company under the Securities Exchange Act of 1934. Accordingly, no

assurance can be given that a holder of such new stock will be able to sell such
securities in the future or as to the price at which any sale may occur.

3. Registration Rights.

In connection with the sale of the Debtors' assets and
confirmation of the Plan, NewCo or the Purchaser may require the execution of a
registration rights agreement between NewCo or the Purchaser and any holder of
new stock that would qualify as an "underwriter" as defined in section 1145(b)
of the Bankruptcy Code, such as a holder of 10% or more of such securities, and
holders of new common stock received upon exercise of any rights issued pursuant
to Regulation D. The reason for such an agreement is that statutory
"underwriters" and such holders will not be able to take advantage of the
exemption from registration provided in section 1145 that is available to other
holders. If a rights offering is required in connection with the sale and
confirmation of the Plan, a copy of the registration rights agreement will be
set forth in the Plan Supplement.

4. Legends.

If stock or rights are issued in connection with the sale
and confirmation of the Plan, then certificates evidencing shares of new common
stock received by holders of at least 10% of the outstanding new common stock
and received by holders of new stock upon exercise of rights issued pursuant to
Regulation D will bear a legend substantially in the form below:

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH REGISTRATION OR QUALIFICATION
IS NOT REQUIRED.

C. RISKS RELATING TO THE SECURITIES ISSUED IN CONNECTION WITH THE SALE

1. Variances from Projections.

The projections included in section IV.C herein are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, with respect to WestPoint's business, financial
condition and results of operations. Statements that use the terms "believe,"
"anticipate," "expect," "plan," "intend," "estimate," "project" and similar
expressions in the affirmative and the negative are intended to identify
forward-looking statements. These statements reflect WestPoint's current views
with respect to future events and are based on current assumptions,
expectations, estimates and projections about WestPoint's business and the
markets in which it operates and are subject to risks and uncertainties. Actual
events (including WestPoint's results) could differ materially from those
anticipated in these forward-looking statements as a result of various factors
which include, but are not limited to, the following: uncertainties exist
related to WestPoint's having filed a chapter 11 petition and the reorganization
proceedings resulting therefrom; product margins may vary from those projected;
raw material prices may vary from those assumed; additional reserves may be
required for bad debts, returns, allowances, governmental compliance costs, or
litigation; there may be changes in the performance of financial markets or
fluctuations in foreign currency exchange rates; unanticipated natural disasters
could have a material impact upon results of operations; there may be changes in
the general economic conditions which affect customer payment practices or
consumer spending; competition for retail and wholesale customers, pricing and
transportation of products may vary from time to time due to seasonal variations
or otherwise; customer preferences for our products can be affected by

competition, or general market demand for domestic or imported goods or the
quantity, quality, price or delivery time of such goods; there could be an
unanticipated loss of a material customer or a material license; there may be
changes in governmental standards for WestPoint's products that materially
affect the cost of production or availability of raw materials; the availability
and price of raw materials could be affected by weather, disease, energy costs
or other factors. In addition, consideration should be given to any other risks
and uncertainties discussed herein and in documents filed by WestPoint with the
Securities and Exchange Commission. Except as required by applicable law,
WestPoint assumes no obligation to update or revise publicly any forward-looking
statements, whether as the result of new information, future events or
otherwise.

2. Significant Holders.

Under the Plan, certain holders of Allowed Claims may
receive distributions of shares in NewCo representing in excess of five percent
of the outstanding shares of the common stock. If holders of a significant
number of shares of NewCo were to act as a group, such holders may be in a
position to control the outcome of actions requiring shareholder approval,
including the election of directors.

Further, the possibility that one or more of the holders of
a number of shares of the NewCo may determine to sell all or a large portion of
their shares in a short period of time may adversely affect the market price of
the stock of the NewCo.

3. Lack of Trading Market.

Any stock issued in connection with the sale and
confirmation of the Plan may not be listed on any exchange. There can be no
assurance that an active trading market for such stock will develop.
Accordingly, no assurance can be given that a holder of the stock will be able
to sell such securities in the future or as to the price at which any such sale
may occur. If such markets were to exist, such securities could trade at prices
higher or lower than the value ascribed to such securities herein depending upon
many factors, including the prevailing interest rates, markets for similar
securities, general economic and industry conditions, and the performance of,
and investor expectations for, NewCo.

D. RISKS ASSOCIATED WITH THE BUSINESS

Additional discussion of risks related to WestPoint's
business are set forth in greater detail in WestPoint's Form 10-K for the fiscal
year ended December 31, 2003, filed with the Securities and Exchange Commission
on March 15, 2004, and the 2004 Annual Review, a copy of which is annexed hereto
as Exhibit "B".

XI.

CONFIRMATION OF THE PLAN

A. CONFIRMATION HEARING

Section 1128(a) of the Bankruptcy Code requires the
Bankruptcy Court, after appropriate notice, to hold a hearing on confirmation of
a Plan. The Confirmation Hearing is scheduled for 10:00 a.m. Eastern Time, on
August 12, 2005, before the Honorable Robert D. Drain, United States Bankruptcy
Judge, in Room 610 of the United States Bankruptcy Court, Alexander Hamilton
Custom House, One Bowling Green, New York, New York. The Confirmation Hearing
may be adjourned from time to time by the Bankruptcy Court without further
notice except for an announcement of the adjourned date made at the Confirmation
Hearing or any subsequent adjourned Confirmation Hearing.

Section 1128(b) of the Bankruptcy Code provides that any
party in interest may object to confirmation of a Plan. Any objection to
confirmation of the Plan must be in writing, must conform to the Federal Rules

of Bankruptcy Procedure, must set forth the name of the objector, the nature and
amount of Claims or interests held or asserted by the objector against the
particular Debtor or Debtors, the basis for the objection and the specific
grounds therefor, and must be filed with the Bankruptcy Court, with a copy to
chambers, together with proof of service thereof, and served upon and received
no later than 4:00 p.m. Eastern Time on July 30, 2005 by (i) WestPoint Stevens
Inc., 507 West Tenth Street, West Point, Georgia 31833 (Attn: M. Clayton
Humphries, Jr., Esq., Vice President & General Counsel); (ii) the attorneys for
the Debtors, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153 (Attn: Michael F. Walsh, Esq. and John J. Rapisardi, Esq.); (iii) the
Office of the United States Trustee for the Southern District of New York, 33
Whitehall Street, 21st floor, New York, New York 10004 (Attn: Brian Masumoto,
Esq.); (iv) the attorneys for the Debtors' postpetition lenders, Parker, Hudson,
Rainer & Dobbs LLP, 1500 Marquis Two Tower, 285 Peachtree Center Avenue,
Atlanta, Georgia 30303 (Attn: C. Edward Dobbs, Esq.); (v) the attorneys for the
First Lien Lender Administrative Agent, Jenkens & Gilchrist, A Professional
Corporation, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799 (Attn:
Gregory G. Hesse, Esq.); (vi) the attorneys for the Steering Committee of First
Lien Lenders, Hennigan, Bennett & Dorman, LLP, 601 S. Figueroa Street, Suite
3300, Los Angeles, CA 90017 (Attn. Bruce Bennett, Esq.); (vii) the attorneys for
the Debtors' prepetition second lien lenders, Kramer Levin Naftalis & Frankel,
LLP, 919 Third Avenue, New York, New York 10022 (Attn: Thomas M. Mayer, Esq.);
(viii) the attorneys for Icahn Associates, Sonnenschein Nath & Rosenthal LLP,
1221 Avenue of the Americas, New York, New York 10020 (Attn: Peter Wolfson,
Esq.); and (ix) the attorneys for the statutory committee of creditors, Stroock
and Stroock and Lavan LLP, 180 Maiden Lane, New York, New York 10038 (Attn:
Lawrence M. Handelsman, Esq. and Michael J. Sage, Esq.).

Objections to confirmation of the Plan are governed by Rule
9014 of the Federal Rules of Bankruptcy Procedure.

UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE
CONSIDERED BY THE BANKRUPTCY COURT.

B. GENERAL REQUIREMENTS OF SECTION 1129

At the Confirmation Hearing, the Bankruptcy Court will
determine whether the following confirmation requirements specified in section
1129 of the Bankruptcy Code have been satisfied.

1. The Plan complies with the applicable provisions of the
Bankruptcy Code. 2. The Debtors have complied with the
applicable provisions of the Bankruptcy Code.

3. The Plan has been proposed in good faith and not by any
means proscribed by law.

4. Any payment made or promised by the Debtors or by a person
issuing securities or acquiring property under the Plan for
services or for costs and expenses in, or in connection
with, the chapter 11 cases, or in connection with the Plan
and incident to the chapter 11 cases, has been disclosed to
the Bankruptcy Court, and any such payment made before the
confirmation of the Plan is reasonable or if such payment
is to be fixed after confirmation of the Plan, such payment
is subject to the approval of the Bankruptcy Court as
reasonable.

5. The Debtors have disclosed the identity and affiliations of
any individual proposed to serve, after confirmation of the
Plan, as a director, officer or voting trustee of NewCo.

6. With respect to each class of Claims or Equity Interests,
each holder of an impaired Claim or impaired Equity
Interest either has accepted the Plan or will receive or
retain under the Plan on account of such holder's Claim or
Equity Interest, property of a value, as of the Effective
Date, that is not less than the amount such holder would

receive or retain if the Debtors were liquidated on the
Effective Date under chapter 7 of the Bankruptcy Code. See
discussion of "Best Interests Test" below.

7. Except to the extent the Plan meets the requirements of
section 1129(b) of the Bankruptcy Code (discussed below),
each class of Claims or Equity Interests has either
accepted the Plan or is not impaired under the Plan.
Classes H, J, K and L are deemed to have rejected the Plan
and thus the Plan can be confirmed only if the requirements
of section 1129(b) of the Bankruptcy Code are met.

8. Except to the extent that the holder of a particular Claim
has agreed to a different treatment of such Claim or, as
described herein, has not objected to the non-payment in
full of such Claim, the Plan provides that Allowed
undisputed Administrative Expense Claims and Allowed
Priority Non-Tax Claims will be paid in full on the
Effective Date and that Allowed Priority Tax Claims will
receive on account of such Claims deferred Cash payments,
over a period not exceeding six (6) years after the date of
assessment of such Claims, of a value, as of the Effective
Date, equal to the Allowed amount of such Claims.

9. At least one class of impaired Claims has accepted the
Plan, determined without including any acceptance of the
Plan by any insider holding a Claim in such class.

10. Confirmation of the Plan is not likely to be followed by
the liquidation or the need for further financial
reorganization of the Debtors or any successor to the
Debtors under the Plan, unless such liquidation or
reorganization is proposed in the Plan. See discussion of
"Feasibility" below.

C. BEST INTERESTS TESTS

As described above, the Bankruptcy Code requires that each
holder of an impaired Claim or Equity Interest either (i) accept the Plan or
(ii) receive or retain under the Plan property of a value, as of the Effective
Date, that is not less than the value such holder would receive if the Debtors
were liquidated under chapter 7 of the Bankruptcy Code.

The first step in determining whether this test has been
satisfied is to determine the dollar amount that would be generated from the
liquidation of the Debtors' assets and properties in the context of a chapter 7
liquidation case. The gross amount of Cash that would be available for
satisfaction of Claims and Equity Interests would be the sum of the proceeds
resulting from the disposition of the unencumbered assets and properties of the
Debtors, augmented by any unencumbered Cash held by the Debtors at the time of
the commencement of the liquidation case.

The next step is to reduce that gross amount by the costs
and expenses of the liquidation itself and by such additional administrative and
priority Claims that might result from the termination of the Debtors' business
and the use of chapter 7 for the purposes of liquidation. Any remaining net Cash
would be allocated to creditors and stockholders in strict priority in
accordance with section 726 of the Bankruptcy Code. Finally, the present value
of such allocations (taking into account the time necessary to accomplish the
liquidation) are compared to the value of the property that is proposed to be
distributed under the Plan on the Effective Date.

The Debtors' costs of liquidation under chapter 7 would
include the fees payable to a trustee in bankruptcy, as well as those fees that
might be payable to attorneys and other professionals that such a trustee might
engage. Other liquidation costs include the expenses incurred during the chapter
11 cases Allowed in the chapter 7 case, such as compensation for attorneys,
financial advisors, appraisers, accountants and other professionals for the
Debtors and the Creditors Committee, and costs and expenses of members of the
Creditors Committee, as well as other compensation Claims. In addition, Claims

would arise by reason of the breach or rejection of obligations incurred and
leases and executory contracts assumed or entered into by the Debtors during the
pendency of the chapter 11 cases.

The foregoing types of Claims, costs, expenses, fees, and
such other Claims that may arise in a liquidation case would be paid in full
from the liquidation proceeds before the balance of those proceeds would be made
available to pay pre-chapter 11 priority and unsecured Claims. The Debtors
believe that in a chapter 7 liquidation, no prepetition Claims or Equity
Interests would receive any distribution of property.

The Debtors' liquidation analysis is an estimate of the
proceeds that may be generated as a result of a hypothetical chapter 7
liquidation of the Debtors. The analysis is based on a number of significant
assumptions which are described below. The liquidation analysis does not purport
to be a valuation of the Debtors' assets and is not necessarily indicative of
the values that may be realized in an actual liquidation.

D. LIQUIDATION ANALYSIS

As noted above, the Debtors believe that under the Plan all
holders of impaired Claims (including Non-Assumed Administrative Expense Claims)
and Equity Interests will receive property with a value not less than the value
such holder would receive in a liquidation of the Debtors under chapter 7 of the
Bankruptcy Code. The Debtors' belief is based primarily on (i) consideration of
the effects that a chapter 7 liquidation would have on the ultimate proceeds
available for distribution to holders of impaired Claims and Equity Interests,
including (a) the increased costs and expenses of a liquidation under chapter 7
arising from fees payable to a chapter 7 trustee and professional advisors to
the trustee, (b) the erosion in value of assets in a chapter 7 case in the
context of the rapid liquidation required under chapter 7 and the "forced sale"
atmosphere that would prevail, (c) the adverse effects on the Debtors'
businesses as a result of the likely departure of key employees and the probable
loss of customers, (d) the substantial increases in Claims, such as estimated
contingent Claims, which would be satisfied on a priority basis or on parity
with the holders of impaired Claims and Equity Interests of the chapter 11
cases, (e) the reduction of value associated with a chapter 7 trustee's
operation of the Debtors' businesses, and (f) the substantial delay in
distributions to the holders of impaired Claims and Equity Interests that would
likely ensue in a chapter 7 liquidation and (ii) the liquidation analysis
prepared by the Debtors will be filed with the Court prior to the Disclosure
Statement Hearing (the "Liquidation Analysis").

The Debtors believe that any liquidation analysis is
speculative, as such an analysis necessarily is premised on assumptions and
estimates which are inherently subject to significant uncertainties and
contingencies, many of which would be beyond the control of the Debtors. Thus,
there can be no assurance as to values that would actually be realized in a
chapter 7 liquidation, nor can there be any assurance that a Bankruptcy Court
would accept the Debtors' conclusions or concur with such assumptions in making
its determinations under section 1129(a)(7) of the Bankruptcy Code.

For example, the Liquidation Analysis necessarily contains
an estimate of the amount of Claims which will ultimately become Allowed Claims.
This estimate is based solely upon the Debtors' review of its books and records
and the Debtors' estimates as to additional Claims that may be filed in the
chapter 11 cases or that would arise in the event of a conversion of the case
from chapter 11 to chapter 7. No order or finding has been entered by the
Bankruptcy Court or any other court estimating or otherwise fixing the amount of
Claims at the projected-amounts of Allowed Claims set forth in the Liquidation
Analysis. In preparing the Liquidation Analysis, the Debtors have projected an
amount of Allowed Claims that is at the lower end of a range of reasonableness
such that, for purposes of the Liquidation Analysis, the largest possible
liquidation dividend to holders of Allowed Claims can be assessed. The estimate
of the amount of Allowed Claims set forth in the Liquidation Analysis should not
be relied on for any other purpose, including any determination of the value of
any distribution to be made on account of Allowed Claims under the Plan.

To the extent that confirmation of the Plan requires the
establishment of amounts for the chapter 7 liquidation value of the Debtors,
funds available to pay Claims, and the reorganization value of the Debtors, the
Bankruptcy Court will determine those amounts at the Confirmation Hearing.
Accordingly, the annexed Liquidation Analysis is provided solely to disclose to
holders the effects of a hypothetical chapter 7 liquidation of the Debtors,
subject to the assumptions set forth therein.

E. FEASIBILITY

The Bankruptcy Code requires that a debtor demonstrate that
confirmation of a plan is not likely to be followed by liquidation or the need
for further financial reorganization. Since the Plan provides for the
liquidation of the Debtors, the Bankruptcy Court will find that the Plan is
feasible if it determines that the Debtors will be able to satisfy the
conditions precedent to the Effective Date and otherwise have sufficient funds
to meet its post Confirmation Date obligations to pay for the costs of
administering and fully consummating the Plan and closing the chapter 11 cases.
The Debtors believe that the Plan satisfies the financial feasibility
requirement imposed by the Bankruptcy Code.

F. SECTION 1129(B)

The Bankruptcy Court may confirm a plan over the rejection
or deemed rejection of the plan by a class of claims or equity interests if the
plan "does not discriminate unfairly" and is "fair and equitable" with respect
to such class.

1. No Unfair Discrimination.

This test applies to classes of Claims or Equity Interests
that are of equal priority and are receiving different treatment under the Plan.
The test does not require that the treatment be the same or equivalent, but that
such treatment be "fair."

2. Fair and Equitable Test.

This test applies to classes of different priority and
status (e.g., secured versus unsecured) and includes the general requirement
that no class of Claims receive more than 100% of the Allowed amount of the
Claims in such class. As to the dissenting class, the test sets different
standards, depending on the type of Claims or interests in such class:

o Secured Creditors. Each holder of an impaired secured
Claim either (i) retains its liens on the property, to
the extent of the Allowed amount of its secured Claim
and receives deferred Cash payments having a value, as
of the effective date, of at least the Allowed amount
of such Claim, or (ii) has the right to credit bid the
amount of its Claim if its property is sold and
retains its liens on the proceeds of the sale (or if
sold, on the proceeds thereof) or (iii) receives the
"indubitable equivalent" of its Allowed secured Claim.

o Unsecured Creditors. Either (i) each holder of an
impaired unsecured creditor receives or retains under
the plan property of a value equal to the amount of
its Allowed Claim or (ii) the holders of Claims and
interests that are junior to the Claims of the
dissenting class will not receive any property under
the plan.

o Equity Interests. Either (i) each Equity Interest
holder will receive or retain under the plan property
of a value equal to the greater of (a) the fixed
liquidation preference or redemption price, if any, of
such stock and (b) the value of the stock, or (ii) the
holders of interests that are junior to the Equity
Interests of the dissenting class will not receive or
retain any property under the Plan.

The Debtors believe the Plan will satisfy the "fair and
equitable" requirement notwithstanding that Classes H, J, K, and L are deemed to
reject the Plan because no class that is junior to such classes will receive or
retain any property on account of the Claims or Equity Interests in such class.

Because several classes of Claims are not being paid in
full, the existing Equity Interests in the Debtors are being extinguished.

XII.

ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THIS PLAN

A. LIQUIDATION UNDER CHAPTER 7

If no chapter 11 plan can be confirmed, the chapter 11
cases may be converted to cases under chapter 7 of the Bankruptcy Code in which
a trustee would be elected or appointed to liquidate the assets of the Debtors
for distribution in accordance with the priorities established by the Bankruptcy
Code. A discussion of the effect that a chapter 7 liquidation would have on the
recoveries of holders of Claims is set forth in section XI.D of this Disclosure
Statement. The Debtors believe that liquidation under chapter 7 would result in
smaller distributions being made to creditors than those provided for in the
Plan because (a) the likelihood that other assets of the Debtors would have to
be sold or otherwise disposed of in a less orderly fashion, (b) additional
administrative expenses attendant to the appointment of a trustee and the
trustee's employment of attorneys and other professionals, (c) additional
expenses and Claims, some of which would be entitled to priority, which would be
generated during the liquidation and from the rejection of leases and other
executory contracts in connection with a cessation of the Debtors' operations.
In a chapter 7 liquidation, the Debtors believe that there would be no
distribution to holders of Administrative Claims or to holders of Class E, F, G,
H, I, J, K and L Claims.

B. ALTERNATIVE PLAN

If the Plan is not confirmed, the Debtors may seek to sell
their assets pursuant to section 363 of the Bankruptcy Code. Alternatively, the
Debtors, or any other party in interest (if the Debtors' exclusive period in
which to file a Plan has expired) could attempt to formulate a different Plan.
Such a plan might involve either a reorganization and continuation of the
Debtors' business or an orderly liquidation of the Debtors' assets under chapter
11. However, since substantially all of the Debtors' assets are being sold
pursuant to the sale and the Plan provides for the distribution of the Sale
Proceeds in accordance with the statutory priorities established by the
Bankruptcy Code, the Debtors believe that any alternative chapter 11 plan will
necessarily be substantially similar to the Plan. Any attempt to formulate an
alternative chapter 11 plan would unnecessarily delay creditors' receipt of
distributions yet to be made and, due to the incurrence of additional
administrative expenses during such period of delay, may provide for smaller
distributions to holders of Claims than are currently provided for in the Plan.
Accordingly, the Debtors believe that the Plan will enable all parties in
interest to realize the greatest possible recovery on their respective Claims
with the least delay.

XIII.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

The following discussion summarizes certain U.S. federal
income tax consequences of the implementation of the Plan to the Debtors and to
certain holders of Allowed Claims. The following summary does not address the
federal income tax consequences to holders of Claims or Equity Interests that
are either unimpaired under the Plan or deemed to reject the Plan, holders of
Priority Tax Claims or Other Secured Claims, and the PBGC.

The following summary is based on the Tax Code, Treasury
regulations promulgated thereunder, judicial decisions, and published
administrative rules and pronouncements of the Internal Revenue Service (the
"IRS"), all as in effect on the date hereof. These rules are subject to change,
possibly on a retroactive basis, and any such change could significantly affect
the U.S. federal income tax consequences described below.

The federal income tax consequences of the Plan are complex
and are subject to significant uncertainties. The Debtors have not requested a
ruling from the IRS or an opinion of counsel with respect to any of the tax
aspects of the Plan. Thus, no assurance can be given as to the interpretation
that the IRS will adopt. In addition, this summary addresses neither state,
local, or foreign income or other tax consequences of the Plan, nor the federal
income tax consequences of the Plan to special classes of taxpayers (such as
foreign taxpayers, broker-dealers, banks, mutual funds, insurance companies,
other financial institutions, small business investment companies, regulated
investment companies, tax-exempt organizations, persons holding an equity
interest as part of an integrated constructive sale or straddle, and investors
in pass-through entities).

The following discussion generally assumes that the Plan
will be treated as a plan of liquidation of the Debtors for federal income tax
purposes, and that all distributions to holders of Claims will be taxed
accordingly. A detailed description of the tax consequences regarding the Sale
Proceeds to be received by holders of Claims will be filed prior to the
Disclosure Statement Hearing.

ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL
CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM.

A. CONSEQUENCES TO DEBTORS

For federal income tax purposes, the Debtors are members of
an affiliated group of corporations of which WestPoint is the common parent (the
"WestPoint Group"), and join in the filing of a consolidated federal income tax
return. The WestPoint Group had, as of the taxable year ending on December 31,
2004, a consolidated net operating loss ("NOL") carryforward of approximately
$454.9 million (a portion of which is subject to current limitations). See the
Company's 2004 Financial Statements at Note 6 (Income Taxes) included in its
2004 Annual Review annexed hereto as Exhibit "B". The WestPoint Group has since
incurred additional operating losses. In addition, it is anticipated that the
Debtors will incur significant losses on the sale of substantially all of their
assets pursuant to the Plan. The amount of the Debtors' losses and NOL
carryforwards remains subject to adjustment by the IRS.

Upon the complete liquidation and dissolution of the
Debtors pursuant to the Plan on or about the Effective Date, all of the Debtors'
existing NOL carryforwards and other tax benefits will be eliminated.

B. CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS.

Pursuant to the Plan, holders of First Lien Lender Claims
will receive their Ratable Proportion of the Sale Proceeds in satisfaction of
their Claims. Thereafter, depending on relative priority, holders of Second Lien
Lender Claims, Non-Assumed Administrative Expense Claims, Compensation and

Reimbursement Claims, Priority Non-Tax Claims, Priority Tax Claims, General
Unsecured Claims, Noteholder Claims, and PBGC Claims may receive a portion of
the Sale Proceeds remaining after satisfying the First Lien Lender Claims and/or
possibly Beneficial Interests in the Liquidating Trust. In the event that the
value of the assets to be transferred to the Liquidating Trust does not exceed
the amount of the superpriority Administrative Expense Claim (if any) awarded to
the Second Lien Lenders, such assets will be transferred directly to the Second
Lien Lender Administrative Agent in satisfaction of Second Lien Lender Claims,
and the Liquidating Trust will not be established.

1. Gain or Loss.

Holders of Allowed Priority Non-Tax Claims, First Lien
Lender Claims, Second Lien Lender Claims, General Unsecured Claims and
Noteholder Claims generally will recognize gain or loss in an amount equal to
the difference between (i) the amount of cash and the fair market value of any
property (including a holder's undivided interest, if any, in the assets
transferred to the Liquidating Trust) received by the holder in satisfaction of
its Claim (other than in respect of any Claim for accrued but unpaid interest)
and (ii) the holder's adjusted tax basis in its Claim (other than any claim for
accrued but unpaid interest). For a discussion of the tax consequences of any
Claims for accrued but unpaid interest, see Section XIII.B.2., below.

As discussed below, the Liquidating Trust has been
structured to qualify as a "grantor trust" for federal income tax purposes.
Accordingly, pursuant to the Plan, each holder of an Allowed Claim that receives
a beneficial interest in the Liquidating Trust generally will be treated for
federal income tax purposes as directly receiving, and as a direct owner of, its
allocable portion of the assets of the Liquidating Trust (absent a determination
by the IRS to the contrary). See Section XIII.B.3, "Tax Treatment of Liquidating
Trust and Holders of Beneficial Interest," below. Pursuant to the Plan, the
Liquidating Trustee will, as soon as practicable after the Effective Date, make
a good faith valuation of the Liquidating Trust Assets as of the Effective Date,
and all parties (including the Debtors, the Liquidating Trustee and the holders
of Beneficial Interests) must consistently use such valuation for all federal
income tax purposes.

After the Effective Date, any amount a holder receives as a
distribution from the Liquidating Trust in respect of its Beneficial Interests
(other than possibly as a result of the subsequent disallowance of a disputed
Second Lien Lender Claim, Non-Assumed Administrative Expense Claim, Compensation
and Reimbursement Claim, Priority Tax Claim, Priority Non-Tax Claim, General
Unsecured Claim, Noteholder Claim or PBGC Claim) should not be included, for
federal income tax purposes, in the holder's amount realized in respect of its
Allowed Claim but should be separately treated as a distribution received in
respect of such holder's beneficial (ownership) interest in the Liquidating
Trust.

Where gain or loss is recognized by a holder in respect of
its Claim, the character of such gain or loss as long-term or short-term capital
gain or loss or as ordinary income or loss will be determined by a number of
factors, including the tax status of the holder, whether the Claim constitutes a
capital asset in the hands of the holder and how long it has been held, whether
the Claim was acquired at a market discount and whether and to what extent the
holder had previously claimed a bad debt deduction.

In general, a holder's tax basis in any assets received
(including the holder's undivided interest in the assets of the Liquidating
Trust) will equal the fair market value of such assets, and the holding period
for such assets generally will begin the day following the transfer of such
assets to the Liquidating Trust or the Second Lien Lender Administrative Agent.

2. Distributions in Discharge of Accrued but Unpaid Interest.

In general, to the extent that any consideration received
by a holder of an Allowed Claim (whether paid in cash property or Beneficial
Interests) is received in satisfaction of accrued interest or amortized original

issue discount ("OID") during its holding period, such amount will be taxable to
the holder as interest income (if not previously included in the holder's gross
income). Conversely, a holder generally recognizes a deductible loss to the
extent any accrued interest claimed or amortized OID was previously included in
its gross income and is not paid in full. However, the IRS has privately ruled
that a holder of a security, in an otherwise tax-free exchange, could not claim
a current deduction with respect to any unpaid OID. Accordingly, it is also
unclear whether, by analogy, a holder of a claim would be required in the
context of a taxable transaction to recognize a capital loss, rather than an
ordinary loss, with respect to previously included OID that is not paid in full.

Pursuant to the Plan, all distributions in respect of
Allowed Claims will be allocated first to the principal amount of such Claims,
as determined for federal income tax purposes, and thereafter, to the portion of
such Claim, if any, representing accrued but unpaid interest. However, there is
no assurance that such allocation would be respected by the IRS for federal
income tax purposes.

Each holder of a Claim is urged to consult its tax advisor
regarding the allocation of consideration and the deductibility of unpaid
interest for tax purposes.

3. Tax Treatment of Liquidating Trust and Holders of Beneficial
Interests.

(a) Classification of Liquidating Trust.

The Liquidating Trust is intended to qualify as a
liquidating trust for U.S. federal income tax purposes. In general, a
liquidating trust is not a separate taxable entity, but rather is treated for
federal income tax purposes as a "grantor trust" (i.e., a pass-through entity).
However, merely establishing a trust as a liquidating trust does not ensure that
it will be treated as a grantor trust for U.S. federal income tax purposes. The
IRS, in Revenue Procedure 94-45, 1994-2 C.B. 684, set forth the general criteria
for obtaining an IRS ruling as to the grantor trust status of a liquidating
trust under a chapter 11 plan. The Liquidating Trust has been structured with
the intention of complying with such general criteria. Pursuant to the Plan, and
in conformity with Revenue Procedure 94-45, all parties (including, without
limitation, the Debtors, the Liquidating Trustee and the holders of Second Lien
Lender Claims, Non-Assumed Administrative Expense Claims, Compensation and
Reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, General
Unsecured Claim, Noteholder Claims and PBGC Claims) are required to treat, for
federal income tax purposes, the Liquidating Trust as a grantor trust of which
the holders of Beneficial Interests are the owners and grantors, and the
following discussion assumes that the Liquidating Trust will be so respected for
U.S. federal income tax purposes. However, no ruling has been requested from the
IRS and no opinion of counsel has been requested concerning the tax status of
the Liquidating Trust as a grantor trust. Accordingly, there can be no assurance
that the IRS would not take a contrary position. If the IRS were to challenge
successfully the classification of the Liquidating Trust, the federal income tax
consequences to the Debtors, the Liquidating Trust and the holders of Beneficial
Interests could vary from those discussed herein (including the possibility that
the Liquidating Trust would be subject to entity level taxation).

(b) General Tax Reporting by the Liquidating Trust and
holders of Beneficial Interests.

For all U.S. federal income tax purposes, all parties
(including, without limitation, the Debtors, the Liquidating Trustee and the
holders of Second Lien Lender Claims, Non-Assumed Administrative Expense Claims,
Compensation and Reimbursement Claims, Priority Tax Claims, Priority Non-Tax
Claims, General Unsecured Claims, Noteholder Claims and PBGC Claims) must treat
the transfer of the Liquidating Trust Assets to the Liquidating Trust, in
accordance with the terms of the Plan, as (i) a transfer of the Liquidating
Trust Assets directly to the holders of Beneficial Interests in satisfaction of
their Claims, followed by (ii) the transfer by such holders to the Liquidating
Trust of such Liquidating Trust Assets in exchange for Beneficial Interests in
the Liquidating Trust. Accordingly, all parties must treat the Liquidating Trust
as a grantor trust of which such holders are the owners and grantors. Thus, such

holders (and any subsequent holders of interests in the Liquidating Trust) will
be treated as the direct owners of an undivided interest in the assets of the
Liquidating Trust for all U.S. federal income tax purposes (which assets will
generally have a tax basis equal to their fair market value on the Effective
Date).

Pursuant to the Plan, as soon as practicable after the
Effective Date, the Liquidating Trustee will make a good faith valuation of the
Liquidating Trust Assets; and all parties (including, without limitation, the
Debtors, the Liquidating Trustee and the holders of Beneficial Interests) must
consistently use such valuation for all federal income tax purposes. The
valuation will be made available as necessary for tax reporting purposes (on an
asset or aggregate basis, as relevant).

Allocations of Liquidating Trust taxable income will be
determined by reference to the manner in which an amount of Cash equal to such
taxable income would be distributed (without regard to any restrictions on
distributions described herein) if, immediately prior to such deemed
distribution, the Liquidating Trust had distributed all of its other assets
(valued at their tax book value) to the holders of the Beneficial Interests
(treating certain pending Second Lien Lender Claims, Disputed Non-Assumed
Administrative Expense Claims, Compensation and Reimbursement Claims, Priority
Tax Claims, Priority Non-Tax Claims, General Unsecured Claims, Noteholder Claims
and PBGC Claims as if they were Allowed Claims; see Section 9.12(b)(iv) of the
Plan) in each case up to the tax book value of the assets treated as contributed
by such holders, adjusted for prior taxable income and loss and taking into
account all prior and concurrent distributions from the Liquidating Trust.
Similarly, taxable loss of the Liquidating Trust shall be allocated by reference
to the manner in which an economic loss would be borne immediately after a
liquidating distribution of the remaining Liquidating Trust Assets. The tax book
value of the Liquidating Trust Assets for this purpose shall equal their fair
market value on the Effective Date, adjusted in accordance with tax accounting
principles prescribed by the Tax Code, the applicable tax regulations, and other
applicable administrative and judicial authorities and pronouncements.

The U.S. federal income tax obligations of a holder are not
dependent on the Liquidating Trust's distributing any cash or other proceeds.
Therefore, a holder may incur a federal income tax liability with respect to its
allocable share of the income of the trust regardless of the fact that the
Liquidating Trust has not made any concurrent distribution to the holder. In
general, other than possibly in respect of cash retained on account of disputed
Second Lien Lender Claims, Non-Assumed Administrative Expense Claims,
Compensation and Reimbursement Claims, Priority Tax Claims, Priority Non-Tax
Claims, General Unsecured Claims, Noteholder Claims and PBGC Claims and
subsequently distributed, a distribution of cash by the Liquidating Trust to the
holders of Beneficial Interests will not be taxable to such holder since such
holder will already be regarded for federal income tax purposes as owning the
underlying assets .

The Liquidating Trustee will file with the IRS returns for
the Liquidating Trust as a grantor trust pursuant to Treasury Regulation section
1.671-4(a). Except as discussed below with respect to the Liquidation Trust
Claims Reserve, the Liquidating Trustee will also annually send to each record
holder of a Beneficial Interest a separate statement setting forth the holder's
share of items of income, gain, loss, deduction, or credit and will instruct all
such holders to report such items on their federal income tax returns or to
forward the appropriate information to the beneficial holders with instructions
to report such items on their federal income tax returns. The Liquidating
Trustee will also file, or cause to be filed, all appropriate tax returns with
respect to any Liquidating Trust Assets allocable to certain disputed Second
Lien Lender Claims, Non-Assumed Administrative Expense Claims, Compensation and
Reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, General
Unsecured Claims, Noteholder Claims and PBGC Claims that have not been Allowed,
as discussed below.

Absent definitive guidance from the IRS or a court of
competent jurisdiction to the contrary (including the receipt by the Liquidating
Trustee of a private letter ruling if the Liquidating Trustee so requests one,
or the receipt of an adverse determination by the IRS upon audit if not
contested by the Liquidating Trustee), the Liquidating Trustee will (i) treat
any Liquidating Trust Assets allocable to, or retained on account of, Beneficial
Interests that would be distributed to holders of disputed Second Lien Lender
Claims, Non-Assumed Administrative Expense Claims, Compensation and
Reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, General
Unsecured Claims, Noteholder Claims and PBGC Claims if such Claims were Allowed
as held by one or more discrete trusts for federal income tax purposes (the
"Liquidating Trust Claims Reserve"), consisting of separate and independent
shares to be established in respect of each Disputed Claim, in accordance with
the trust provisions of the Tax Code (section 641 et seq.), (ii) treat as
taxable income or loss of the Liquidating Trust Claims Reserve, with respect to
any given taxable year, the portion of the taxable income or loss of the
Liquidating Trust that would have been allocated to the holders of such Disputed
Claims had such Claims been Allowed on the Effective Date (but only for the
portion of the taxable year with respect to which such Claims are unresolved),
(iii) treat as a distribution from the Liquidating Trust Claims Reserve any
increased amounts distributed by the Liquidating Trust as a result of any such
Disputed Claims resolved earlier in the taxable year, to the extent such
distributions relate to taxable income or loss of the Liquidating Trust Claims
Reserve determined in accordance with the provisions hereof, and (iv) to the
extent permitted by applicable law, report consistent with the foregoing for
state and local income tax purposes. In addition, pursuant to the Plan, all
holders of Beneficial Interests are required to report consistently with such
treatment.

Accordingly, subject to issuance of definitive guidance,
(i) the Liquidating Trustee will report on the basis that any amounts earned by
this separate trust and any taxable income of the Liquidating Trust allocable to
it are subject to a separate entity level tax, except to the extent such
earnings are distributed during the same taxable year, and (ii) any amounts
earned by or attributable to the separate trust and distributed to a holder
during the same taxable year will be includible in such holder's gross income.

4. Information Reporting and Withholding.

All distributions to holders of Allowed Claims under the
Plan are subject to any applicable withholding (including employment tax
withholding). Under federal income tax law, interest, dividends, and other
reportable payments may, under certain circumstances, be subject to "backup
withholding" at the then applicable rate (currently 28%). Backup withholding
generally applies if the holder (a) fails to furnish its social security number
or other taxpayer identification number ("TIN"), (b) furnishes an incorrect TIN,
(c) fails properly to report interest or dividends, or (d) under certain
circumstances, fails to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not subject
to backup withholding. Certain persons are exempt from backup withholding,
including, in certain circumstances, corporations and financial institutions.
Backup withholding is not an additional tax but merely an advance payment, which
may be refunded to the extent it results in an overpayment of tax and the
appropriate information is supplied to the IRS.

The Treasury Regulations generally require disclosure by a
taxpayer on its federal income tax return of certain types of transactions in
which the taxpayer participated, including, among other types of transactions,
the following (i) certain transactions that result in the taxpayer claiming a
loss in excess of specified thresholds; and (ii) certain transactions in which
the taxpayer's book-tax differences exceed a specified threshold in any tax
year. Holders are urged to consult their tax advisors regarding these
regulations and whether the transactions contemplated by the Plan would be
subject to these regulations and require disclosure on the holders' tax returns.

THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL
PURPOSES ONLY. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER
THE PLAN. XIV.

CONCLUSION

The Debtors believe the Plan is in the best interests of
all creditors and urge the holders of impaired Claims in Classes A, B, C, D, E,
F, and G to vote to accept the Plan and to evidence such acceptance by returning
their Ballots.

Dated: June 10, 2005

Respectfully submitted,

By: /s/ Lester D. Sears
--------------------------------
Name: Lester D. Sears
Title: Chief Financial Officer

EXHIBIT "A"

AMENDED JOINT PLAN

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------X
IN RE :
: CHAPTER 11 CASE NO.
WESTPOINT STEVENS INC., ET AL., : 03-13532 (RDD)
: (JOINTLY ADMINISTERED)
:
DEBTORS. :
- ----------------------------------X

DEBTORS' AMENDED JOINT PLAN
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------

WEIL, GOTSHAL & MANGES LLP
Attorneys for Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000

Dated: June 10, 2005

TABLE OF CONTENTS

PAGE

Section 1. DEFINITIONS AND INTERPRETATION.......................................................................1

A. Definitions..........................................................................................1

1.1. Adequate Protection Order..................................................................1

1.2. Administrative Expense Claim...............................................................1

1.3. Allowed....................................................................................1

1.4. APA........................................................................................2

1.5. Assigned Contracts and Leases..............................................................2

1.6. Assumed Administrative Expense Claim.......................................................2

1.7. Avoidance Actions..........................................................................2

1.8. Bankruptcy Code............................................................................2

1.9. Bankruptcy Court...........................................................................2

1.10. Bankruptcy Rules...........................................................................2

1.11. Beneficial Interests.......................................................................2

1.12. Bidding Procedures.........................................................................2

1.13. Bidding Procedures Order...................................................................2

1.14. Business Day...............................................................................2

1.15. Cash.......................................................................................2

1.16. Catch-up Distribution......................................................................2

1.17. Cause of Action............................................................................3

1.18. Claim......................................................................................3

1.19. Class......................................................................................3

1.20. Closing....................................................................................3

1.21. Collateral.................................................................................3

1.22. Commencement Date..........................................................................3

1.23. Confirmation Date..........................................................................3

1.24. Confirmation Hearing.......................................................................3

1.25. Confirmation Order.........................................................................3

1.26. Creditors Committee........................................................................3

1.27. Debtors....................................................................................3

1.28. Debtors in Possession......................................................................3

1.29. DIP Credit Agreement.......................................................................3

TABLE OF CONTENTS
(CONTINUED)

1.30. DIP Claim..................................................................................3

1.31. Disbursing Agent...........................................................................3

1.32. Disclosure Statement.......................................................................3

1.33. Disputed Claim.............................................................................4

1.34. Distribution Record Date...................................................................4

1.35. Effective Date.............................................................................4

1.36. Equity Interest............................................................................4

1.37. Estates....................................................................................4

1.38. Final DIP Order............................................................................4

1.39. Final Distribution Date....................................................................4

1.40. Final Order................................................................................4

1.41. First Lien Lender Administrative Agent.....................................................5

1.42. First Lien Lender Agreement................................................................5

1.43. First Lien Lender Claim....................................................................5

1.44. General Unsecured Claim....................................................................5

1.45. Indentures.................................................................................5

1.46. Indenture Trustee..........................................................................5

1.47. Intercompany Claim.........................................................................5

1.48. Liquidating Trust..........................................................................5

1.49. Liquidating Trust Agreement................................................................5

1.50. Liquidating Trust Assets...................................................................5

1.51. Liquidating Trust Claims Reserve...........................................................5

1.52. Litigation Claim...........................................................................6

1.53. NewCo......................................................................................6

1.54. Non-Assumed Administrative Expense Claim...................................................6

1.55. Noteholder Claim...........................................................................6

1.56. Other Secured Claim........................................................................6

1.57. PBGC Claim.................................................................................6

1.58. Plan.......................................................................................6

1.59. Plan Documents.............................................................................6

1.60. Plan Supplement............................................................................6

TABLE OF CONTENTS
(CONTINUED)

1.61. Priority Non-Tax Claim.....................................................................6

1.62. Priority Tax Claim.........................................................................6

1.63. Punitive Damage Claim......................................................................6

1.64. Purchaser..................................................................................6

1.65. Purchaser Selection Hearing................................................................7

1.66. Purchaser Selection Order..................................................................7

1.67. Ratable Proportion.........................................................................7

1.68. Reorganization Cases.......................................................................7

1.69. Sale Order.................................................................................7

1.70. Sale Proceeds..............................................................................7

1.71. Schedules..................................................................................7

1.72. Second Lien Lender Administrative Agent....................................................7

1.73. Second Lien Lender Agreement...............................................................7

1.74. Second Lien Lender Claim...................................................................7

1.75. Secured Claim..............................................................................8

1.76. Securities Act.............................................................................8

1.77. Securities Litigation Claim................................................................8

1.78. Series A Beneficial Interests..............................................................8

1.79. Series B Beneficial Interests..............................................................8

1.80. Series C Beneficial Interests..............................................................8

1.81. Tax Code...................................................................................8

1.82. WestPoint Common Stock Interest............................................................8

B. Interpretation; Application of Definitions and Rules of Construction.................................8

Section 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS................................................9

2.1. Assumed Administrative Expense Claims......................................................9

2.2. Non-Assumed Administrative Expense Claims..................................................9

2.3. Compensation and Reimbursement Claims......................................................9

2.4. Priority Tax Claims.......................................................................10

2.5. DIP Claims................................................................................10

Section 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.......................................................11

Section 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS............................................................11

iii

TABLE OF CONTENTS
(CONTINUED)

4.1. Priority Non-Tax Claims (Class A).........................................................11

4.2. Other Secured Claims (Class B)............................................................12

4.3. First Lien Lender Claims (Class C)........................................................12

4.4. Second Lien Lender Claims (Class D).......................................................12

4.5. General Unsecured Claims (Class E)........................................................12

4.6. Noteholder Claims (Class F)...............................................................12

4.7. PBGC Claims (Class G).....................................................................12

4.8. Litigation Claims (Class H)...............................................................12

4.9. Intercompany Claims (Class I).............................................................13

4.10. Securities Litigation Claims (Class J)....................................................13

4.11. Punitive Damage Claims (Class K)..........................................................13

4.12. Common Stock Interests (Class L)..........................................................13

Section 5. MEANS FOR IMPLEMENTATION............................................................................13

5.1. Sale of Substantially All the Assets......................................................13

5.2. Deemed Consolidation of Debtors for Plan Purposes Only....................................13

5.3. Authorization of Plan Securities..........................................................14

5.4. Release of Representatives................................................................14

5.5. Cancellation of Existing Securities and Agreements........................................14

5.6. Board of Directors........................................................................14

5.7. Officers..................................................................................14

5.8. Corporate Action..........................................................................14

5.9. Effectuating Documents and Further Transactions...........................................15

5.10. Claims Administration, Prosecution and Plan Distributions.................................15

5.11. Dissolution...............................................................................15

Section 6. DISTRIBUTIONS.......................................................................................15

6.1. Distribution Record Date..................................................................15

6.2. Date of Distributions.....................................................................16

6.3. Post-Petition Interest on Claims..........................................................16

6.4. Distributions to Classes..................................................................16

6.5. Disbursing Agent..........................................................................17

6.6. Rights and Powers of Disbursing Agent.....................................................17

TABLE OF CONTENTS
(CONTINUED)

6.7. Compensation of Expenses Incurred on or After the Effective Date..........................17

6.8. Surrender of Instruments..................................................................17

6.9. Delivery of Distributions.................................................................17

6.10. Distributions of Cash.....................................................................18

6.11. Fractional Shares.........................................................................18

6.12. Setoffs...................................................................................18

6.13. Minimum Distributions.....................................................................18

6.14. Distributions After the Effective Date....................................................18

6.15. Allocation of Plan Distributions Between Principal and Interest...........................19

6.16. Withholding and Reporting Requirements....................................................19

Section 7. PROCEDURES FOR DISPUTED CLAIMS......................................................................19

7.1. Objections to Claims......................................................................19

7.2. Payments and Distributions with Respect to Disputed Claims................................19

7.3. Estimation of Claims......................................................................20

7.4. Distributions Relating to Disputed Claims.................................................20

7.5. Distributions after Allowance.............................................................20

7.6. Preservation of Rights to Settle Claims...................................................20

7.7. Disallowed Claims.........................................................................21

Section 8. EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................................................21

8.1. General Treatment.........................................................................21

8.2. Assigned Contracts and Leases.............................................................21

8.3. Cure of Defaults..........................................................................22

8.4. Rejection Claims..........................................................................22

8.5. Insurance Policies........................................................................22

Section 9. ESTABLISHMENT OF THE LIQUIDATING TRUST AND APPOINTMENT OF A LIQUIDATING TRUSTEE.....................22

9.1. Appointment of a Liquidating Trustee......................................................22

9.2. Creation of the Beneficial Interests and Execution of the Liquidating Trust Agreement.....22

9.3. Purpose of the Liquidating Trust..........................................................23

9.4. Assignment of Trust Assets................................................................23

9.5. Books and Records.........................................................................23

TABLE OF CONTENTS
(CONTINUED)

9.6. Role of the Liquidating Trustee...........................................................24

9.7. Nontransferability of Liquidating Trust Interests.........................................24

9.8. Permitted Investments.....................................................................24

9.9. Costs, Expenses and Compensation of the Liquidating Trustee...............................24

9.10. Distribution of Liquidating Trust Assets..................................................24

9.11. Retention of Professionals by the Liquidating Trustee.....................................25

9.12. Federal Income Tax Treatment of Liquidating Trust.........................................25

9.13. Dissolution of the Liquidating Trust......................................................27

9.14. Indemnification of the Liquidating Trustee................................................27

9.15. Closing of the Chapter 11 Cases...........................................................27

9.16. Closing of the Chapter 11 Cases by Charitable Gift........................................27

Section 10. CONDITIONS PRECEDENT TO CONFIRMATION AND THE EFFECTIVE DATE.........................................28

10.1. Conditions Precedent to Confirmation......................................................28

10.2. Conditions Precedent to the Effective Date................................................28

10.3. Failure of Conditions.....................................................................28

10.4. Satisfaction of Conditions................................................................29

Section 11. EFFECT OF CONFIRMATION..............................................................................29

11.1. Vesting of Assets.........................................................................29

11.2. Discharge of Claims and Termination of Equity Interests...................................29

11.3. Discharge of Debtors......................................................................29

11.4. Term of Injunctions or Stays..............................................................30

11.5. Injunction Against Interference With the Plan or APA......................................30

11.6. Exculpation...............................................................................30

11.7. Retention of Causes of Action/Reservation of Rights.......................................30

Section 12. RETENTION OF JURISDICTION...........................................................................31

Section 13. MISCELLANEOUS PROVISIONS............................................................................32

13.1. Payment of Statutory Fees.................................................................32

13.2. Dissolution of Statutory Committee of Unsecured Creditors.................................32

13.3. Substantial Consummation..................................................................33

13.4. Effectuating Documents & Further Transactions.............................................33

13.5. Corporate Action..........................................................................33

TABLE OF CONTENTS
(CONTINUED)

13.6. Request for Expedited Determination of Taxes..............................................33

13.7. Exemption from Transfer Taxes.............................................................33

13.8. Amendments................................................................................33

13.9. Revocation or Withdrawal of the Plan......................................................34

13.10. Severability..............................................................................34

13.11. Governing Law.............................................................................34

13.12. Time......................................................................................34

13.13. Notices...................................................................................34

vii

DEBTORS' AMENDED JOINT PLAN UNDER
CHAPTER 11 OF THE BANKRUPTCY CODE

WestPoint Stevens Inc., and the other above-captioned
debtors and debtors in possession propose the following joint chapter 11 Plan,
pursuant to section 1121(a) of title 11 of the United States Code:

SECTION 1. DEFINITIONS AND INTERPRETATION

A. DEFINITIONS.

The following terms used herein shall have the respective
meanings defined below (such meanings to be equally
applicable to both the singular and plural):

1.1. Adequate Protection Order means the final order
(including any amendments thereto) pursuant to Sections 361, 363 and 364(d)(1)
of the Bankruptcy Code and Rule 4001 of the Federal Rules of Bankruptcy
Procedure providing the First Lien Lenders and Second Lien Lenders adequate
protection which was entered by the Bankruptcy Court on June 18, 2003.

1.2. Administrative Expense Claim means any right to
payment constituting a cost or expense of administration of any of the
Reorganization Cases allowed under sections 503(b), 507(a)(1), and 1114(e) of
the Bankruptcy Code, including, without limitation, any actual and necessary
costs and expenses of preserving the Debtors' estates, any actual and necessary
costs and expenses of operating the Debtors' businesses, any indebtedness or
obligations incurred or assumed by the Debtors, as debtors in possession, during
the Reorganization Cases, including, without limitation, for the acquisition or
lease of property or an interest in property or the rendition of services, any
allowances of compensation and reimbursement of expenses to the extent allowed
by Final Order under sections 330 or 503 of the Bankruptcy Code, and any fees or
charges assessed against the estates of the Debtors under section 1930 of
chapter 123 of title 28 of the United States Code.

1.3. Allowed means, with reference to any Claim, (i) any
Claim against any Debtor which has been listed by such Debtor in the Schedules,
as such Schedules may be amended by the Debtors from time to time in accordance
with Bankruptcy Rule 1009, as liquidated in amount and not disputed or
contingent and for which no contrary proof of claim has been filed, (ii) any
timely filed Claim as to which no objection to allowance has been interposed in
accordance with Section 7.1 hereof or such other applicable period of limitation
fixed by the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or
as to which any objection has been determined by a Final Order to the extent
such objection is determined in favor of the respective holder, or (iii) any
Claim expressly allowed by a Final Order or hereunder.

1.4. APA means the Asset Purchase Agreement dated as of
______, 2005, by and among the Debtors and the Purchaser in accordance with the
Bidding Procedures Order for the sale of all or substantially all of the
Debtors' assets, which will be approved by the Bankruptcy Court at the Purchaser
Selection Hearing. A copy of the APA will be filed as an exhibit to the Plan
after the Purchaser Selection Hearing.

1.5. Assigned Contracts and Leases means the executory
contracts and unexpired leases that will be assumed and assigned in accordance
with Section 8 hereof and the APA.

1.6. Assumed Administrative Expense Claim means any
Administrative Expense Claim that is being assumed by the Purchaser under the
APA or paid on the Effective Date.

1.7. Avoidance Actions means all Claims and/or causes of
action arising under or authorized by sections 510, 542 through 551, and 553 of
the Bankruptcy Code that belong to the Debtors, the Debtors in Possession and
the Debtors' Estates.

1.8. Bankruptcy Code means title 11 of the United States
Code, as amended from time to time, as applicable to the Reorganization Cases.

1.9. Bankruptcy Court means the United States Bankruptcy
Court for the Southern District of New York having jurisdiction over the
Reorganization Cases and, to the extent of any reference made under section 157
of title 28 of the United States Code, the unit of such District Court having
jurisdiction over the Reorganization Cases under section 151 of title 28 of the
United States Code.

1.10. Bankruptcy Rules means the Federal Rules of
Bankruptcy Procedure as promulgated by the United States Supreme Court under
section 2075 of title 28 of the United States Code, as amended from time to
time, applicable to the Reorganization Cases, and any Local Rules of the
Bankruptcy Court.

1.11. Beneficial Interests means the Series A Beneficial
Interests, Series B Beneficial Interests and Series C Beneficial Interests in
the Liquidating Trust.

1.12. Bidding Procedures means those procedures for bidding
for all or substantially all of the Debtors' assets set forth in the Bidding
Procedures Order.

1.13. Bidding Procedures Order means the order approving
the Debtors' Bidding Procedures and forms of notice in connection therewith in
connection with the sale of substantially all of the Debtors' assets free and
clear of all liens, Claims, encumbrances and other interests which was entered
by the Bankruptcy Court on April 22, 2005.

1.14. Business Day means any day other than a Saturday, a
Sunday, or any other day on which banking institutions in New York, New York are
required or authorized to close by law or executive order.

1.15. Cash means legal tender of the United States of
America.

1.16. Catch-up Distribution means with respect to each
holder of an Allowed Claim in Classes E, F and G the difference between (i) the
Ratable Proportion of Sale Proceeds (if any) and the beneficial interests in the
Liquidating Trust such holder would have received if the resolution of all
Disputed Claims in such Classes had been known on the Effective Date, and (ii)
the aggregate amount of Sale Proceeds (if any) and beneficial interests in the
Liquidating Trust.

1.17. Cause of Action means any and all actions, causes of
action, liabilities, obligations, rights, suits, damages, judgments, claims, and
demands whatsoever, whether known or unknown, existing or hereafter arising in
law, equity or otherwise, based in whole or in part upon any act or omission or
other event occurring prior to the Commencement Date or during the course of the
Chapter 11 Cases, including through the Effective Date, but not including the
Avoidance Actions.

1.18. Claim has the meaning set forth in section 101 of the
Bankruptcy Code.

1.19. Class means any group of Claims or Equity Interests
classified by the Plan pursuant to section 1122(a)(1) of the Bankruptcy Code.

1.20. Closing shall have the meaning set forth in the APA.

1.21. Collateral means any property or interest in property
of the estate of any Debtor subject to a lien, charge, or other encumbrance to
secure the payment or performance of a Claim, which lien, charge, or other
encumbrance is not subject to avoidance under the Bankruptcy Code.

1.22. Commencement Date means June 1, 2003.

1.23. Confirmation Date means the date on which the Clerk
of the Bankruptcy Court enters the Confirmation Order.

1.24. Confirmation Hearing means the hearing to be held by
the Bankruptcy Court regarding 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.

1.26. Creditors Committee means the statutory committee of
unsecured creditors appointed in the Reorganization Cases, as constituted from
time to time.

1.27. Debtors means WestPoint Stevens Inc., WestPoint
Stevens I., J.P. Stevens and Co., Inc., J.P. Stevens Enterprises, Inc., and
WestPoint Stevens Stores, Inc.

1.28. Debtors in Possession means the Debtors in their
capacity as debtors in possession in the Chapter 11 cases pursuant to sections
1101, 1107(a), and 1108 of the Bankruptcy Code.

1.29. DIP Credit Agreement means that certain credit
agreement, dated as of June 5, 2003, as amended, among the Debtors, Bank of
America, N.A., as Administrative Agent, Wachovia Bank, National Association, as
Syndication Agent and the other lenders who are time to time parties thereto.

1.30. DIP Claim means all claims arising under the DIP
Credit Agreement.

1.31. Disbursing Agent means any entity (including any
applicable Debtor or the Liquidating Trustee if it acts in such capacity) in its
capacity as a disbursing agent under Section 6.4 hereof.

1.32. Disclosure Statement means that certain disclosure
statement relating to the Plan, including, without limitation, all exhibits and
schedules thereto, as approved by the Bankruptcy Court pursuant to Section 1125
of the Bankruptcy Code.

1.33. Disputed Claim means any Claim which has not been
Allowed pursuant to the Plan or a Final Order, and

(a) if no proof of claim has been filed by the applicable
deadline: (i) a Claim that has been or hereafter is listed on the Schedules as
disputed, contingent, or unliquidated; or (ii) a Claim that has been or
hereafter is listed on the Schedules as other than disputed, contingent, or
unliquidated, but as to which the Debtors, the Liquidating Trustee or any other
party in interest has interposed an objection or request for estimation which
has not been withdrawn or determined by a Final Order; or

(b) if a proof of claim or request for payment of an
Administrative Claim has been filed by the applicable deadline: (i) a Claim for
which no corresponding Claim has been or hereafter is listed on the Schedules;
(ii) a Claim for which a corresponding Claim has been or hereafter is listed on
the Schedules as other than disputed, contingent, or unliquidated, but the
nature or amount of the Claim as asserted in the proof of claim varies from the
nature and amount of such Claim as listed on the Schedules; (iii) a Claim for
which a corresponding Claim has been or hereafter is listed on the Schedules as
disputed, contingent, or unliquidated; (iv) a Claim for which a timely objection
or request for estimation is interposed by the Debtors or the Liquidating
Trustee which has not been withdrawn or determined by a Final Order; or (v) any
Litigation Claim.

1.34. Distribution Record Date means the Confirmation Date.

1.35. Effective Date means a Business Day on or after the
Confirmation Date specified by the Debtors on which (i) no stay of the
Confirmation Order is in effect, and (ii) the conditions to the effectiveness of
the Plan specified in Section 10 hereof have been satisfied or waived.

1.36. Equity Interest means the interest of any holder of
an equity security of any of the Debtors represented by any issued and
outstanding shares of common or preferred stock or other instrument evidencing a
present ownership interest in any of the Debtors, whether or not transferable,
or any option, warrant, or right, contractual or otherwise, to acquire any such
interest.

1.37. Estates means the Debtors' estates created pursuant
to section 541 of the Bankruptcy Code.

1.38. Final DIP Order means the final order (including any
amendments thereto) (i) authorizing the Debtors in Possession to obtain
financing, grant security interests and accord priority status pursuant to 11
U.S.C. ss.ss. 361 and 364(c) and 364(d); (ii) authorizing the Debtors to use
cash collateral pursuant to 11 U.S.C. ss.ss. 361 and 363 and (iii) modifying the
automatic stay which was entered by the Bankruptcy Court on June 18, 2003.

1.39. Final Distribution Date means, in the event there
exist on the Effective Date any Disputed Claims, a date selected by the Debtors
or the Liquidating Trustee in their sole discretion, on which all such Disputed
Claims have been resolved by Final Order.

1.40. Final Order means an order or judgment of the
Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in
the Reorganization Cases, which has not been reversed, vacated, or stayed and as
to which (i) the time to appeal, petition for certiorari, or move for a new
trial, reargument, or rehearing has expired and as to which no appeal, petition
for certiorari, or other proceedings for a new trial, reargument, or rehearing
shall then be pending, or (ii) if an appeal, writ of certiorari, new trial,
reargument, or rehearing thereof has been sought, such order or judgment of the
Bankruptcy Court shall have been affirmed by the highest court to which such
order was appealed, or certiorari shall have been denied, or a new trial,

reargument, or rehearing shall have been denied or resulted in no modification
of such order, and the time to take any further appeal, petition for certiorari
or move for a new trial, reargument, or rehearing shall have expired; provided,
however, that the possibility that a motion under Rule 60 of the Federal Rules
of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be
filed relating to such order shall not cause such order to not be a Final Order.

1.41. First Lien Lender Administrative Agent means Beal
Bank (as successor to Bank of America N.A.) as administrative agent under the
First Lien Lender Agreement and any successor agent thereto.

1.42. First Lien Lender Agreement means that certain Second
Amended and Restated Credit Agreement, dated as of June 9, 1998, among WestPoint
Stevens Inc., as Borrower, WestPoint Stevens (U.K.) Limited and WestPoint
Stevens (Europe) Limited, as Foreign Borrowers, Bank of America, N.A., as
Issuing Lender, Swingline Lender and Administrative Agent and the several banks
and other financial institutions from time to time parties thereto.

1.43. First Lien Lender Claim means any Claim against any
of the Debtors based on the First Lien Lender Agreement (inclusive of
post-petition interest) to the extent of the value of the Collateral securing
such Claims, net of all cash payments made by the Debtors to the holders of such
claims on or after the Commencement Date.

1.44. General Unsecured Claim means any Claim against any
of the Debtors that (a) is not an Other Secured Claim, First Lien Lender Claim,
Second Lien Lender Claim, Administrative Expense Claim, Priority Tax Claim,
Priority Non-Tax Claim, Intercompany Claim, PBGC Claim, Noteholder Claim,
Securities Litigation Claim or Punitive Damage Claim or (b) is otherwise
determined by the Bankruptcy Court to be a General Unsecured Claim.

1.45. Indentures means (i) that certain indenture, dated as
of June 9, 1998, between WestPoint and HSBC Bank USA (as successor to the Bank
of New York) as Trustee, in the original aggregate principal amount of
$525,000,000 and (ii) that certain Indenture, dated as of June 9, 1998, between
WestPoint and HSBC Bank USA (as successor to the Bank of New York) as Trustee,
in the original aggregate principal amount of $475,000,000.

1.46. Indenture Trustee means HSBC Bank USA (as successor
to the Bank of New York) as indenture trustee under the Indentures or any
successor trustees under the Indentures.

1.47. Intercompany Claim means a Claim held by a
wholly-owned Debtor against another wholly-owned Debtor.

1.48. Liquidating Trust means the liquidating trust
described in Article 9 hereof.

1.49. Liquidating Trust Agreement means the agreement
governing the Liquidating Trust, dated as of the Effective Date, substantially
in the form set forth in the Plan Supplement.

1.50. Liquidating Trust Assets means the Avoidance Actions
and any other assets not transferred pursuant to the APA which are transferred
by the Debtors to the Liquidating Trust (or in the event the Liquidating Trust
is not formed, to the Second Lien Lender Administrative Agent) on the Effective
Date and the earnings and proceeds therefrom.

1.51. Liquidating Trust Claims Reserve has the meaning
assigned to such term in Section 9.12(b)(iv) hereof.

1.52. Litigation Claim means any claim related to personal
injury, property damage, products liability, wrongful death, patent liability,
environmental damage, antitrust, asbestos, or other similar claims against any
of the Debtors.

1.53. NewCo means the entity formed to be the parent
company of Purchaser to purchase all or substantially all of the Debtors'
assets.

1.54. Non-Assumed Administrative Expense Claim means any
Administrative Expense Claim that is not being assumed by Purchaser under the
APA or paid on the Effective Date.

1.55. Noteholder Claim means any Claim against any of the
Debtors arising under or in connection with the notes issued by WestPoint
Stevens Inc., under the Indentures.

1.56. Other Secured Claim means any Secured Claim against
any of the Debtors not constituting a secured First Lien Lender Claim or a
Second Lien Lender Claim.

1.57. PBGC Claim means any Claim of the Pension Benefit
Guaranty Corporation against any of the Debtors.

1.58. Plan means this joint chapter 11 plan, including the
exhibits hereto, as the same may be amended or modified from time to time in
accordance with the provisions of the Bankruptcy Code and the terms hereof.

1.59. Plan Documents means the documents to be executed,
delivered, assumed, and/or performed in conjunction with the consummation of the
Plan on the Effective Date, including, but not limited to, (i) the Liquidating
Trust Agreement, and (ii) the APA. Each of the Plan Documents to be entered into
as of the Effective Date will be filed in draft form in the Plan Supplement.

1.60. Plan Supplement means a supplemental appendix to the
Plan that will contain the draft form of the Plan Documents to be entered into
as of the Effective Date, to be filed prior to the Confirmation Hearing.

1.61. Priority Non-Tax Claim means any Claim against any of
the Debtors other than an Administrative Expense Claim or a Priority Tax Claim,
entitled to priority in payment as specified in section 507(a)(3), (4), (5),
(6), (7), or (9) of the Bankruptcy Code.

1.62. Priority Tax Claim means any Claim of a governmental
unit of the kind entitled to priority in payment as specified in sections 502(i)
and 507(a)(8) of the Bankruptcy Code.

1.63. Punitive Damage Claim means, to the maximum extent
permitted by law, any Claim against any of the Debtors, whether secured or
unsecured, for any fine, penalty, forfeiture, attorneys' fees (to the extent
such attorneys' fees are punitive in nature), or for multiple, exemplary, or
punitive damages, to the extent that such fine, penalty, forfeiture, attorneys'
fees, or damages is not compensation for actual pecuniary loss suffered by the
holder of such Claim and not statutorily prescribed.

1.64. Purchaser means _______, (the successful bidder
selected in accordance with the Bidding Procedures Order and approved by the
Bankruptcy Court at the Purchaser Selection Hearing).

1.65. Purchaser Selection Hearing means the hearing held by
the Bankruptcy Court to confirm the results of the auction held in accordance
with the Bidding Procedures at which the Purchaser will be approved.

1.66. Purchaser Selection Order means the order entered by
the Bankruptcy Court at the Purchaser Selection Hearing approving the Purchaser.

1.67. Ratable Proportion means the ratio (expressed as a
percentage) of the amount of an Allowed Claim in a Class or category of
Administrative Expense Claim to the aggregate amount of all Allowed Claims in
the same Class or category of Administrative Expense Claim, provided, however,
that in the case of Classes E, F and G "Ratable Proportion" means the ratio
(expressed as a percentage) of the amount of an Allowed Claim in any of those
Classes to the aggregate amount of all Allowed Claims in such Classes.

1.68. Reorganization Cases means the jointly administered
cases under chapter 11 of the Bankruptcy Code commenced by the Debtors on June
1, 2003, in the United States District Court for the Southern District of New
York and styled In re WestPoint Stevens, Inc., et al., 03-13532 (RDD) (Jointly
Administered).

1.69. Sale Order means an Order approving the APA and the
transactions contemplated thereunder including, without limitation, the sale of
all or substantially all of the Debtors' assets free and clear of all liens,
Claims, encumbrances and other interests. If the Confirmation Order is entered
it shall be deemed the Sale Order.

1.70. Sale Proceeds means the proceeds received pursuant to
the APA in connection with the sale of all or substantially all of the Debtors'
assets which may include, among other forms of consideration, Cash, stock and/or
rights. The Sale Proceeds will be distributed to creditors in order of their
priority and in the following order: (i) Cash, until all Cash has been
distributed, (ii) stock, until all stock has been distributed, and (iii) rights,
until all rights have been distributed. A detailed exhibit setting forth the
specific form of Sale Proceeds to be distributed to creditors pursuant to the
Plan and the procedures governing such distribution, including, if applicable, a
description of any rights offering to be held in connection with the Sale and
confirmation of the Plan will be filed as an exhibit to the Plan after the
Purchaser Selection Hearing.

1.71. Schedules means the schedules of assets and
liabilities and the statement of financial affairs filed by the Debtors under
section 521 of the Bankruptcy Code, Bankruptcy Rule 1007, and the Official
Bankruptcy Forms of the Bankruptcy Rules as such schedules and statements have
been or may be supplemented or amended from time to time.

1.72. Second Lien Lender Administrative Agent means
Wilmington Trust Company as administrative agent under the Second Lien Lender
Agreement, or any successor agent thereto.

1.73. Second Lien Lender Agreement means that certain
Second Lien Credit Facility, dated as of June 29, 2001, among WestPoint as
Borrower, Wilmington Trust Company (as successor to Deutsche Bank Trust Company
Americas (f/k/a Bankers Trust Company)), as Administrative Agent, and the banks
and other financial institutions from time to time parties thereto.

1.74. Second Lien Lender Claim means any claim against any
of the debtors based on the Second Lien Lender Agreement (inclusive of
post-petition adequate protection payments) to the extent of the value of their
collateral, net of all Cash payments made by the Debtors to the holders of such
claims on or after the Commencement Date. Any other Claims arising under the

Second Lien Lender Agreement will be treated as Administrative Claims or Class E
General Unsecured Claims as determined by the Bankruptcy Court.

1.75. Secured Claim means a Claim to the extent (i) secured
by Collateral, the amount of which is equal to or less than the value of such
Collateral (A) as set forth in the Plan, (B) as agreed to by the holder of such
Claim and the Debtors, or (C) as determined by a Final Order in accordance with
section 506(a) of the Bankruptcy Code, or (ii) secured by the amount of any
rights of setoff of the holder thereof under section 553 of the Bankruptcy Code.

1.76. Securities Act means the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.

1.77. Securities Litigation Claim means any claim against
any of the Debtors, whether or not the subject of an existing lawsuit, arising
from rescission of a purchase or sale of shares or shares or notes of any of the
Debtors, for damages arising from the purchase or sale of any security, or for
reimbursement or contribution allowed under section 502 of the Bankruptcy Code
on account of any such claim.

1.78. Series A Beneficial Interests means the first
priority beneficial interests in the Liquidating Trust, entitling holders to
receive distributions from the Liquidating Trust having a value up to the amount
(if any) of the superpriority administrative claim awarded to the Second Lien
Lenders by the Bankruptcy Court. In the event no superpriority administrative
claim is awarded to the holders of Second Lien Lender Claims, no Series A
Beneficial Interests shall be distributed.

1.79. Series B Beneficial Interests means the second
priority beneficial interests in the Liquidating Trust, entitling holders to
receive distributions from the Liquidating Trust having a value up to the
Allowed Amount of their Claims. Series B Beneficial Interests will be
distributed in the following priority: (i) to holders of Non-Assumed
Administrative Expense Claims and compensation and reimbursement Claims, (ii) to
holders of Priority Non-Tax Claims and (iii) to holders of Priority Tax Claims.

1.80. Series C Beneficial Interests means the residual
beneficial interests in the Liquidating Trust.

1.81. Tax Code means the Internal Revenue Code of 1986, as
amended from time to time.

1.82. WestPoint Common Stock Interest means the Equity
Interest of any holder of the authorized common stock issued by WestPoint
Stevens Inc., or any option, warrant, or right, contractual or otherwise, to
acquire any such Equity Interest.

B. INTERPRETATION; APPLICATION OF DEFINITIONS AND RULES OF
CONSTRUCTION.

Unless otherwise specified, all section or exhibit
references in the Plan are to the respective section in, or exhibit to, the
Plan, as the same may be amended, waived, or modified from time to time. The
words "herein," "hereof," "hereto," "hereunder," and other words of similar
import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained therein. A term used herein that is not defined
herein shall have the meaning assigned to that term in the Bankruptcy Code. The
rules of construction contained in section 102 of the Bankruptcy Code shall
apply to the Plan. The headings in the Plan are for convenience of reference
only and shall not limit or otherwise affect the provisions hereof.

SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS

2.1. Assumed Administrative Expense Claims.

Each holder of an Assumed Administrative Expense Claim
shall, pursuant to the APA, have its Administrative Expense Claim assumed,
performed and paid when due by the Purchaser in the ordinary course of business
in accordance with the terms and subject to the conditions of the APA and any
agreements governing, instruments evidencing, or other documents relating to
such transactions. The holders of Allowed Assumed Administrative Expense Claims
shall have recourse only to Purchaser and neither the Debtors, their Estates nor
their respective properties shall be subject to any such Claims.

2.2. Non-Assumed Administrative Expense Claims.

Except to the extent that a holder of an Allowed
Non-Assumed Administrative Expense Claim agrees to a different treatment and
except as provided below, the Debtors shall pay to each holder of an Allowed
Non-Assumed Administrative Expense Claim, Cash in an amount equal to such Claim
on, or as soon thereafter as is reasonably practicable, the later of the
Effective Date and the first Business Day after the date that is thirty (30)
calendar days after the date such Non-Assumed Administrative Expense Claim
becomes an Allowed Non-Assumed Administrative Expense Claim.

In the event that insufficient funds exist to pay all
Non-Assumed Administrative Expense Claims in full on the Effective Date or upon
allowance, the holder of each Allowed Non-Assumed Administrative Expense Claim
shall receive, in full satisfaction of such Claim, at the option of the Debtors,
either (i) its Ratable Proportion of Cash available (if any) to the Debtors for
distribution on the Effective Date or (ii) its Ratable Proportion of the Sale
Proceeds (if any) remaining after satisfaction of the Allowed Claims secured by
valid liens on the assets sold to Purchaser and (iii) its Ratable Proportion of
Series B Beneficial Interests (if any). Each holder of a Non-Assumed
Administrative Expense Claim shall be deemed to have agreed to such ratable
treatment and such treatment shall be deemed to satisfy section 1129(a)(9) as to
such holder unless such holder files an objection to such treatment on or before
the deadline to file an objection to confirmation of the Plan. If there is no
Cash, Sale Proceeds or Series B Beneficial Interests available for distribution
there shall be no distribution to holders of Claims in any of these classes.

2.3. Compensation and Reimbursement Claims.

All entities seeking an award by the Bankruptcy Court of
compensation for services rendered or reimbursement of expenses incurred through
and including the Confirmation Date under section 503(b)(2), 503(b)(3),
503(b)(4), or 503(b)(5) of the Bankruptcy Code (i) shall file their respective
final applications for allowance of compensation for services rendered and
reimbursement of expenses incurred by the date that is forty-five (45) days
after the Effective Date, and (ii) except as provided below, shall be paid in
such amounts as are allowed by the Bankruptcy Court (A) upon the later of (1)
the Effective Date, and (2) the date upon which the order relating to any such
Administrative Expense Claim is entered, or (B) upon such other terms as may be
mutually agreed upon between the holder of such an Administrative Expense Claim
and the Debtors. The Debtors or the Disbursing Agent are authorized to pay
compensation for services rendered or reimbursement of expenses incurred after
the Confirmation Date and until the Effective Date in the ordinary course and
without the need for Bankruptcy Court approval.

Other than amounts covered by the carve-out approved by the
Bankruptcy Court in the Final DIP Order and the Adequate Protection Order, in
the event that compensation and reimbursement Claims are not assumed by
Purchaser and there exist insufficient funds to pay all compensation and

reimbursement Claims in full on the Effective Date or upon allowance, the holder
of each non-assumed Allowed compensation and reimbursement Claim shall receive,
in full satisfaction of such Claim, at the option of the Debtors, either (i) its
Ratable Proportion of Cash available (if any) to the Debtors for distribution on
the Effective Date or (ii) its Ratable Proportion of the Sale Proceeds (if any)
remaining after satisfaction of the Allowed Claims secured by valid liens on the
assets sold to Purchaser and (iii) its Ratable Proportion of Series B Beneficial
Interests (if any). Each holder of a compensation and reimbursement Claim shall
be deemed to have agreed to such ratable treatment and such treatment shall be
deemed to satisfy section 1129(a)(9) as to such holder unless such holder files
an objection to such treatment on or before the deadline to file an objection to
confirmation of the Plan. If there is no Cash, Sale Proceeds or Series B
Beneficial Interests available for distribution there shall be no distribution
to holders of Claims in any of these classes.

2.4. Priority Tax Claims.

Except to the extent that a holder of an Allowed Priority
Tax Claim agrees to a different treatment, each holder of an Allowed Priority
Tax Claim shall receive, at the sole option of the Debtors, (i) Cash in an
amount equal to such Allowed Priority Tax Claim on, or as soon thereafter as is
reasonably practicable, the later of the Effective Date and the first Business
Day after the date that is thirty (30) calendar days after the date such
Priority Tax Claim becomes an Allowed Priority Tax Claim, or (ii) equal annual
Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim,
together with interest at a fixed annual rate equal to six percent (6%), over a
period not exceeding six (6) years after the date of assessment of such Allowed
Priority Tax Claim. The Debtors reserve the right to prepay at any time under
this option. All Allowed Priority Tax Claims that are not due and payable on or
before the Effective Date shall be paid in the ordinary course of business as
such obligations become due.

In the event that insufficient funds exist to pay all
Allowed Priority Tax Claims in full on the Effective Date or upon allowance, the
holder of each Allowed Priority Tax Claim shall receive, in full satisfaction of
such Claim, at the option of the Debtors, after the allocations set forth in
sections 2.2, 2.3 and 4.1 either (i) its Ratable Proportion of Cash available
(if any) to the Debtors for distribution on the Effective Date or (ii) its
Ratable Proportion of the Sale Proceeds remaining (if any) after satisfaction of
the Allowed Claims secured by valid liens on the assets sold to Purchaser and
(iii) its Ratable Proportion of the Series B Beneficial Interests (if any). Each
holder of a Priority Tax Claim shall be deemed to have agreed to such ratable
treatment and such treatment shall be deemed to satisfy section 1129(a)(9) as to
such holder unless such holder files an objection to such treatment on or before
the deadline to file an objection to confirmation of the Plan. If there is no
Cash, Sale Proceeds or Series B Beneficial Interests available for distribution
there shall be no distribution to holders of Claims in any of these classes.

2.5. DIP Claims.

On the Effective Date, the Debtors shall pay or arrange
through Purchaser for the payment of all amounts outstanding under the DIP
Credit Agreement. Once such payment has been made, these agreements, and any
agreements or instruments related thereto, shall be deemed terminated (subject
in all respects to any carve-out approved by the Bankruptcy Court in the Final
DIP Order and the Adequate Protection Order), and Bank of America, N.A., as
administrative agent, and the lenders thereunder shall take all reasonable
action to confirm the removal of any liens on the properties of the Debtors
securing such DIP Credit Agreement. On the Effective Date, any outstanding
letters of credit issued under such agreement shall be either replaced by
Purchaser or secured by cash collateral or by letters of credit arranged to be
issued by Purchaser in accordance with the APA.

SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS

The following table designates the Classes of Claims
against and Equity Interests in the Debtors and specifies which of those Classes
are (i) impaired or unimpaired by the Plan, (ii) entitled to vote to accept or
reject the Plan in accordance with section 1126 of the Bankruptcy Code, and
(iii) deemed to reject the Plan.

---------------------------------------------------------------------------------------------------
Entitled
Class Designation Impairment to Vote
----- ----------- ---------- -------

Class A Priority Non-Tax Claims Impaired Yes
Class B Other Secured Claims Impaired Yes

Class C First Lien Lender Claims Impaired Yes
Class D Second Lien Lender Claims Impaired Yes
Class E General Unsecured Claims Impaired Yes
Class F Noteholder Claims Impaired Yes
Class G PBGC Claims Impaired Yes
Class H Litigation Claims Impaired No
Class I Intercompany Claims Impaired Yes (will accept)
Class J Securities Litigation Claims Impaired No (deemed to reject)
Class K Punitive Damage Claims Impaired No (deemed to reject)
Class L Common Stock Interests Impaired No (deemed to reject)
---------------------------------------------------------------------------------------------------

SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS

4.1. Priority Non-Tax Claims (Class A).

If not otherwise assumed by the Purchaser under the APA and
except to the extent that a holder of an Allowed Priority Non-Tax Claim against
any of the Debtors has agreed to a different treatment of such Claim, each such
holder shall receive, in full satisfaction of such Claim, Cash in an amount
equal to such Claim, on or as soon as reasonably practicable after the later of
(i) the Effective Date, (ii) the date such Claim becomes Allowed, and (iii) the
date for payment provided by any agreement or understanding between the parties.

In the event that insufficient funds exist to pay all
Allowed Priority Non-Tax Claims in full on the Effective Date or upon allowance,
the holder of each Allowed Priority Non-Tax Claim shall receive, in full
satisfaction of such Claim, at the option of the Debtors, after the allocations
set forth in sections 2.2, and 2.3, either (i) its Ratable Proportion of Cash
available (if any) to the Debtors for distribution on the Effective Date or (ii)
its Ratable Proportion of the Sale Proceeds remaining (if any) after
satisfaction of the Allowed Claims secured by valid liens on the assets sold to
Purchaser and (iii) its Ratable Proportion of the Series B Beneficial Interests
(if any). Each holder of a Priority Non-Tax Claim shall be deemed to have agreed
to such ratable treatment and such treatment shall be deemed to satisfy section
1129(a)(9) as to such holder unless such holder files an objection to such
treatment on or before the deadline to file an objection to confirmation of the
Plan. If there is no Cash, Sale Proceeds or Series B Beneficial Interests
available for distribution there shall be no distribution to holders of Claims
in any of these classes.

4.2. Other Secured Claims (Class B).

Each Holder of an Allowed Other Secured Claim shall have
its Other Secured Claim assumed and paid in full by Purchaser over a six month
period following the Effective Date. The Debtors or the Purchaser shall have the
right to challenge the validity, nature, and perfection of, and to avoid
pursuant to the provisions of the Bankruptcy Code and other applicable law, any
purported liens relating to the Other Secured Claims.

4.3. First Lien Lender Claims (Class C).

Each holder of a First Lien Lender Claim shall receive
(subject in all respects to the carve-out approved by the Bankruptcy Court in
the Final DIP Order and the Adequate Protection Order) its Ratable Proportion of
the Sale Proceeds until the value of such Sale Proceeds equals the Allowed First
Lien Lender Claim of such holder. Sale Proceeds remaining, if any, after
allocation to Class C shall be distributed as described below.

4.4. Second Lien Lender Claims (Class D).

Each holder of a Second Lien Lender Claim shall receive
(subject in all respects to the carve-out approved by the Bankruptcy Court in
the Final DIP Order and the Adequate Protection Order) its (i) Ratable
Proportion of the Sale Proceeds remaining after the allocation in section 4.3
until the value of such Sale Proceeds equals the Allowed Second Lien Lender
Claim of such holder and (ii) to the extent not paid in full, its Ratable
Proportion of the Series A Beneficial Interests (if any). Sale Proceeds
remaining, if any, after allocation to Class D shall be distributed as described
below.

4.5. General Unsecured Claims (Class E).

Each holder of an Allowed General Unsecured Claim shall
receive (i) its Ratable Proportion of the Sale Proceeds remaining (if any) after
the allocations in sections 2.2, 2.3, 2.4, 4.1, 4.3 and 4.4 and (ii) its Ratable
Proportion of the Series C Beneficial Interests (if any).

4.6. Noteholder Claims (Class F).

Each holder of a Noteholder Claim shall receive (i) its
Ratable Proportion of the Sale Proceeds remaining (if any) after the allocations
in sections 2.2, 2.3, 2.4, 4.1, 4.3 and 4.4 and (ii) its Ratable Proportion of
the Series C Beneficial Interests (if any).

4.7. PBGC Claims (Class G).

The PBGC shall receive (i) its Ratable Proportion of the
Sale Proceeds remaining (if any) after the allocations in sections 2.2, 2.3,
2.4, 4.1, 4.3 and 4.4 and (ii) its Ratable Proportion of the Series C Beneficial
Interests (if any).

4.8. Litigation Claims (Class H).

All Litigation Claims are Disputed Claims and will be
governed by the terms of Section 7 hereof.

4.9. Intercompany Claims (Class I).

On or prior to the Effective Date, each Allowed
Intercompany Claim shall be extinguished by either offset, distribution,
contribution of such Intercompany Claim, or otherwise (as, and to the extent,
determined by the Debtors).

4.10. Securities Litigation Claims (Class J).

The holders of Securities Litigation Claims shall receive
no distribution of property under the Plan on account of such claims.

4.11. Punitive Damage Claims (Class K).

Each holder of a Punitive Damage Claim shall receive no
distribution under the Plan.

4.12. Common Stock Interests (Class L).

On the Effective Date, all WestPoint Common Stock Interests
shall be cancelled and there shall be no distributions made to such holders on
account of such WestPoint Common Stock Interests under the Plan.

SECTION 5. MEANS FOR IMPLEMENTATION

5.1. Sale of Substantially All the Assets.

The filing of the Plan constitutes a motion for an order of
the Bankruptcy Court approving, pursuant to Bankruptcy Code sections 363 and
365, the APA and the transactions contemplated thereunder, including, without
limitation, the sale of the Debtors' assets free and clear of all liens, Claims,
encumbrances and other interests and the assumption and assignment of the
Assigned Contracts and Leases thereunder. Confirmation of the Plan shall
constitute authorization for such relief.

In the event the Debtors decide not to continue to pursue
confirmation of the Plan or the Bankruptcy Court denies confirmation of the
Plan, the Debtors reserve the right to designate the Confirmation Hearing as the
Sale Hearing and seek entry of the Sale Order pursuant to sections 363 and 365
of the Bankruptcy Code.

5.2. Deemed Consolidation of Debtors for Plan Purposes
Only.

Subject to the occurrence of the Effective Date, the
Debtors shall be deemed consolidated for the following purposes under the Plan:
(i) no distributions shall be made under the Plan on account of the Intercompany
Claims; (ii) all guaranties by any of the Debtors of the obligations of any
other Debtor arising prior to the Effective Date shall be deemed eliminated so
that any Claim against any Debtor and any guaranty thereof executed by any other
Debtor and any joint and several liability of any of the Debtors shall be deemed
to be one obligation of the deemed consolidated Debtors; and (iii) each and
every Claim filed or to be filed in the Reorganization Case of any of the
Debtors shall be deemed filed against the deemed consolidated Debtors and shall
be deemed one Claim against and obligation of the deemed consolidated Debtors.

Such deemed consolidation, however, shall not (other than
for purposes related to funding distributions under the Plan and as set forth
above in this Section) affect: (i) the legal and organizational structure of the
Debtors; (ii) Intercompany Claims by and among the Debtors; (iii) pre- and

post-Commencement Date guaranties, liens, and security interests that are
required to be maintained (A) in connection with executory contracts or
unexpired leases that were entered into during the Reorganization Cases or that
have been or will be assumed by Purchaser, (B) pursuant to the Plan; and (iv)
distributions out of any insurance policies or proceeds of such policies.

5.3. Authorization of Plan Securities.

The Purchaser and NewCo are authorized to issue all plan
related securities and documents set forth in the APA.

5.4. Release of Representatives.

As of the Effective Date, the respective officers,
directors, employees, financial advisors, investment bankers, professionals,
accountants, and attorneys of the Debtors, the Creditors Committee appointed
pursuant to section 1102 of the Bankruptcy Code in the Reorganization Cases, the
First Lien Lender Administrative Agent, the Second Lien Lender Administrative
Agent and the Indenture Trustees shall be released by the Debtors from all
claims against them in their capacity as representatives of the Debtors, the
Creditors Committee, the First Lien Lender Claims, the Second Lien Lender Claims
and the Noteholder Claims as applicable, except for claims based on willful
misconduct, gross negligence or breach of the duty of loyalty.

5.5. Cancellation of Existing Securities and Agreements.

Except for purposes of evidencing a right to distributions
under the Plan or otherwise provided hereunder, on the Effective Date, all the
agreements and other documents evidencing the Claims or rights of any holder of
a Claim against the Debtors, including all indentures and notes evidencing such
Claims and any options or warrants to purchase Equity Interests, obligating the
Debtors to issue, transfer, or sell Equity Interests or any other capital stock
of the Debtors, shall be canceled; provided, however, that the Indentures
relating to the Noteholder Claims shall continue in effect solely for the
purposes of (i) allowing the Indenture Trustee to make any distributions on
account of holders of Claims in those classes pursuant to the Plan and to
perform such other necessary administrative functions with respect thereto, and
(ii) permitting the Indenture Trustee to maintain any rights or liens they may
have for fees, costs, and expenses under the Indenture.

5.6. Board of Directors.

The names of the initial Board of Directors of NewCo and
the Purchaser shall be disclosed at or prior to the Confirmation Hearing.

5.7. Officers.

The officers of the Debtors immediately prior to the
Effective Date shall serve as the initial officers of NewCo and the Purchaser.
After the Effective Date, the officers of NewCo and the Purchaser shall be
determined by the Board of Directors.

5.8. Corporate Action.

after the Effective Date pursuant to the applicable general corporation law (or
other applicable law) of the states in which the Debtors are incorporated or
organized, without any requirement of further action by the stockholders,
members, or directors (or other governing body) of the Debtors. Each of the
Debtors shall be authorized and directed, following the completion of all
disbursements, other transfers, and other actions required of the Debtors by the
Plan, to file its certificate of cancellation, dissolution or merger as
contemplated by Section 5.11 hereof. The filing of such certificates of
cancellation, dissolution or merger shall be authorized and approved in all
respects without further action under applicable law, regulation, order or rule,
including, without express or implied limitation, any action by the
stockholders, members or directors (or other governing body) of the Debtors.

5.9. Effectuating Documents and Further Transactions.

Each of the officers of each of the Debtors is authorized
and directed to execute, deliver, file, or record such contracts, instruments,
releases, indentures, and other agreements or documents and take such actions as
may be necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan and the APA.

5.10. Claims Administration, Prosecution and Plan
Distributions.

The Debtors, or if the Liquidating Trust is established,
the Liquidating Trustee, shall continue to have the power and authority to
prosecute and resolve objections to Disputed Non-Assumed Administrative Expense
Claims, Disputed Priority Tax Claims, Disputed Priority Non-Tax Claims, Disputed
Other Secured Claims, Disputed compensation and reimbursement Claims and
Litigation Claims. The Debtors or, if the Liquidating Trustee is established,
the Liquidating Trustee, shall also continue to have the power and authority to
hold, manage and distribute Plan distributions to the holders of Allowed
Non-Assumed Administrative Expense Claims, Allowed Priority Tax Claims, Allowed
Priority Non-Tax Claims, Allowed Other Secured Claims and Allowed compensation
and reimbursement Claims.

5.11. Dissolution.

Within thirty (30) days after its completion of the acts
required by the Plan, or as soon thereafter as is practicable, each Debtor shall
be deemed dissolved for all purposes without the necessity of any other or
further actions to be taken by or on behalf of each Debtor; provided, however,
that each Debtor shall file with the office of the Secretary of State or other
appropriate office for the state of its organization a certificate of
cancellation or dissolution, or alternatively, it may be merged with and into
another Debtor and so file an appropriate certificate of merger.

SECTION 6. DISTRIBUTIONS

6.1. Distribution Record Date.

As of the close of business on the Distribution Record
Date, the various transfer registers for each of the Classes of Claims or Equity
Interests as maintained by the Debtors, or their respective agents, shall be
deemed closed, and there shall be no further changes in the record holders of
any of the Claims or Equity Interests. The Debtors and the Liquidating Trustee
shall have no obligation to recognize any transfer of the Claims or Equity
Interests occurring on or after the Distribution Record Date. The Debtors and
the Liquidating Trustee shall be entitled to recognize and deal for all purposes
hereunder only with those record holders stated on the transfer ledgers as of
the close of business on the Distribution Record Date, to the extent applicable.

6.2. Date of Distributions.

Except as otherwise provided herein, any distributions and
deliveries to be made hereunder shall be made on the Effective Date or as soon
thereafter as is practicable. In the event that any payment or act under the
Plan is required to be made or performed on a date that is not a Business Day,
then the making of such payment or the performance of such act may be completed
on or as soon as reasonably practicable after the next succeeding Business Day,
but shall be deemed to have been completed as of the required date.

6.3. Post-Petition Interest on Claims.

Unless expressly provided in the Plan, the Confirmation
Order, the Final DIP Order or any contract, instrument, release, settlement or
other agreement entered into in connection with the Plan, or required by
applicable bankruptcy law, postpetition interest shall not accrue on or after
the Commencement Date on account of any Claim.

6.4. Distributions to Classes.

On the Effective Date, the Disbursing Agent shall
distribute the Sale Proceeds to the individual holders of the First Lien Lender
Claims and the Sale Proceeds and Series A Beneficial Interests (if any) to
individual holders of Second Lien Lender Claims in such denominations and
registered in the names of the holders as the First Lien Lender and Second Lien
Lender Administrative Agents shall have directed in writing. In the event
insufficient funds exist to pay all Allowed Non-Assumed Administrative Expense
Claims, Allowed compensation and reimbursement claims, Allowed Priority Non-Tax
Claims and Allowed Priority Tax Claims in full in Cash on the Effective Date,
the Disbursing Agent shall distribute to holders of such claims, in accordance
with the allocations set forth in sections 2.2, 2.3, 2.4 and 4.1 at the option
of the Debtors, either (i) their Ratable Proportion of the Cash available (if
any) to the Debtors for distribution on the Effective Date or (ii) their Ratable
Proportion of the Sale Proceeds remaining (if any) after distribution to the
First and Second Lien Lenders and (iii) their Ratable Proportion of the Series B
Beneficial Interests (if any). The Disbursing Agent shall also distribute to
holders of Allowed Claims in Classes E, F and G on the Effective Date the Sale
Proceeds remaining (if any) after distribution to the afore-mentioned
Claimholders and their Ratable Proportion of the Series C Beneficial Interests
(if any). For the purpose of calculating the Sale Proceeds and Series B and
Series C Beneficial Interests in the Liquidating Trust to be distributed to
holders of Allowed Non-Assumed Administrative Expense Claims, Allowed
compensation and reimbursement claims, Allowed Priority Tax Claims, Allowed
Priority Non-Tax Claims and Allowed Class E, F and G Claims on the Effective
Date, all Disputed Claims in such Classes will be treated as though such Claims
were Allowed Claims in the amounts asserted by the holders of such Claims or as
estimated by the Bankruptcy Court, as applicable. On the Final Distribution
Date, each holder of an Allowed Non-Assumed Administrative Expense Claims,
Allowed compensation and reimbursement Claim, Allowed Priority Tax Claim,
Allowed Priority Non-Tax Claim and Allowed Classes E, F or G Claim shall receive
a Catch-up Distribution of Sale Proceeds and Beneficial Interests in the
Liquidating Trust, as applicable. After the Effective Date, but prior to the
Final Distribution Date, the Debtors or the Liquidating Trustee, in their sole
discretion, may direct the Disbursing Agent to distribute Sale Proceeds and
Beneficial Interests in the Liquidating Trust, as applicable, to a holder of a
Disputed Claim which becomes an Allowed Claim after the Effective Date such that
the holder of such Claim receives the same allocation of Sale Proceeds and
Beneficial Interests in the Liquidating Trust, as applicable, that such holder
would have received had its Claim been an Allowed Claim in such amount on the
Effective Date.

6.5. Disbursing Agent.

Except as provided in Section 9, all distributions under
the Plan (other than distributions described in the next sentences) shall be
made by the applicable Debtor as Disbursing Agent or such other entity
designated by the applicable Debtor as a Disbursing Agent on or after the
Effective Date. The Indenture Trustee shall be the Disbursing Agent for the
respective Noteholders in Class F. A Disbursing Agent shall not be required to
give any bond or surety or other security for the performance of its duties
unless otherwise ordered by the Bankruptcy Court, and, in the event that a
Disbursing Agent is so otherwise ordered, all costs and expenses of procuring
any such bond or surety shall be borne by the applicable Debtor.

6.6. Rights and Powers of Disbursing Agent.

The Disbursing Agent shall be empowered to (i) effect all
actions and execute all agreements, instruments, and other documents necessary
to perform its duties under the Plan, (ii) make all distributions contemplated
hereby, (iii) employ professionals to represent it with respect to its
responsibilities, and (iv) exercise such other powers as may be vested in the
Disbursing Agent by order of the Bankruptcy Court, pursuant to the Plan, or as
deemed by the Disbursing Agent to be necessary and proper to implement the
provisions hereof.

6.7. Compensation of Expenses Incurred on or After the
Effective Date.

Except as otherwise ordered by the Bankruptcy Court, the
amount of any reasonable fees and expenses incurred by the Disbursing Agent on
or after the Effective Date (including, without limitation, taxes) and any
reasonable compensation and expense reimbursement claims (including, without
limitation, reasonable attorneys' fees and expenses) made by the Disbursing
Agent shall be paid in Cash by the Debtors or, if the Liquidating Trust is
established, the Liquidating Trustee.

6.8. Surrender of Instruments.

As a condition to receiving any distribution under the
Plan, each holder of a certificated instrument or note must surrender such
instrument or note held by it to the Disbursing Agent or its designee, unless
such certificated instrument or note is being reinstated or being left
unimpaired under the Plan. Any holder of such instrument or note that fails to
(i) surrender such instrument or note, or (ii) execute and deliver an affidavit
of loss and/or indemnity reasonably satisfactory to the Disbursing Agent and
furnish a bond in form, substance, and amount reasonably satisfactory to the
Disbursing Agent before the first anniversary of the Effective Date shall be
deemed to have forfeited all rights and Claims and may not participate in any
distribution under the Plan. Any distribution so forfeited shall become property
of the Debtors, or, if the Liquidating Trust is established, the Liquidating
Trust. The Debtors, or if the Liquidating Trust is established, the Liquidating
Trustee, reserve the right to waive this requirement.

6.9. Delivery of Distributions.

Subject to Bankruptcy Rule 9010, all distributions to any
holder of an Allowed Claim, except the holders of First Lien Lender Claims,
Second Lien Lender Claims and Noteholder Claims, shall be made at the address of
such holder as set forth on the Schedules filed with the Bankruptcy Court or on
the books and records of the Debtors or their agents or in a letter of
transmittal unless the Debtors have been notified in writing of a change of
address, including, without limitation, by the filing of a proof of claim or
interest by such holder that contains an address for such holder different from
the address reflected on such Schedules for such holder. All distributions to
holders of First Lien Lender Claims shall be made to the First Lien Lender
Administrative Agent. All distributions to holders of Second Lien Lender Claims

shall be made to the Second Lien Lender Administrative Agent. Any distribution
of Sale Proceeds or beneficial interests in the Liquidating Trust to the
Indenture Trustee shall be deemed a distribution to the respective holder of a
Noteholder Claim. In the event that any distribution to any holder is returned
as undeliverable, the Disbursing Agent or the Liquidating Trustee, as the case
may be, shall use reasonable efforts to determine the current address of such
holder, but no distribution to such holder shall be made unless and until the
Disbursing Agent or the Liquidating Trustee, as the case may be, has determined
the then current address of such holder, at which time such distribution shall
be made to such holder without interest; provided that such distributions shall
be deemed unclaimed property under section 347(b) of the Bankruptcy Code at the
expiration of one year from the Effective Date. After such date, all unclaimed
property or interest in property shall revert to the Liquidating Trust and any
claim in respect of such undeliverable distribution shall be discharged and
forever barred from assertion against the Debtors, their Estates, their property
and the Liquidating Trustee.

6.10. Distributions of Cash.

Any payment of Cash made by the Disbursing Agent or the
Liquidating Trustee, where applicable, pursuant to the Plan shall, at the
Disbursing Agent or Liquidating Trustee's option, be made by check drawn on a
domestic bank or by wire transfer.

6.11. Fractional Shares.

In the event the Sale Proceeds consist of common or
preferred stock, no fractional shares or Cash in lieu thereof, shall be
distributed. For purposes of distribution, any fractional shares shall be
rounded down to the next whole number or zero, as applicable. A detailed
description of the Sale Proceeds to be distributed pursuant to the Plan will be
filed as an Exhibit to the Plan after the Purchaser Selection Hearing.

6.12. Setoffs.

The Debtors and, where applicable, the Liquidating Trustee,
may, but shall not be required to, set off against any Claim (for purposes of
determining the Allowed amount of such Claim on which such distribution shall be
made), any claims of any nature whatsoever that the Debtors may have against the
holder of such Claim, but neither the failure to do so nor the allowance of any
Claim hereunder shall constitute a waiver or release by the Debtors of any such
claim the Debtors may have against the holder of such Claim. Notwithstanding
anything contained herein to the contrary, the Debtors will not set off against
any Claim of a First or Second Lien Lender who votes in favor of the Plan.

6.13. Minimum Distributions.

Except as provided in section 9.10, no distribution of less
than $100.00 shall be made by the Debtors, the Disbursing Agent or the
Liquidating Trustee, where applicable, to any holder of a Claim unless a request
therefor is made in writing to the Debtors, the Disbursing Agent or the
Liquidating Trustee.

6.14. Distributions After the Effective Date.

Distributions made after the Effective Date to holders of
Disputed Claims that are not Allowed Claims as of the Effective Date but which
later become Allowed Claims shall be deemed to have been made on the Effective
Date.

6.15. Allocation of Plan Distributions Between Principal
and Interest.

To the extent that any Allowed Claim entitled to a
distribution under the Plan is comprised of indebtedness and accrued but unpaid
interest thereon, such distribution shall be allocated to the principal amount
(as determined for federal income tax purposes) of the Claim first, and then to
accrued but unpaid interest.

6.16. Withholding and Reporting Requirements.

In connection with the Plan and all instruments issued in
connection therewith and distributed thereon, the Disbursing Agent shall comply
with all applicable withholding and reporting requirements imposed by any
federal, state or local taxing authority, and all distributions under the Plan
shall be subject to any such withholding or reporting requirements.
Notwithstanding the above, each holder of an Allowed Claim or Beneficial
Interest that is to receive a distribution under the Plan shall have the sole
and exclusive responsibility for the satisfaction and payment of any tax
obligation imposed by any governmental unit, including income, withholding and
other tax obligations, on account of such distribution. The Disbursing Agent has
the right, but not the obligation, to not make a distribution until such holder
has made arrangements satisfactory to the Disbursing Agent for payment of any
such tax obligations.

SECTION 7. PROCEDURES FOR DISPUTED CLAIMS

7.1. Objections to Claims.

The Debtors and, if the Liquidating Trust is established,
the Liquidating Trustee or the Second Lien Lender Administrative Agent in
accordance with section 9.2, on and after the Effective Date, shall be entitled
to object to Claims. Any objections to Claims shall be served and filed on or
before the later of (i) one hundred eighty (180) days after the Effective Date,
and (ii) such date as may be fixed by the Bankruptcy Court, whether fixed before
or after the date specified in clause (i) above.

7.2. Payments and Distributions with Respect to Disputed
Claims.

(a) General. Notwithstanding any other provision hereof, if
any portion of a Claim is a Disputed Claim, no payment or distribution provided
hereunder shall be made on account of such Claim unless and until such Disputed
Claim becomes an Allowed Claim.

(b) Litigation Claims. All prepetition Litigation Claims
not previously allowed by Final Order are Disputed Claims. Subject to the rights
of the Debtors and the Liquidating Trustee under section 7.4 hereof, prepetition
Litigation Claims as to which proofs of claim were timely filed in the
Reorganization Cases shall be determined and liquidated in the Bankruptcy Court
unless the Debtors or the Liquidating Trustee elect or the Bankruptcy Court
orders, that such claims be determined and liquidated in the administrative or
judicial tribunal in which it is pending on the Confirmation Date or, if no such
action was pending on the Confirmation Date, in any administrative or judicial
tribunal of appropriate jurisdiction, or in accordance with any alternative
dispute resolution or similar proceeding as same may be approved by order of a
court of competent jurisdiction. Any prepetition Litigation Claim determined and
liquidated (i) pursuant to a judgment obtained in accordance with this section
7.2 and applicable non-bankruptcy law that is no longer subject to appeal or
other review, or (ii) in any alternative dispute resolution or similar
proceeding as same may be approved by order of a court of competent
jurisdiction, shall be deemed to be an Allowed Claim in Class E, J, or K as
applicable, in such liquidated amount and satisfied in accordance with the Plan;
provided, that to the extent that a Litigation Claim is allowed and is covered
under any of the Debtor's insurance policies, such Claim shall be paid from the

insurance proceeds available to satisfy such liquidated amount. Nothing
contained in this section 7.2 impairs the Debtors' or the Liquidating Trustee's
right to seek estimation of any and all Litigation Claims in a court or courts
of competent jurisdiction or constitute or be deemed a waiver of any claim,
right or cause of action that the Debtors may have against any person in
connection with or arising out of any Litigation Claim, including, without
limitation, any rights under section 157(b) of title 28 of the United States
Code.

7.3. Estimation of Claims.

The Debtors or, after the Effective Date, the Liquidating
Trustee, 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 the Liquidating Trustee,
where applicable, previously 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 the allowed amount of such Claim or a maximum
limitation on such Claim, as determined by the Bankruptcy Court. If the
estimated amount constitutes a maximum limitation on the amount of such Claim,
the Debtors or the Liquidating Trustee, where applicable, may pursue
supplementary proceedings to object to the allowance of such Claim. All of the
aforementioned objection, estimation, and resolution procedures are intended to
be cumulative and not exclusive of one another. Claims may be estimated and
subsequently compromised, settled, withdrawn, or resolved by any mechanism
approved by the Bankruptcy Court.

7.4. Distributions Relating to Disputed Claims.

At such time as a Disputed Claim becomes an Allowed Claim,
the Disbursing Agent or the Liquidating Trustee, where applicable, shall
distribute to the holder of such Claim, such holder's Ratable Proportion of the
property distributable with respect to the Class in which such Claim belongs. To
the extent that all or a portion of a Disputed Claim is disallowed, the holder
of such Claim shall not receive any distribution on account of the portion of
such Claim that is disallowed and any property withheld pending the resolution
of such Claim shall be reallocated pro rata to the holders of Allowed Claims in
the same class.

7.5. Distributions after Allowance.

To the extent that a Disputed Claim becomes an Allowed
Claim after the Effective Date, a distribution shall be made to the holder of
such Allowed Claim in accordance with the provisions of the Plan. As soon as
practicable after the date that the Order or Judgment of the Bankruptcy Court
allowing any Disputed Claim becomes a Final Order, the Disbursing Agent or the
Liquidating Trustee, where applicable, shall provide to the holder of such
Claim, the distribution to which such holder is entitled under the Plan.

7.6. Preservation of Rights to Settle Claims.

In accordance with Section 11.7 hereof and section 1123(b)
of the Bankruptcy Code, the Debtors and the Liquidating Trustee shall retain and
may enforce, sue on, settle, or compromise (or decline to do any of the
foregoing) all claims, rights, causes of action, suits and proceedings, whether
in law or in equity, whether known or unknown, that the Debtors or their estates
may hold against any person or entity without the approval of the Bankruptcy
Court, subject to the terms of section 7.1 hereof, the Confirmation Order, and
any contract, instrument, release, indenture, or other agreement entered into in

connection with the Plan. The Liquidating Trustee may pursue such retained
claims, rights or causes of action, suits or proceedings, as appropriate, in
accordance with the best interests of the holders of the Beneficial Interests.

7.7. Disallowed Claims.

All claims held by persons or entities against whom any
Debtor has commenced a proceeding asserting a cause of action under sections
542, 543, 544, 545, 547, 548, 549, and/or 550 of the Bankruptcy Code, shall be
deemed "disallowed" claims pursuant to section 502(d) of the Bankruptcy Code and
holders of such claims shall not be entitled to vote to accept or reject the
Plan. Claims that are deemed disallowed pursuant to this section shall continue
to be disallowed for all purposes until the avoidance action against such party
has been settled or resolved by Final Order and any sums due to the Debtors or
the Liquidating Trustee from such party have been paid.

SECTION 8. EXECUTORY CONTRACTS AND UNEXPIRED LEASES

8.1. General Treatment.

On the Effective Date, all executory contracts and
unexpired leases to which any of the Debtors are parties shall be deemed
rejected as of the Effective Date, except for an executory contract that (i) has
already been assumed or rejected pursuant to Final Order of the Bankruptcy
Court, (ii) is specifically designated as a contract or lease to be assumed and
assigned in accordance with the APA, (iii) is the subject of a separate motion
to assume or reject filed under section 365 of the Bankruptcy Code by the
Debtors prior to the Confirmation Date, or (iv) is an option or warrant to
purchase common stock of any of the Debtors or right to convert any Equity
Interest into common stock of any of the Debtors to the extent such option,
warrant, or conversion right is determined not to be an Equity Interest.

For purposes hereof, each executory contract and unexpired
lease that relates to the use or occupancy of real property shall include all
(x) modifications, amendments, supplements, restatements, or other agreements
made directly or indirectly by any agreement, instrument, or other document that
in any manner affects such executory contract or unexpired Lease, and (y) all
easements, licenses, permits, rights, privileges, immunities, options, rights of
first refusal, powers, uses, usufructs, reciprocal easement agreements, vault,
tunnel or bridge agreements or franchises, and any other interests in real
estate or rights in rem relating to such premises to the extent any of the
foregoing agreements are specifically rejected.

8.2. Assigned Contracts and Leases.

The filing of the Plan constitutes a motion by the Debtors,
pursuant to section 365 and 1123 of the Bankruptcy Code, to assume and assign to
the Purchaser the Assigned Contracts and Leases. Each of the Assigned Contracts
and Leases shall be assumed and assigned to the Purchaser as of the Closing on
the terms and conditions set forth in the APA and the Sale Order; provided,
however, that the Debtors reserve the right up to eleven (11) days prior to the
Confirmation Hearing, to amend the Schedules to the APA by adding any executory
contract or unexpired lease thereto, deleting any Assigned Contract or lease
therefrom, or amending any cure amount set forth thereon, in which event such
executory contract(s) or unexpired lease(s) shall be deemed so amended. The
Debtors shall, no later than ten (10) days prior to the Confirmation Hearing,
provide notice of any amendments to the APA Schedules to the parties to the
executory contracts and leases affected thereby. The listing of a document on a
Schedule to the APA shall not constitute an admission by the Debtors that such
document is an executory contract or unexpired lease or that the Debtors have
any liability thereunder.

8.3. Cure of Defaults.

Except as otherwise may be agreed to by the parties, at the
Closing, or as promptly thereafter as practicable, the Purchaser shall cure
those defaults under the Assigned Contracts or Leases under the APA that need to
be cured in accordance with Section 365(b) of the Bankruptcy Code on the terms
and subject to the conditions set forth in the APA and the Sale Order by (a)
payment of the undisputed cure amounts or (b) reserving amounts with respect to
the disputed cure amounts.

8.4. Rejection Claims.

In the event that the rejection of an executory contract or
unexpired lease by any of the Debtors pursuant to the Plan results in damages to
the other party or parties to such contract or lease, a Claim for such damages,
if not heretofore evidenced by a filed proof of claim, shall be forever barred
and shall not be enforceable against the Debtors, the Debtors' respective
properties or interests in property as agents, successors, or assigns or the
Liquidating Trust, unless a proof of claim is filed with the Bankruptcy Court
and served upon counsel for the Debtors on or before the date that is thirty
(30) days after the Confirmation Date or such later rejection date that occurs
as a result of a dispute concerning amounts necessary to cure any defaults.

8.5. Insurance Policies.

Except as otherwise provided herein or in the APA, all
insurance policies pursuant to which the Debtors have any obligations in effect
as of the date of the Confirmation Order shall be deemed and treated as
executory contracts pursuant to the Plan and shall be assumed by the respective
Debtors and assigned to either the Purchaser in accordance with the APA or the
Liquidating Trustee and shall continue in full force and effect.

SECTION 9. ESTABLISHMENT OF THE LIQUIDATING TRUST AND APPOINTMENT OF
A LIQUIDATING TRUSTEE

9.1. Appointment of a Liquidating Trustee.

In the event Series A Beneficial Interests are issued as
provided herein, then, on the Effective Date, the Second Lien Agent shall
designate, with the consent of the Creditors Committee and the Debtors, which
consent shall not be unreasonably withheld, the Liquidating Trustee for the
Liquidating Trust. In the event no Series A Beneficial Interests are issued, the
Liquidating Trustee shall be designated by the Creditors Committee with the
consent of the Debtors, which consent shall not be unreasonably withheld. The
designation of the Liquidating Trustee shall be effective on the Effective Date
without the need for a further order of the Bankruptcy Court.

9.2. Creation of the Beneficial Interests and Execution of
the Liquidating Trust Agreement.

This Section 9 sets forth certain of the rights, duties and
obligations of the Liquidating Trustee. In the event of any conflict between the
terms of this Section 9 and the terms of the Liquidating Trust Agreement, the
terms of the Liquidating Trust Agreement shall govern.

On the Effective Date, the Liquidating Trust Agreement
shall be executed, and all other necessary steps shall be taken to establish the
Liquidating Trust and the Beneficial Interests therein. There shall be three
sets of Beneficial Interests created under the Liquidating Trust Agreement: (i)
Series A Beneficial Interests, (ii) Series B Beneficial Interests in accordance
with the allocations set forth in sections 2.2, 2.3, 2.4 and 4.1 of the Plan and

(iii) Series C Beneficial Interests. Proceeds received from the Liquidating
Trust Assets will be distributed to holders of Beneficial Interests in the
following order of priority: (i) to holders of Series A Beneficial Interests
until the holders of Series A Beneficial Interests have been paid in full, (ii)
to holders of Series B Beneficial Interests until the holders of Series B
Beneficial Interests have been paid in full, and (iii) to holders of Series C
Beneficial Interests. In the event no Series A Beneficial Interests are
distributed as set forth herein, no distribution on account of such Series A
Beneficial Interests shall be made. In such event, distributions will be made
first to holders of Series B Beneficial Interests and then to holders of Series
C Beneficial Interests. In the event no Series B Beneficial Interests are
distributed as set forth herein, no distribution on account of such Series B
Beneficial Interests shall be made. In such event, distributions will be made
first to holders of Series A Beneficial Interests and, if no Series A Beneficial
Interests have been distributed, to holders of Series C Beneficial Interests. In
the event the value of the Liquidating Trust Assets does not exceed the amount
of the superpriority administrative claim awarded to the Second Lien Lenders by
the Bankruptcy Court, no Liquidating Trust will be established and no
distributions will be made on account of holders of Beneficial Interests.
Instead, the Liquidating Trust Assets will be assigned directly to the Second
Lien Lender Administrative Agent who shall distribute them to, or liquidate them
for the benefit of holders of Second Lien Lender Claims in accordance with the
terms of the Second Lien Lender Agreement. In such event, the Second Lien Lender
Administrative Agent will be authorized to and responsible for the tax reporting
requirements set forth in section 9.12(b)(vii).

9.3. Purpose of the Liquidating Trust.

The Liquidating Trust shall be established for the sole
purpose of liquidating and distributing its assets, in accordance with Treasury
Regulation section 301.7701-4(d), with no objective to continue or engage in the
conduct of a trade or business.

9.4. Assignment of Trust Assets.

On the Effective Date, or as soon thereafter as
practicable, the Debtors shall transfer and shall be deemed to have transferred
to the Liquidating Trust, for and on behalf of the holders of Beneficial
Interests, the Liquidating Trust Assets free and clear of all liens, Claims,
encumbrances and other interests.

9.5. Books and Records.

Upon the Effective Date, WestPoint shall transfer and
assign to the Liquidating Trust full title to, and the Liquidating Trust shall
be authorized to take possession of, all of the books and records of the Debtors
which are not sold pursuant to the APA. The Liquidating Trust shall have the
responsibility of storing and maintaining books and records transferred
hereunder until one year after the date WestPoint is dissolved in accordance
with section 5.11 hereof, after which time such books and records may be
abandoned or destroyed without further Bankruptcy Court order. The Debtors shall
cooperate with the Liquidating Trustee to facilitate the delivery and storage of
their books and records in accordance herewith. The Debtors (as well as their
current and former officers and directors) shall be entitled to reasonable
access to any books and records transferred to the Liquidating Trust for all
necessary corporate purposes, including, without limitation, defending or
prosecuting litigation, determining insurance coverage, filing tax returns, and
addressing personnel matters. For purposes of this Section, books and records
include computer generated or computer maintained books and records and computer
data, as well as electronically generated or maintained books and records or
data, along with books and records of the Debtors maintained by or in possession
of third parties and all of the claims and rights of the Debtors in and to their
books and records, wherever located.

9.6. Role of the Liquidating Trustee.

In furtherance of and consistent with the purpose of the
Liquidating Trust and the Plan, the Liquidating Trustee shall (A) have the power
and authority to hold, manage, sell, and distribute the Liquidating Trust Assets
to the holders of Beneficial Interests in accordance with the Plan, (B) hold the
Liquidating Trust Assets for the benefit of the holders of Beneficial Interests,
(C) have the power and authority to hold, manage, sell and distribute Cash or
non-Cash Liquidating Trust Assets obtained through the exercise of its power and
authority, (D) have the power and authority to prosecute and resolve, in the
names of the Debtors and/or the name of the Liquidating Trustee, the Avoidance
Actions, (E) have the power and authority to prosecute and resolve objections to
Disputed Claims, (F) have the power and authority to perform such other
functions as are provided in the Plan, and (G) have the power and authority to
administer the closure of the Chapter 11 Cases. The Liquidating Trustee shall be
responsible for all decisions and duties with respect to the Liquidating Trust
and the Liquidating Trust Assets. In all circumstances, the Liquidating Trustee
shall act in the best interests of all beneficiaries of the Liquidating Trust
and in furtherance of the purpose of the Liquidating Trust.

9.7. Nontransferability of Liquidating Trust Interests.

The beneficial interests in the Liquidating Trust shall not
be certificated and are not transferable, except by will or the laws of descent
and distribution.

9.8. Permitted Investments.

The Liquidating Trustee may invest Cash (including any
earnings thereon or proceeds therefrom) as permitted by section 345 of the
Bankruptcy Code; provided, however, that such investments are investments
permitted to be made by a liquidating trust within the meaning of Treasury
Regulation section 301.7701-4(d), as reflected therein, or under applicable
Internal Revenue Service guidelines, rulings, or other controlling authorities.

9.9. Costs, Expenses and Compensation of the Liquidating
Trustee.

The costs and expenses of the Liquidating Trust, including
the fees and expenses of the Liquidating Trustee and its retained professionals
shall be paid out of the Liquidating Trust Assets. The Liquidating Trustee shall
be entitled to reasonable compensation in an amount consistent with that of
similar functionaries in similar types of bankruptcy proceedings.

9.10. Distribution of Liquidating Trust Assets.

The Liquidating Trustee shall distribute at least annually
and in accordance with the Liquidating Trust Agreement, beginning on the
Effective Date or as soon thereafter as is practicable, the Liquidating Trust
Assets on hand, except such amounts (i) as would be distributable to a holder of
a Disputed Claim if such Disputed Claim had been Allowed prior to the time of
such distribution (but only until such Claim is resolved), (ii) as are
reasonably necessary to meet contingent liabilities and to maintain the value of
the Liquidating Trust Assets during liquidation, (iii) to pay reasonable
expenses (including, but not limited to, any taxes imposed on the Liquidating
Trust or in respect of the Liquidating Trust Assets), and (iv) to satisfy other
liabilities incurred by the Liquidating Trust in accordance with this Plan or
the Liquidating Trust Agreement.

9.11. Retention of Professionals by the Liquidating
Trustee.

9.12. Federal Income Tax Treatment of Liquidating Trust.

(a) Tax Treatment and Transfer of Liquidating Trust Assets.

For all federal income tax purposes, all parties
(including, without limitation, the Debtors, the Liquidating Trustee, and the
holders of Non-Assumed Administrative Expense Claims, compensation and
reimbursement Claims, Priority Tax Claims, Priority Non-Tax Claims, Second Lien
Lender Claims, General Unsecured Claims, Noteholder Claims and PBGC Claims)
shall treat the transfer of the Liquidating Trust Assets to the Liquidating
Trust for the benefit of the holders of Beneficial Interests, whether Allowed on
or after the Effective Date, as (A) a transfer of the Liquidating Trust Assets
directly to the holders of Beneficial Interests in satisfaction of such Claims
(other than to the extent allocable to Disputed Claims) followed by (B) the
transfer by such holders to the Liquidating Trust of the Liquidating Trust
Assets in exchange for beneficial interests in the Liquidating Trust.
Accordingly, the holders of such Claims shall be treated for federal income tax
purposes as the grantors and owners of their respective shares of the
Liquidating Trust Assets. The foregoing treatment shall also apply, to the
extent permitted by applicable law, for state and local income tax purposes.

(b) Tax Reporting.

(i) The Liquidating Trustee shall file returns for the
Liquidating Trust as a grantor trust pursuant to Treasury Regulation section
1.671-4(a) and in accordance with this Section 9.12. The Liquidating Trustee
shall also annually send to each record holder of a beneficial interest a
separate statement setting forth the holder's share of items of income, gain,
loss, deduction, or credit and will instruct all such holders to report such
items on their federal income tax returns or to forward the appropriate
information to the beneficial holders with instructions to report such items on
their federal income tax returns. The Liquidating Trust's taxable income, gain,
loss, deduction, or credit will be allocated (subject to Section 9.12(b)(iii)
and (iv) hereof) to the holders of Beneficial Interests, in accordance with
their relative Beneficial Interests in the Liquidating Trust.

(ii) As soon as practicable after the Effective Date, the
Liquidating Trustee shall make a good faith valuation of the Liquidating Trust
Assets. Such valuation shall be made available from time to time, to the extent
relevant, and used consistently by all parties (including, without limitation,
the Debtors, the Liquidating Trustee, and the holders of Beneficial Interests)
for all federal income tax purposes. The Liquidating Trustee shall also file (or
cause to be filed) any other statements, returns, or disclosures relating to the
Liquidating Trust that are required by any governmental unit.

(iii) Allocations of Liquidating Trust taxable income shall
be determined by reference to the manner in which an amount of Cash equal to
such taxable income would be distributed (without regard to any restrictions on
distributions described herein) if, immediately prior to such deemed
distribution, the Liquidating Trust had distributed all of its other assets
(valued at their tax book value) to the holders of the Beneficial Interests
(treating certain pending Disputed Non-Assumed Administrative Expense Claims,
compensation and reimbursement Claims, Priority Tax Claims, Priority Non-Tax
Claims, Second Lien Lender Claims, General Unsecured Claims, Noteholder Claims
and PBGC Claims as if they were Allowed Claims; see Section 9.12(b)(iv) below)
in each case up to the tax book value of the assets treated as contributed by

such holders, adjusted for prior taxable income and loss and taking into account
all prior and concurrent distributions from the Liquidating Trust. Similarly,
taxable loss of the Liquidating Trust shall be allocated by reference to the
manner in which an economic loss would be borne immediately after a liquidating
distribution of the remaining Liquidating Trust Assets. The tax book value of
the Liquidating Trust Assets for this purpose shall equal their fair market
value on the Effective Date, adjusted in accordance with tax accounting
principles prescribed by the Tax Code, the applicable tax regulations, and other
applicable administrative and judicial authorities and pronouncements.

(iv) Subject to definitive guidance from the Internal
Revenue Service or a court of competent jurisdiction to the contrary (including
the receipt by the Liquidating Trustee of a private letter ruling if the
Liquidating Trustee so requests one, or the receipt of an adverse determination
by the Internal Revenue Service upon audit if not contested by the Liquidating
Trustee), the Liquidating Trustee shall (i) treat any Liquidating Trust Assets
allocable to, or retained on account of, Beneficial Interests that would be
distributed to holders of Disputed Non-Assumed Administrative Expense Claims,
compensation and reimbursement Claims, Priority Tax Claims, Priority Non-Tax
Claims, Second Lien Lender Claims, General Unsecured Claims, Noteholder Claims
and PBGC Claims if such claims were Allowed as held by one or more discrete
trusts for federal income tax purposes (the "Liquidating Trust Claims Reserve"),
consisting of separate and independent shares to be established in respect of
each such Disputed Claim, in accordance with the trust provisions of the Tax
Code (section 641 et seq.), (ii) treat as taxable income or loss of the
Liquidating Trust Claims Reserve, with respect to any given taxable year, the
portion of the taxable income or loss of the Liquidating Trust that would have
been allocated to the holders of such Disputed Claims had such Claims been
Allowed on the Effective Date (but only for the portion of the taxable year with
respect to which such Claims are unresolved), (iii) treat as a distribution from
the Liquidating Trust Claims Reserve any increased amounts distributed by the
Liquidating Trust as a result of any such Disputed Claims resolved earlier in
the taxable year, to the extent such distributions relate to taxable income or
loss of the Liquidating Trust Claims Reserve determined in accordance with the
provisions hereof, and (iv) to the extent permitted by applicable law, report
consistent with the foregoing for state and local income tax purposes. All
holders of Beneficial Interests, shall report, for tax purposes, consistent with
the foregoing.

(v) The Liquidating Trustee shall be responsible for
payments, out of the Liquidating Trust Assets, of any taxes imposed on the
Liquidating Trust or the Liquidating Trust Assets, including the Liquidating
Trust Claims Reserve. In the event, and to the extent, any Cash retained on
account of Disputed Claims in the Liquidating Trust Claims Reserve is
insufficient to pay the portion of any such taxes attributable to the taxable
income arising from the assets allocable to, or retained on account of, Disputed
Claims, such taxes shall be (i) reimbursed from any subsequent Cash amounts
retained on account of Disputed Claims, or (ii) to the extent such Disputed
Claims have subsequently been resolved, deducted from any amounts distributable
by the Liquidating Trustee as a result of the resolutions of such Disputed
Claims.

(vii) After the Effective Date, the Liquidating Trustee
shall be authorized to exercise all powers regarding the Debtors' tax matters,
including filing tax returns, to the same extent as if the Liquidating Trustee
were the Debtor in Possession. The Liquidating Trustee shall (A) complete and
file within ninety (90) days of the filing for dissolution by WestPoint Stevens,
to the extent not previously filed, the Debtors' final federal, state, and local
tax returns, (B) request an expedited determination of any unpaid tax liability

of the Debtors under section 505(b) of the Bankruptcy Code for all tax periods
of the Debtors ending after the Commencement Date through the liquidation of the
Debtors as determined under applicable tax laws, to the extent not previously
requested, and (C) represent the interest and account of the Debtors before any
taxing authority in all matters, including, but not limited to, any action,
suit, proceeding, or audit.

9.13. Dissolution of the Liquidating Trust.

The Liquidating Trustee and the Liquidating Trust shall be
discharged or dissolved, as the case may be, at such time as (i) all Disputed
Claims have been resolved, (ii) all Liquidating Trust Assets have been
liquidated, and (iii) all distributions required to be made by the Liquidating
Trustee under the Plan have been made, but in no event shall the Liquidating
Trust be dissolved later than five (5) years from the Effective Date unless the
Bankruptcy Court, upon motion within the six (6) month period prior to the fifth
(5th) anniversary (and, in the case of any extension, within six (6) months
prior to the end of such extension), determines that a fixed period extension
(not to exceed three (3) years, together with any prior extensions, without a
favorable letter ruling from the Internal Revenue Service that any further
extension would not adversely affect the status of the Liquidating Trust as a
liquidating trust for federal income tax purposes) is necessary to facilitate or
complete the recovery and liquidation of the Liquidating Trust Assets or the
dissolution of the Debtors.

9.14. Indemnification of the Liquidating Trustee.

The Liquidating Trustee or the individuals comprising the
Liquidating Trustee, as the case may be, and the Liquidating Trustee's agents
and professionals, shall not be liable for actions taken or omitted in its
capacity as, or on behalf of, the Liquidating Trustee, except those acts arising
out of its or their own willful misconduct, gross negligence, bad faith,
self-dealing, breach of fiduciary duty, or ultra vires acts, and each shall be
entitled to indemnification and reimbursement for fees and expenses in defending
any and all of its actions or inactions in its capacity as, or on behalf of, the
Liquidating Trustee, except for any actions or inactions involving willful
misconduct, gross negligence, bad faith, self-dealing, breach of fiduciary duty,
or ultra vires acts. Any indemnification claim of the Liquidating Trustee (and
the other parties entitled to indemnification under this Section 9.14) shall be
satisfied from the Liquidating Trust Assets. The Liquidating Trustee shall be
entitled to rely, in good faith, on the advice of its retained professionals.

9.15. Closing of the Chapter 11 Cases.

When all Disputed Claims filed against the Debtors have
become Allowed Claims or have been disallowed by Final Order, and all of the
Liquidating Trust Assets have been distributed in accordance with the Plan, the
Liquidating Trustee shall seek authority from the Bankruptcy Court to close the
Chapter 11 Cases in accordance with the Bankruptcy Code and the Bankruptcy
Rules.

9.16. Closing of the Chapter 11 Cases by Charitable Gift.

If at any time the Liquidating Trustee determines that the
expense of administering the Liquidating Trust so as to make a final
distribution to its beneficiaries is likely to exceed the value of the assets
remaining in the Liquidating Trust, the Liquidating Trustee shall apply to the
Bankruptcy Court for authority to (i) reserve any amounts necessary to close the
Chapter 11 Cases, (ii) donate any balance to a charitable organization exempt
from federal income tax under section 501(c)(3) of the Tax Code that is
unrelated to WestPoint Stevens Inc., the Liquidating Trust, and any insider of
the Liquidating Trustee, and (iii) close the Chapter 11 Cases in accordance with
the Bankruptcy Code and Bankruptcy Rules. If the aims or purposes of any
charities satisfying the conditions of clause (ii) above relate to benefiting

the residents of WestPoint, Georgia, then the Liquidating Trustee shall choose
any recipients of any donations from among such charities. Notice of such
application shall be given electronically, to the extent practicable, to those
parties who have filed requests for notices and whose electronic addresses
remain current or operating.

SECTION 10. CONDITIONS PRECEDENT TO CONFIRMATION AND THE EFFECTIVE
DATE.

10.1. Conditions Precedent to Confirmation.

Entry of the Confirmation Order in a form and substance
reasonably satisfactory to the Debtors and the approval of a Purchaser at the
Purchaser Selection Hearing are conditions precedent to confirmation of the
Plan.

10.2. Conditions Precedent to the Effective Date.

The Plan shall not become effective unless and until the
following conditions have been satisfied in full or waived:

(a) The Confirmation Order and the Sale Order, in a form
and substance reasonably acceptable to the Debtors and the Purchaser, shall each
have been entered and shall not have been modified except as permitted hereby or
upon consent of the parties and shall not be subject to a stay.

(b) The Liquidating Trust Agreement shall have been
executed or a determination shall have been made that no Liquidating Trust is
necessary;

(d) The Debtors shall have received all authorizations,
consents, regulatory approvals, rulings, letters, no-action letters, opinions or
documents that are required to implement the Plan and the APA; and

(e) all actions, documents and agreements required to
implement the Plan shall have been effected or executed.

10.3. Failure of Conditions.

In the event that one or more of the conditions specified
in Section 10.1 or 10.2 of the Plan have not occurred or have been waived in
accordance with Section 10.4 of the Plan, on or before [one hundred and twenty
(120) days] after the Confirmation Date, (i) the Confirmation Order shall be
vacated, (ii) no Distributions under the Plan shall be made (and the
Distributions that have been made shall be unwound), (iii) the Debtors and all
holders of Claims and Equity Interests shall be restored to the status quo ante
as of the day immediately preceding the Confirmation Date as though the
Confirmation Date never occurred, and (iv) the Debtors obligations with respect
to Claims and Equity Interests shall remain unchanged and nothing contained
herein shall constitute or be deemed a waiver or release of any Claims or Equity
Interests by or against the Debtors or any other entity or to prejudice in any
manner the rights of the Debtors or any entity in any further proceedings
involving the Debtors.

10.4. Satisfaction of Conditions.

If the Debtors decide, after consultation with the
Purchaser, that one of the conditions precedent set forth in Sections 10.1 and
10.2 hereof cannot be satisfied and the occurrence of such condition is not
waived or cannot be waived, then the Debtors shall file a notice of the failure
of the Effective Date with the Bankruptcy Court.

SECTION 11. EFFECT OF CONFIRMATION

11.1. Vesting of Assets.

Upon the Effective Date, pursuant to sections 1141(b) and
(c) of the Bankruptcy Code, all property of the Debtors' bankruptcy estates
which are not transferred pursuant to the APA shall vest in the Debtors free and
clear of all liens, Claims, encumbrances, charges, and other interests, except
as provided herein. In accordance with Section 9 hereof and subject to the
exceptions contained therein, upon the Effective Date, the Liquidating Trust
Assets shall be transferred to the Liquidating Trust free and clear of all
liens, Claims, encumbrances and interests, except as provided herein. From and
after the Effective Date, if the Liquidating Trust is established, the
Liquidating Trustee may dispose of the assets of the Liquidating Trust free of
any restrictions of the Bankruptcy Code but in accordance with the provisions of
the Plan and the Liquidating Trust Agreement.

11.2. Discharge of Claims and Termination of Equity
Interests.

Except as otherwise provided herein or in the Confirmation
Order, the rights afforded in the Plan and the payments and distributions to be
made hereunder, shall discharge all existing debts and Claims, and terminate all
Equity Interests, of any kind, nature, or description whatsoever against or in
the Debtors or any of their assets or properties to the fullest extent permitted
by section 1141 of the Bankruptcy Code. Except as provided in the Plan, upon the
Effective Date, all existing Claims against the Debtors and Equity Interests in
the Debtors, shall be, and shall be deemed to be, discharged and terminated, and
all holders of Claims and Equity Interests shall be precluded and enjoined from
asserting against the Debtors or the Purchaser any other or further Claim or
Equity Interest based upon any act or omission, transaction, or other activity
of any kind or nature that occurred prior to the Effective Date, whether or not
such holder has filed a proof of claim or proof of equity interest.
Notwithstanding any provision of the Plan to the contrary, any valid setoff or
recoupment rights held against any of the Debtors, shall not be affected by the
Plan and shall be expressly preserved in the Confirmation Order.

11.3. Discharge of Debtors.

Upon the Effective Date and in consideration of the
distributions to be made hereunder, except as otherwise expressly provided
herein, each holder (as well as any trustees and agents on behalf of each
holder) of a Claim or Equity Interest and any affiliate of such holder shall be
deemed to have forever waived, released, and discharged the Debtors, to the
fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any
and all Claims, Equity Interests, rights, and liabilities that arose prior to
the Effective Date. Upon the Effective Date, all such persons shall be forever
precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from
prosecuting or asserting any such discharged Claim against or terminated Equity
Interest in the Debtors. Notwithstanding any provision of the Plan to the
contrary, any valid setoff or recoupment rights held against any of the Debtors
shall not be affected by the Plan and shall be expressly preserved in the
Confirmation Order.

11.4. Term of Injunctions or Stays.

(a) Unless otherwise provided, all injunctions or stays
arising under or entered during the Reorganization Cases under section 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 later of the Effective
Date and the date indicated in such order.

(b) Injunction Regarding Worthless Stock Deduction. Unless
otherwise ordered by the Bankruptcy Court, on and after the Confirmation Date,
any "fifty percent shareholder" within the meaning of section 382(g)(4)(D) of
the Internal Revenue Code of 1986, as amended, shall be enjoined from claiming a
worthless stock deduction with respect to any Equity Interest held by such
shareholder for any taxable year of such shareholder ending prior to the
Effective Date.

11.5. Injunction Against Interference With the Plan or APA.

Upon the entry of the Sale Order with respect to the APA or
the Confirmation Order with respect to the Plan, all holders of Claims and
Equity Interests and other parties in interest, along with their respective
present or former employees, agents, officers, directors, or principals, shall
be enjoined from taking any actions to interfere with the implementation or
consummation of the Plan or the APA.

11.6. Exculpation.

Neither the Debtors, the Purchaser, the Liquidating
Trustee, the Disbursing Agent, the Creditors Committee appointed pursuant to
section 1102 of the Bankruptcy Code in the Reorganization Cases, the First Lien
Lender Administrative Agent, the Second Lien Lender Administrative Agent, the
Indenture Trustees nor any of their respective members, officers, directors,
employees, agents, financial advisors, investment bankers or professionals shall
have or incur any liability to any holder of any Claim or Equity Interest for
any act or omission in connection with, or arising out of, the Reorganization
Cases, the confirmation of the Plan, the consummation of the Plan and APA, or
the administration of the Plan or property to be distributed under the Plan,
except for willful misconduct or gross negligence.

11.7. Retention of Causes of Action/Reservation of Rights.

(a) Except as provided in the APA, nothing contained in the
Plan or the Confirmation Order shall be deemed to be a waiver or the
relinquishment of any rights or causes of action that the Debtors may have or
which the Debtors or, in accordance with Section 9 hereof, the Liquidating
Trustee may choose to assert on behalf of the Debtors' respective estates under
any provision of the Bankruptcy Code or any applicable nonbankruptcy law,
including, without limitation, (i) any and all Claims against any person or
entity, to the extent such person or entity asserts a crossclaim, counterclaim,
and/or Claim for setoff which seeks affirmative relief against the Debtors,
their officers, directors, or representatives, and (ii) the turnover of any
property of the Debtors' estates. Except as otherwise provided in the Plan or
the APA, on and after the Effective Date, the Debtors will have the right to
enforce any and all Causes of Action against any person other than Avoidance
Actions, and the Liquidating Trustee shall have the exclusive right to enforce
any and all Avoidance Actions against any person and the right to enforce Causes
of Action not enforced by the Debtors. The Debtors may pursue, abandon, settle
or release any or all Causes of Action, other than Avoidance Actions, as it
deems appropriate, without the need to obtain approval or any other or further
relief from the Bankruptcy Court. The Liquidating Trustee may pursue, abandon,
settle or release any or all Causes of Action not pursued by the Debtors and
Avoidance Actions as it deems appropriate, without the need to obtain approval
or any other or further relief from the Bankruptcy Court. The Debtors may, in
their discretion, offset any claim held against a person other than Avoidance

Actions, against any payment due such person under the Plan, and the Liquidating
Trustee may offset any claim with respect to Avoidance Actions and Causes of
Action not pursued by the Debtors held against a person against any payment due
such person under the Plan, provided, however, that any claims of the Debtors
arising before the Commencement Date shall first be offset against Claims
against the Debtors arising before the Commencement Date.

(b) Nothing contained in the Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any claim, cause of action,
right of setoff, or other legal or equitable defense which the Debtors had
immediately prior to the Commencement Date, against or with respect to any Claim
left unimpaired by the Plan. The Debtors and the Liquidating Trustee shall have,
retain, reserve, and be entitled to assert all such claims, causes of action,
rights of setoff, and other legal or equitable defenses which they had
immediately prior to the Commencement Date fully as if the Reorganization Cases
had not been commenced, and all of the Debtors' legal and equitable rights
respecting any Claim left unimpaired by the Plan may be asserted by the Debtors
or the Liquidating Trustee after the Confirmation Date to the same extent as if
the Reorganization Cases had not been commenced.

SECTION 12. RETENTION OF JURISDICTION

(a) To hear and determine applications for the assumption
or rejection of executory contracts or unexpired leases and the allowance of
Claims resulting therefrom.

(b) To determine any motion, adversary proceeding,
application, contested matter, and other litigated matter pending on or
commenced after the Confirmation Date.

(d) To consider Claims or the allowance, classification,
priority, compromise, estimation, or payment of any Claim, Administrative Claim,
or Equity Interest.

(e) To enter, implement, or enforce such orders as may be
appropriate in the event the Confirmation Order, the Purchaser Selection Order
or the Sale Order is for any reason stayed, reversed, revoked, modified, or
vacated.

(f) To issue injunctions, enter and implement other orders,
and take such other actions as may be necessary or appropriate to restrain
interference by any person with the consummation, implementation, or enforcement
of the Plan, the Confirmation Order, the Purchaser Selection Order or the Sale
Order or any other order of the Bankruptcy Court.

(g) To hear and determine any application to modify the
Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any
defect or omission or reconcile any inconsistency in the Plan, the Disclosure
Statement, or any order of the Bankruptcy Court, including the Confirmation
Order, Purchaser Selection Order and Sale Order in such a manner as may be
necessary to carry out the purposes and effects thereof.

(i) To hear and determine disputes arising in connection
with the interpretation, implementation, or enforcement of the APA, the Plan,
the Confirmation Order, the Sale Order, any transactions or payments
contemplated hereby, or any agreement, instrument, or other document governing
or relating to any of the foregoing.

(j) To take any action and issue such orders as may be
necessary to construe, enforce, implement, execute, and consummate the Plan or
the APA or to maintain the integrity of the Plan or the APA following
consummation.

(k) To hear any disputes arising out of, and to enforce,
the order approving alternative dispute resolution procedures to resolve
personal injury, employment litigation, and similar claims pursuant to section
105(a) of the Bankruptcy Code.

(l) To determine such other matters and for such other
purposes as may be provided in the Purchase Selection Order, the Sale Order or
the Confirmation Order.

(m) To hear and determine disputes arising in connection
with the interpretation, implementation, or enforcement of the Liquidating Trust
or the Liquidating Trust Agreements.

(n) To hear and determine matters concerning state, local,
and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code (including any requests for expedited determinations under
section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax
returns for any and all taxable periods of the Debtors, the Liquidating Trust or
the Liquidating Trust Claims Reserve ending after the Commencement Date).

(o) To hear and determine any other matters related hereto
and not inconsistent with the Bankruptcy Code and title 28 of the United States
Code.

(p) To enter a final decree closing the Reorganization
Cases.

(q) To recover all assets of the Debtors and property of
the Debtors' estates, wherever located.

SECTION 13. MISCELLANEOUS PROVISIONS

13.1. Payment of Statutory Fees.

On the Effective Date, and thereafter as may be required,
the Debtors shall pay all fees payable pursuant to section 1930 of chapter 123
of title 28 of the United States Code.

13.2. Dissolution of Statutory Committee of Unsecured
Creditors.

The Creditors Committee appointed pursuant to section 1102
of the Bankruptcy Code in the Reorganization Cases shall dissolve on the
Effective Date, except that the Creditors Committee shall have the right to
review and object to any applications for compensation and reimbursement of
expenses filed in accordance with section 2.3 hereof.

13.3. Substantial Consummation.

On the Effective Date, the Plan shall be deemed to be
substantially consummated under sections 1101 and 1127(b) of the Bankruptcy
Code.

13.4. Effectuating Documents & Further Transactions.

Each of the Debtors and the Liquidating Trustee is
authorized to execute, deliver, file or record such contracts, instruments,
releases, indentures and other agreements or documents and take such actions as
may be necessary or appropriate to effectuate and further evidence the transfer
of the Debtors' Assets under the APA and the terms and conditions of the
Liquidating Trust Agreement.

13.5. Corporate Action.

On the Effective Date, all matters provided for under the
Plan that would otherwise require approval of the stockholders or directors of
one or more of the Debtors shall be deemed to have occurred and shall be in
effect from and after the Effective Date pursuant to the applicable general
corporation law of the states in which the Debtors are incorporated, without any
requirement of further action by the stockholders or directors of the Debtors.

13.6. Request for Expedited Determination of Taxes.

The Debtors or the Liquidating Trustee shall have the right
to request an expedited determination under section 505(b) of the Bankruptcy
Code with respect to tax returns filed, or to be filed, for any and all taxable
periods ending after the Commencement Date through the date on which the Debtors
are dissolved.

13.7. Exemption from Transfer Taxes.

Pursuant to section 1146(c) of the Bankruptcy Code, the
assignment or surrender of any lease or sublease, or the delivery of any deed or
other instrument of transfer under, in furtherance of, or in connection with the
Plan, including any deeds, bills of sale or assignments executed in connection
with any disposition of assets contemplated by the APA or the Plan (including
transfers of assets to and by the Liquidating Trust) shall not be subject to any
stamp, real estate transfer, mortgage, recording, sales, use or other similar
tax.

13.8. Amendments.

(a) Plan Modifications & Amendments. The Plan may be
amended, modified, or supplemented by the Debtors in the manner provided for by
section 1127 of the Bankruptcy Code or as otherwise permitted by law without
additional disclosure pursuant to section 1125 of the Bankruptcy Code. In
addition, after the Confirmation Date, so long as such action does not
materially adversely affect the treatment of holders of Claims or Equity
Interests under the Plan, the Debtors may institute proceedings in the
Bankruptcy Court to remedy any defect or omission or reconcile any
inconsistencies in the Plan or the Confirmation Order, with respect to such
matters as may be necessary to carry out the purposes and effects of the Plan.

(b) Other Amendments. Prior to the Effective Date, the
Debtors may make appropriate technical adjustments and modifications to the
Plan, including the filing of additional exhibits, and may make amendments to
the Plan to reflect the outcome of the Purchaser Selection Hearing without
further order or approval of the Bankruptcy Court, provided that such technical

adjustments and modifications and amendments do not adversely affect in a
material way the treatment of holders of Claims or Equity Interests.

13.9. Revocation or Withdrawal of the Plan.

The Debtors reserve the right to revoke or withdraw the
Plan prior to the Effective Date. If the Debtors take such action, the Plan
shall be deemed null and void.

13.10. Severability.

If, prior to the entry of the Confirmation Order, any term
or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or
unenforceable, the Bankruptcy Court, at the request of the Debtors, shall have
the power to alter and interpret such term or provision to make it valid or
enforceable to the maximum extent practicable, consistent with the original
purpose of the term or provision held to be invalid, void, or unenforceable, and
such term or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration, or interpretation, the remainder
of the terms and provisions of the Plan will remain in full force and effect and
will in no way be affected, impaired, or invalidated by such holding,
alteration, or interpretation. The Confirmation Order shall constitute a
judicial determination and shall provide that each term and provision of the
Plan, as it may have been altered or interpreted in accordance with the
foregoing, is valid and enforceable pursuant to its terms.

13.11. Governing Law.

Except to the extent that the Bankruptcy Code or other
federal law is applicable, or to the extent an exhibit hereto or a schedule in
the Plan Supplement provides otherwise, the rights, duties, and obligations
arising under the Plan shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.

13.12. Time.

In computing any period of time prescribed or allowed by
the Plan, unless otherwise set forth herein or determined by the Bankruptcy
Court, the provisions of Bankruptcy Rule 9006 shall apply.

13.13. Notices.

All notices, requests, and demands to or upon the Debtors
to be effective shall be in writing (including by facsimile transmission) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:

WestPoint Stevens, Inc.
P.O. Box 71507
West Tenth Street
WestPoint, Georgia 31833
Attn: Clayton Humphries
Vice President and General Counsel
Telephone: (706) 645-4115
Telecopier: (706) 645-4396

- and -

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Michael F. Walsh, Esq.
John J. Rapisardi, Esq.
Telephone: (212) 310-8000
Telecopier: (212) 310-8007

with copies to:

The Attorneys for the Agent under the First
Lien Lender Agreement

Telephone:
Telecopier:

-and-

The Attorneys for the Steering Committee of
First Lien Lenders
Hennigan, Bennett & Dorman, LLP
601 S. Figueroa Street, Suite 3300
Los Angeles, California 90017
Attn: Bruce Bennett, Esq.
Telephone: (213) 694-1200
Telecopier: (213) 694-1234

-and-

The Attorneys for Icahn Associates
Sonnenschein Nath & Rosenthal LLP
1221 Avenue of the Americas, 24th Floor
New York, NY 10020
Attn: Peter Wolfson, Esq.
Telephone: (212) 768-6700
Telecopier: (212) 768-6800

-and-

The Attorneys for the Agent under the Second
Lien Lender Agreement
Kramer Levin Naftalis & Frankel, LLP
919 Third Avenue
New York, NY 10022
Attn: Thomas Mayer, Esq.
Telephone: (212) 715-9100
Telecopier: (212) 715-8000

-and-

The Attorneys for the Creditors Committee
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attn: Lawrence M. Handelsman, Esq.
Telephone: (212) 806-5400
Telecopier: (212) 806-6006

Dated: New York, New York
June 10, 2005

Respectfully submitted,

WestPoint Stevens, Inc.
WestPoint Stevens Inc., I
J. P. Stevens and Co., Inc.
J. P. Stevens Enterprises, Inc.
WestPoint Stevens Stores, Inc.

By: WestPoint Stevens, Inc.

By:
------------------------------------
Name: Lester D. Sears
Title: Chief Financial Officer

EXHIBITS AND SCHEDULES TO THE PLAN

EXHIBIT A
WESTPOINT DEBTORS

1. WestPoint Stevens Inc.

2. WestPoint Stevens Inc., I

3. J. P. Stevens and Co., Inc.

4. J. P. Stevens Enterprises, Inc.

5. WestPoint Stevens Stores, Inc.

EXHIBIT "B"

2004 ANNUAL REVIEW

THIS ANNUAL REVIEW HAS NOT BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

WestPoint Stevens Inc.
2004
Annual Review
for Fiscal Year Ended
December 31, 2004

TABLE OF CONTENTS

Page No.
--------

PART I

Item 1. Business.............................................................................................................1

Item 2. Properties...........................................................................................................7

Item 3. Legal Proceedings....................................................................................................7

Item 4. Submission of Matters to a Vote of Security Holders..................................................................9

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ........9

Item 6. Selected Financial Data.............................................................................................10

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................11

Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........................................................26

Item 8. Financial Statements and Supplementary Data.........................................................................27

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................60

Item 9A. Controls and Procedures.............................................................................................60

Item 9B. Other Information...................................................................................................60

PART III

Item 10. Directors and Executive Officers of the Registrant..................................................................61

Item 11. Executive Compensation..............................................................................................64

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters......................69

Item 13. Certain Relationships and Related Transactions......................................................................70

Item 14. Principal Accounting Fees and Services..............................................................................70

PART IV

Item 15. Exhibits and Financial Statement Schedules..........................................................................71

ITEM 1. BUSINESS

GENERAL

On June 1, 2003 (the "Petition Date"), WestPoint Stevens Inc., a Delaware
corporation (the "Company"), and several of its subsidiaries (together with the
Company, the "Debtors") filed a petition for relief under chapter 11 of title 11
of the United States Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
The Debtors are authorized to operate their business and manage their properties
as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. On June 2, 2003, the Bankruptcy Court entered a number of orders enabling
the Company to continue regular operations throughout the reorganization
proceedings. On June 18, 2003, the Bankruptcy Court approved $300 million of
debtor in possession financing pursuant to a Post-Petition Credit Agreement,
dated as of June 2, 2003, among the Company and certain of its subsidiaries, the
financial institutions named therein and Bank of America, N.A. and Wachovia
Bank, National Association (the "DIP Credit Agreement"). For a more complete
discussion of the DIP Credit Agreement see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- DIP Credit
Agreement."

Since the commencement of its chapter 11 cases, the Debtors have been operating
as debtors in possession under chapter 11 and conducting business in the
ordinary course. Pursuant to the Bankruptcy Code, pre-petition obligations of
the Debtors (including obligations under debt instruments) generally may not be
enforced against the Debtors, and any actions to collect pre-petition
indebtedness are automatically stayed, unless the stay is lifted by the
Bankruptcy Court. In addition, as debtors in possession, the Debtors have the
right, subject to Bankruptcy Court approval and certain other limitations, to
assume or reject executory contracts and unexpired leases.

The Company initially announced that it had reached an agreement in principle
with the holders of approximately 52% of the aggregate principal amount of its
7-7/8% Senior Notes due 2005 and 7-7/8% Senior Notes due 2008 (the "Senior
Notes") on the terms of a financial restructuring to be implemented through the
chapter 11 process. The agreement in principle was subject to numerous
conditions and further agreements, including the entry of an order confirming
the plan of reorganization contemplated by the proposal. On October 17, 2003,
the Company announced that it had determined not to implement the previously
announced agreement in principle. Instead, the Company stated that it intended
to negotiate new terms for a chapter 11 plan of reorganization with all of its
major creditor constituencies. The Company filed a plan of reorganization on
January 20, 2005. The Company currently intends to sell substantially all of its
assets, subject to either Section 363 of the Bankruptcy Code or a confirmation
of a new chapter 11 plan. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" below.

The Company, which was organized in 1987, is the successor corporation to West
Point-Pepperell, Inc. through a series of mergers occurring in December 1993.
The Company operates its business directly and through its consolidated
subsidiaries. The Company is a leading manufacturer, marketer and distributor of
an extensive range of bed and bath home fashions ("Home Fashions") products. The
Company's trademark brands include ATELIER MARTEX(R), BABY MARTEX(R),
CHATHAM(R), GRAND PATRICIAN(R), MARTEX(R), PATRICIAN(R), LADY PEPPERELL(R),
LUXOR(R), SEDUCTION(R), STEVENS(R), UTICA, and VELLUX(R). In addition, certain
Home Fashions products are manufactured and sold pursuant to licensing
agreements under designer and brand names that include, among others, Ralph
Lauren Home, Charisma, Glynda Turley and Disney Home. The Company's products are
marketed through leading department stores, mass merchants, specialty stores,
institutional channels and WestPoint Stevens Stores Inc.

The Company estimates that it has one of the largest market shares in the
domestic sheet and pillowcase market, the domestic bath towel market and the
domestic blanket market. The Company also has significant market share in the
domestic accessories market, which includes comforters, bedspreads, bed pillows,
throw pillows and mattress pads, among others.

As a result of a strategic review of the Company's businesses, manufacturing and
other facilities and products, the Board of Directors has approved various
restructuring initiatives designed to streamline operations and improve
profitability. For a comprehensive discussion of the Company's restructuring
initiatives and overall financial condition, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."

PRODUCTS

The Company markets a broad range of manufactured and sourced bed, bath and
basic bedding products.

Bed and Bath Products, including:
- bath accessories;

- bath rugs;

- bath towels;

- beach towels;

- bedskirts;

- bedspreads;

- comforters and duvet covers;

- decorative throw pillows;

- drapes and valances;

- quilts;

- sheets and pillowcases;

- shower curtains; and

- table covers.

Basic Bedding Products, include:

- bed pillows;

- flocked blankets;

- mattress pads;

- natural fill pillows, comforters and featherbeds;

- woven blankets and throws; and

- heated blankets and mattress pads.

Such products are made from a variety of fabrics, such as chambray, twill,
sateen, flannel, linen, cotton and cotton blends and are available in a wide
assortment of colors and patterns. The Company has positioned itself as a
single-source supplier to retailers of bed and bath products, offering a broad
assortment of products across multiple price points. Such product and price
point breadth allows the Company to provide a comprehensive product offering for
each major distribution channel. For each of the last three years substantially
all of the Company's products have consisted of Home Fashions products.

TRADEMARKS AND LICENSES

The Company's products are marketed under well-known and firmly established
trademarks, brand names and private labels. The Company uses trademarks, brand
names and private labels as merchandising tools to assist its customers in
coordinating their product offerings and differentiating their products from
those of their competitors. Registered trademarks include ATELIER MARTEX(R),
BABY MARTEX(R), CHATHAM(R), GRAND PATRICIAN(R), MARTEX(R), PATRICIAN(R), LADY
PEPPERELL(R), LUXOR(R), SEDUCTION, STEVENS(R), UTICA(R) and VELLUX(R). In 2004
the Company recognized $2 million in revenues for licensing its trademarks to
third party manufacturers who produced home fashion products. In addition,
products are manufactured and sold pursuant to licensing agreements under
designer and brand names that include, among others, Ralph Lauren Home, Disney
Home, Charisma and Glynda Turley. A portion of the Company's sales is derived
from licensed designer brands. The license agreements for the Company's designer
brands generally are for a term of two or three years. Some of the licenses are
automatically renewable for additional periods, provided that certain sales
thresholds set forth in the license agreements are met. No single license has
accounted for more than 13.5% of the Company's total sales volume during any of
the last five fiscal years ending on December 31, 2004. The loss of a
significant license could have an adverse effect upon the Company's business,
which effect could be material. The licensing agreements with fixed expiration
dates are: Ralph Lauren Home, December 31, 2005 (The parties are currently
negotiating the terms of a new agreement to run through December 31, 2008);
Glynda Turley, December 31, 2005; Charisma, March 31, 2010; and Disney Home,
December 31, 2005.

MARKETING

The Company is committed to developing and maintaining integral relationships
with its customers through "Strategic Partnering," a program designed to improve
customers' operating results by leveraging the Company's merchandising,
manufacturing and inventory management skills. "Strategic Partnering" includes
Electronic Data Interchange ("EDI") direct electronic entry systems, "Quick
Response" and "Vendor Managed Inventory" customer delivery programs and
point-of-sale processing. The Company incorporates Strategic Partnering into its
planning, manufacturing and shipping systems, in order to enable it to
efficiently and economically anticipate and respond to customers' inventory
requirements. As a result, the Company is better able to plan and forecast its
own production and inventory requirements. Sales and marketing of the Company's
Home Fashions products are conducted through a recently enhanced format
consisting of divisions for Bed and Bath Products and Basic Bedding Products,
each with supporting domestic sales, marketing and merchandising teams and
international sales and marketing teams. Distribution specific teams focused on
targeted key accounts are linked with product management, operations, customer
service and distribution to service each segment of retail.

The Bed and Bath Products Division and the Basic Bedding Products Division focus
sales on the following channels of distribution:

- catalogs;

- chain stores;

- department stores;

- mass merchants;

- specialty stores;

- Warehouse clubs; and

- Healthcare and hospitality institutions.

For the Bed and Bath Products Division and the Basic Bedding Products Division,
marketing is comprised of the following functions that create products and
services in direct response to recognized consumer trends:

- design;

- marketing;

- advertising;

- licensing;

- consumer research; and

- product innovation.

For the Bed and Bath Products Division and the Basic Bedding Products Division,
merchandising is comprised of the following functions:

- product management;

- business management;

- productivity analysis;

- stock keeping unit, or SKU, control; and

- design technology.

The Retail Stores Division is comprised of:

- WestPoint Stevens Stores Inc. -- a wholly owned subsidiary of the
Company ("WestPoint Stores") that currently consists of 34
geographically dispersed, value-priced retail outlets throughout the
United States, most of which are located in factory outlet shopping
centers. WestPoint Stores sells products which are first quality
(including overstocks), seconds, discontinued items and other
products.

The Company works closely with its major customers to assist them in
merchandising and promoting its products to consumers. In addition, the Company
periodically meets with its customers in an effort to maximize product exposure
and sales and to jointly develop merchandise assortments and plan promotional
events specifically tailored to the customer. The Company provides merchandising
assistance with store layouts, fixture designs, advertising and point-of-sale
displays. A national consumer and trade advertising campaign and comprehensive
internet website have served to enhance brand recognition. The Company also
provides its customers with suggested customized advertising materials designed
to increase its product sales. A heightened focus on consumer research provides
needed products on a continual basis.

Approximately 87% of the Company's total sales in 2004 were made to retail
establishments in the United States, including catalog retailers, chain and
department stores, mass merchants, specialty bed and bath stores, warehouse
clubs and WestPoint Stores. Finished products are distributed to retailers
directly from the Company's plants. The majority of the remaining portion of the
Company's sales of Home Fashions products are through the institutional channel,
which includes hospitality and healthcare establishments, as well as laundry
supply businesses. In addition to domestic sales, the Company distributes its
Home Fashions products for eventual sale to certain foreign markets, principally
Australia, Canada, Mexico, Central and South America, the Middle East and the
Far East. International operations accounted for approximately 3% of the total
revenues of the Company in 2004. On August 28, 2003, one of the Company's
foreign subsidiaries, WestPoint Stevens (Europe) Ltd., commenced an insolvency
proceeding in the United Kingdom and is in the process of being closed and
liquidated.

INVENTORY MANAGEMENT, ELECTRONIC COMMUNICATION AND DELIVERY

The Company has been recognized as a leader and innovator of advanced
technology, as evidenced by its inclusion in the 2004 InformationWeek 500, which
recognizes businesses that make innovative use of information technology. The
Company deploys a variety of innovative, leading-edge e-commerce applications
and has been selected as a preferred vendor for many customers wishing to

participate in web-based collaboration programs, Quick Response, EDI and Vendor
Managed Inventory. The Company operates a retail merchandising and inventory
replenishment system (Inforem(R)) in conjunction with its forecasting and
planning system (Demand Planner(R) from i2 Technologies, Inc.). It also utilizes
ESSBASE(R) business intelligence tools for inventory optimization and
performance measurement to complement the Company's core business systems,
including its supply chain, sourcing and logistics systems. The Company combines
the use of an advanced, customer order fulfillment system, real-time radio
frequency and in-line label printing distribution systems, and in-house
transportation to compress the order to delivery cycle time, maintain low
inventory levels and achieve high customer scorecard objectives. The Company has
placed a strong emphasis on the supply chain and logistics function and believes
that continued investment in planning, sourcing, distribution and transportation
capabilities will enhance its ability to provide its customers with superior
service. For example the Company has recently invested in a project to label
product shipments to selected customers using Radio Frequency Identification
tags beginning in January 2006.

CUSTOMERS

The Company is always pursuing strategic relationships with key merchandisers.
An important component of the Company's strategy is to increase its share of
shelf and floor space by strengthening its partnership with its customers. The
Company is working closely with retailers and is sharing information and
business practices with them to improve service and achieve higher profitability
for both the retailer and the Company.

The Company's Home Fashions products are sold to catalog retailers, chain
stores, mass merchants, department stores, specialty stores, warehouse clubs and
its own retail stores. The Company's six largest customers in 2004, Federated
Department Stores, Inc., J.C. Penney Company, Inc., Kmart Corporation, Sears
Roebuck & Co., Inc., Target Corporation and Wal-Mart Stores, Inc. accounted for
approximately 51% of the net sales of the Company during the fiscal year ended
December 31, 2004. In 2004, sales to Target Corporation and Wal-Mart Stores,
Inc. were 13% and 14%, respectively, of the net sales of the Company. Each of
such customers has purchased goods from the Company in each of the last 10
years. Representatives of Target Corporation and J.C. Penney Company, Inc. have
indicated that they intend to significantly increase their direct sourcing of
home fashion products from foreign sources. A loss of any of the largest
accounts (or a material portion of any thereof) would have an adverse effect
upon the Company's business, which could be material.

MANUFACTURING

The Company currently uses the latest manufacturing and distribution equipment
and technologies in its mills. Management therefore believes that the Company is
one of the most efficient manufacturers in the home fashions industry. Over the
past five years the Company has spent approximately $220 million to modernize
its manufacturing and distribution systems and has spent approximately $18
million of that amount during 2004. The capital expenditures have been used to,
among other things, further automate the Company's cut and sew operations and
modernize yarn processing. The Company intends to invest approximately $35
million in capital improvements in the aggregate in 2005, which includes the
further automation of the cut and sew operations, continued modernization and
upgrading of distribution centers and continuation of various restructuring
projects. These capital programs have resulted, and are expected to continue to
result, in improved product quality, increased efficiency, lower costs and
shorter response time to customer orders. As of May 15, 2005, the Company
(including its subsidiaries) owns and utilizes approximately 14 manufacturing
facilities and leases and utilizes four manufacturing facilities. These
facilities are located primarily in the Southeastern United States. As a result
of our increased sourcing efforts, the Company has reduced its domestic
capacity. See "Item 2. Properties."

SOURCING

The Company has had a long-standing history of domestic and international
sourcing of selected component products such as specialty yarns and specialty
greige sheeting fabric for use in domestic production of Home Fashions products.
Today, the Company views sourcing as a means to drive business growth and
improve profitability by providing products and services that accelerate product
and packaging innovation resulting in a competitive market advantage. In 2004,
the Company imported both component and finished products from 22 countries and
has established strong relationships in several key export countries including
China, India, Pakistan and Turkey. To accelerate speed to market and improve
customer service, the Company successfully implemented third party logistics'
operations on the east coast. The Company continues to increase the number of
vendors and sourced product categories and estimates that sales from sourced
products accounted for roughly 29% of the Company's sales in 2004. Through
global sourcing operations, the categories of product offerings by the Company
to its customers has been significantly expanded to increase focus on high
growth product categories such as bath accessories, rugs and quilts.

The Company's policy on sourcing prohibits the purchase of merchandise that is
produced in whole or in part by indentured, prison or illegal immigrant or child
labor. The Company requires that vendors certify the locations used for the
production of products it purchases and that the vendors submit to compliance
inspections from the Company or its representatives to ensure that the Company
does not do business with suppliers who violate human rights.

RAW MATERIALS

The principal raw materials used in the manufacture of Home Fashions products
are cotton of various grades and staple lengths, polyester and nylon in staple
and filament form. Cotton, polyester and nylon presently are available from
several sources in quantities sufficient to meet the Company's requirements. The
Company is not dependent on any one supplier as a source of raw materials. Since
cotton is an agricultural product, its supply and quality are subject to weather
patterns, disease and other factors. The price of cotton is also influenced by
supply and demand considerations, both domestically and worldwide, and by the
cost of polyester. Although the Company has always been able to acquire
sufficient quantities of cotton for its operations in the past, any shortage in
the cotton supply by reason of weather, disease or other factors could adversely
affect the Company's operations. The price of man-made fibers such as polyester
and nylon is influenced by demand, manufacturing capacity and costs, petroleum
prices, cotton prices and the cost of polymers used in producing man-made
fibers. Any significant prolonged petrochemical shortages could significantly
affect the availability of man-made fibers and cause a substantial increase in
demand for cotton, resulting in decreased availability and, possibly, increased
price. The Company also purchases substantial quantities of dyes and chemicals.
Dyes and chemicals have been and are expected to continue to be available in
sufficient supply from a wide variety of sources. The Company also purchases
feathers and down for use as fill for certain products it produces. The supply
of feathers and down is influenced by many factors such as the rapidly growing
consumer demand in China and Asian influenza which could affect the amount of
feathers and down available for export. The Company anticipates that there will
be sufficient supply of feathers and down to meet its current demand.

SEASONALITY; CYCLICALITY; INVENTORY

Traditionally, the home fashions industry has been seasonal, with peak sales in
the fall. In accordance with industry practice, the Company increases its Home
Fashions' inventory levels during the first six months of the year to meet
customer demands for the fall peak season. The Company's commitment to EDI,
Quick Response, and Vendor Managed Inventory, however, has facilitated a more
even distribution of products throughout the calendar year and reduced some of
the need to stockpile inventory to meet peak season demands. The Company's
increased emphasis on sourcing of products is anticipated to increase the
inventory cycle times to account for transit time and quick peaks in demand.

The home fashions industry is also cyclical. While the Company's performance may
be negatively affected by downturns in consumer spending, management believes
the effects thereof are somewhat mitigated by the Company's large market shares
and broad distribution base.

BACKLOG ORDERS

The backlog of the Company's unfilled customer orders, believed by management to
be firm, was approximately $35 million at April 2, 2005, as compared with
approximately $60 million at March 27, 2004. The Company does not believe that
its backlogs are a meaningful indicator of its business due in part to its use
of Vendor Managed Inventory systems. The Company produces a majority of its
inventory to a sales forecast versus an order backlog in order to provide rapid
replenishment service to its customers.

COMPETITION

The home fashions industry is highly competitive. The Company competes on the
basis of price, quality, design and customer service, among other factors. In
the sheet, towel and blanket markets, the Company competes primarily with
Springs Industries, Inc. In the other bedding and accessories markets, the
Company competes with many companies, most of which are much smaller in size
than the Company. The Company has pursued a competitive strategy focused on
providing the best fashion, quality, service and value to its customers and to
the ultimate consumer. The Company believes that there has been a continuing
increase in the sale of imported Home Fashions products in the domestic market
which is expected to increase with the lifting of import quotas in 2005 and is
actively pursuing its own foreign sourcing opportunities to meet the demand for
such products. There can be no assurance that foreign competition will not grow
to a level that could have an adverse effect upon the Company's ability to
compete effectively.

OTHER OPERATIONS

The Company's operations also include Grifftex Chemicals ("Grifftex"), which
formulates chemicals primarily used in the Company's finishing processes, and
WestPoint Stevens Graphics ("Graphics"), which prints product packaging and
labeling. Neither Grifftex nor Graphics represent a material portion of the
Company's business.

RESEARCH AND DEVELOPMENT

Management believes that research and development in product innovation and
differentiation is important to maintain the Company's competitive edge. The
Company continually seeks to develop new specialty finishes and finishing
techniques that would improve fabric quality and enhance fabric aesthetics.
Research also is conducted to develop new products in response to changing
customer demands and environmental concerns. The Company has continued to invest
in product development to maintain a leadership position in the market place.

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the storage, handling, usage,
discharge and disposal of a variety of hazardous and non-hazardous substances
and wastes used in or resulting from its operations, including, but not limited
to, the Water Pollution Control Act, as amended; the Clean Air Act, as amended;
the Resource Conservation and Recovery Act, as amended; the Toxic Substances
Control Act; and the Comprehensive Environmental Response, Compensation and
Liability Act.

The Company's operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical, physical and ergonomic hazards in the workplace.

Although the Company does not expect that compliance with any of the
aforementioned laws and regulations will have a material adverse effect on its
capital expenditures, earnings or competitive position in the foreseeable
future, there can be no assurances that environmental requirements will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.

EMPLOYEES

The Company (including its subsidiaries) employed approximately 9,730 active
employees as of May 31, 2005. The Company believes that its relations with its
employees are excellent. The Company has not experienced a strike or work
stoppage by any of its unionized employees during the past 20 years. Currently,
less than 5% of the Company's employees are unionized.

The Company has developed an effective employee relations and communications
program that includes rules and regulations for employee conduct and procedures
for employee complaints. This long-standing program focuses on and, in the view
of management, has resulted in, strong, positive employee relations practices,
good working conditions, progressive human resources policies and expansive
safety programs.

OTHER FACTORS

This Annual Review includes "forward-looking statements," within the meaning of
the Private Securities Litigation Reform Act of 1995, with respect to the
Company's business, financial condition and results of operations. Statements
that use the terms "believe," "anticipate," "expect," "plan," "intend,"
"estimate," "project" and similar expressions in the affirmative and the
negative are intended to identify forward-looking statements. These statements
reflect the Company's current views with respect to future events and are based
on current assumptions, expectations, estimates and projections about the
Company's business and the markets in which it operates and are subject to risks
and uncertainties. Actual events (including the Company's results) could differ
materially from those anticipated in these forward-looking statements as a
result of various factors which include, but are not limited to, the following:
uncertainties exist related to the Company's having filed a chapter 11 petition
and the reorganization proceedings resulting therefrom; product margins may vary
from those projected; raw material prices may vary from those assumed;
additional reserves may be required for bad debts, returns, allowances,
governmental compliance costs, or litigation; there may be changes in the
performance of financial markets or fluctuations in foreign currency exchange
rates; unanticipated natural disasters could have a material impact upon results
of operations; there may be changes in the general economic conditions which
affect customer payment practices or consumer spending; competition for retail
and wholesale customers, pricing and transportation of products may vary from
time to time due to seasonal variations or otherwise; customer preferences for

our products can be affected by competition, or general market demand for
domestic or imported goods or the quantity, quality, price or delivery time of
such goods; there could be an unanticipated loss of a material customer or a
material license; there may be changes in governmental standards for the
Company's products that materially affect the cost of production or availability
of raw materials; the availability and price of raw materials could be affected
by weather, disease, energy costs or other factors. In addition, consideration
should be given to any other risks and uncertainties discussed in other
documents filed by the Company with the Securities and Exchange Commission.
Except as required by applicable law, the Company assumes no obligation to
update or revise publicly any forward-looking statements, whether as the result
of new information, future events or otherwise.

ITEM 2. PROPERTIES

The Company's properties are owned or leased directly and indirectly through its
subsidiaries. Management believes that the Company's facilities and equipment
are in good condition and sufficient for current operations. The Company owns
office space in West Point, Georgia, and Valley, Alabama, and leases various
additional office space, including approximately 140,000 square feet in New York
City, of which approximately 36,000 square feet is subleased to other tenants.
The Company also leases approximately 14,000 square feet elsewhere for other
administrative, storage and office space.

The Company and its subsidiaries own and utilize 14 manufacturing facilities
located in Alabama, Florida, Maine, North Carolina, and South Carolina which
contain in the aggregate approximately 6,010,480 square feet of floor space and
lease and utilize four manufacturing facilities in Alabama and North Carolina
which contain in the aggregate approximately 528,792 square feet of floor space.

The Company owns a chemical plant containing approximately 43,000 square feet of
floor space from which Grifftex Chemicals operates. In addition, the Company
owns a printing facility consisting of 38,000 square feet in which Graphics
prints product packaging and labeling.

The Company and its subsidiaries also own and operate 11 distribution centers
and warehouses for their operations which contain approximately 4,059,284 square
feet of floor space. In addition, the Company and its subsidiaries lease and
operate three distribution outlets and warehouses containing approximately
567,190 square feet of floor space.

WestPoint Stores owns two retail outlet stores and leases its 32 other retail
stores, all of which are dispersed throughout the United States.

The properties owned by the Company are subject to liens held by the Company's
secured lenders. See "Item 8. Financial Statements and Supplementary Data --
Notes to Consolidated Financial Statements -- 3. Indebtedness and Financial
Arrangements."

ITEM 3. LEGAL PROCEEDINGS

Except as stated below, as of the Petition Date, the following actions in which
the Company is a defendant have been enjoined from further proceedings pursuant
to section 362 of the Bankruptcy Code. To the extent parties have filed timely
proofs of claim, the Bankruptcy Court will determine the amount of their
pre-bankruptcy claims against the Company. In certain instances, the Bankruptcy
Court may permit actions to proceed to judgment for the purpose of determining
the amount of the pre-bankruptcy claim against the Company. Lawsuits based on
facts arising solely after the commencement of the Company's chapter 11 case are
not stayed by section 362 of the Bankruptcy Code.

On October 5, 2001, a purported stockholder class action suit, entitled Norman
Geller v. WestPoint Stevens Inc., et al. (the "Geller action"), was filed
against the Company and certain of its former officers and directors in the
United States District Court for the Northern District of Georgia. (A subsequent
and functionally identical complaint was also filed.) The actions were
consolidated by Order dated January 25, 2002. Plaintiffs served a Consolidated
Amended Complaint (the "Amended Complaint") on March 29, 2002. The Amended
Complaint asserted claims against all Defendants under ss. 10(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated
thereunder and against the Company and Defendant Holcombe T. Green, Jr. as
"controlling persons" under ss. 20(a) of the Exchange Act. The Amended Complaint
alleged that, during the putative class period (i.e., February 10, 1999, to
October 10, 2000), the Company and certain of its officers and directors caused
false and misleading statements to be issued regarding, inter alia, alleged
overcapacity and excessive inventories of the Company's towel-related products
and customer demand for such products and that certain Individual Defendants
wrongfully sold or pledged Company stock at inflated prices for their benefit.
The Amended Complaint referred to the Company's press releases and quarterly and

annual reports on Securities and Exchange Commission Forms 10-Q and 10-K, which
discussed the Company's results and forecasts for the fiscal years 1999 and
2000. Plaintiffs alleged that these press releases and public filings were false
and misleading because they failed to disclose that the Company allegedly "knew
sales would be adversely affected in future quarters and years." Plaintiffs also
alleged in general terms that the Company materially overstated revenues by
making premature shipments of products.

The Company's insurance carrier reached an agreement to settle the Geller action
at no cost to the Company. The settlement was approved by the Bankruptcy Court
and received final approval through a fairness hearing before the United States
District Court for the Northern District of Georgia on November 16, 2004.

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark v.
Holcombe T. Green, Jr., et al. (the "Clark action"), was filed against certain
of the Company's former directors and officers in the Superior Court of Fulton
County, Georgia. The Complaint alleged that the named individuals breached their
fiduciary duties by acting in bad faith and wasting corporate assets. The
Complaint also asserted claims under Georgia Code Ann. ss.ss. 14-2-740 to
14-2-747 and 14-2-831. The claims were based on the same or similar facts as
were alleged in the Geller action.

The Clark action was voluntarily dismissed on June 28, 2004.

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al. (the "Hemmer action"), was filed against Mr.
Green and certain of the Company's other current and former directors including
Messrs. Hugh M. Chapman, John F. Sorte and Ms. M. Katherine Dwyer in the Court
of Chancery in the State of Delaware in and for New Castle County. The Complaint
alleged that the named individuals breached their fiduciary duties and knowingly
or recklessly failed to exercise oversight responsibilities to ensure the
integrity of the Company's financial reporting. The Complaint also asserted that
certain of the named individuals used proprietary Company information in selling
or pledging Company stock at inflated prices for their benefit. The claims were
based on the same or similar facts as were alleged in the Geller action.

The Hemmer action was voluntarily dismissed on August 25, 2004.

On March 21, 2002, an Adversary Complaint of Debtors and Debtors in Possession
Against WestPoint Stevens Inc. was filed by Pillowtex, Inc., a Delaware
corporation, et al., and Pillowtex Corporation, et al., against the Company in
the United States Bankruptcy Court for the District of Delaware. Pillowtex
Corporation and its related and affiliated companies ("Pillowtex") as Debtors
and Debtors in Possession allege breach of a postpetition contract (the "Sale
Agreement") dated January 31, 2001, among Pillowtex, Ralph Lauren Home
Collection, Inc. ("RLH") and Polo Ralph Lauren Corporation ("PRLC") collectively
referred to as "Ralph Lauren" and the Company. Pillowtex alleges that the
Company refused to perform its purchase obligation under the Sales Agreement and
is liable to it for $4,800,000 plus potentially significant other consequential
damages. The Company believes that the complaint is without merit and intends to
contest the action vigorously. The case is currently stayed due to the Company's
bankruptcy filing.

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Company's facilities (including certain facilities no
longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company is cooperating fully with relevant parties and authorities in all
such matters. The Company believes that it has adequately provided in its
financial statements for any expenses and liabilities that may result from such
matters. The Company also is insured with respect to certain of such matters.
The Company's operations are governed by laws and regulations relating to
employee safety and health which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.

Although the Company does not expect that compliance with any of such laws and
regulations will adversely affect the Company's operations, there can be no
assurance such regulatory requirements will not become more stringent in the
future or that the Company will not incur significant costs in the future to
comply with such requirements.

The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business. It is the opinion of management that the aforementioned actions and
claims, if determined adversely to the Company, will not have a material adverse
effect on the financial condition or operations of the Company taken as a whole.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal year 2004, no matters were submitted by the
Company to a vote of its security holders.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company became eligible for trade reporting on the
Automated Confirmation Transaction Service ("ACT") under the ticker symbol
"WSPTQ.PK" effective May 9, 2005. Prior thereto, the Company's Common Stock was
quoted on the Over the Counter Bulletin Board ("OTCBB") under the ticker symbol
"WSPQE.OB." Such listing became effective on January 30, 2003. Prior thereto,
the Company's Common Stock was listed on the New York Stock Exchange ("NYSE")
under the ticker symbol WXS from October 15, 1999.

The following table presents the high and low sales prices of the Company's
Common Stock as reported by the NYSE and the high and low bid prices as reported
by the OTCBB, as applicable, for each full quarterly period within the two most
recent fiscal years:

Quarter Ended Share Price
------------- ------------------------------------------
2004 2003
---- ----
High Low High Low
---- --- ---- ---

March 31 $0.03 $0.01 $0.68 $0.26
June 30 $0.02 $0.01 $0.44 $0.02
September 30 $0.02 $0.01 $0.03 $0.01
December 31 $0.04 $0.01 $0.03 $0.01

Under its existing credit facilities, the Company is not permitted to pay
dividends. For an additional discussion of these restrictions on the payment of
dividends see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

As of April 20, 2005, there were approximately 3,700 holders of the Company's
Common Stock. Of that total, approximately 300 were stockholders of record and
approximately 3,400 held their stock in nominee name through the Depository
Trust Company.

The Company currently anticipates that all of the currently outstanding shares
of its Common Stock will be cancelled pursuant to the plan which it has proposed
under chapter 11 of the Bankruptcy Code.

WEBSITE ACCESS

Our website address is www.westpointstevens.com. You may obtain free electronic
copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports at our investor
relations website,
http://phx.corporate-ir.net/phoenix.zhtml?c=82626&p=irol-irhome under the
headings "Annual Reports" and "SEC Filings." You may also find our Code of
Business Conduct and Ethics and our Audit Committee Charter on our website under
the heading "Corporate Governance." These reports are available on our investor
relations website as soon as reasonably practicable after we electronically file
them with the SEC. The information on our website is not part of or incorporated
by reference in this Annual Review.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information as of December 31, 2004 (except as
otherwise specified in the footnotes).

- ------------------------------------------ ------------------------------ ------------------------- --------------------------------
Plan category Number of securities to be Weighted-average exercise Number of securities remaining
issued upon exercise of price of outstanding available for future issuance
outstanding options, warrants options, warrants and under equity compensation plans
and rights rights (excluding securities reflected
in column (a))
(a) (b) (c)
- ------------------------------------------ ------------------------------ ------------------------- --------------------------------

Equity compensation plans approved by
security holders 3,020,882 $16.91 3,259,220(1)(2)

- ------------------------------------------ ------------------------------ ------------------------- --------------------------------
Equity compensation plans not approved by
security holders 20,000 $14.50 41,351(3)

- ------------------------------------------ ------------------------------ ------------------------- --------------------------------
Total 3,040,882 $16.89 3,300,571(1)(2)(3)
- ------------------------------------------ ------------------------------ ------------------------- --------------------------------

(1) Includes 3,166,498 shares available for grant under the Omnibus Stock
Incentive Plan (the "OSIP"), 22,000 restricted shares granted but not vested
under the OSIP, 7,500 restricted shares vested but not issued under the OSIP,
43,926 shares earned but not vested and 19,296 shares vested but not issued
under the Key Employee Stock Bonus Plan (the "KESB Plan").

(2) The KESB Plan was first approved by equity holders at the Company's annual
meeting on May 15, 1996, and re-approved in amended form at the Company's annual
meeting on May 9, 2001. Under the terms of the KESB Plan the number of shares
available for issuance is not limited but is established by a formula in the
KESB Plan which is subject to administration by the Compensation Committee (the
"Committee") of the Board of Directors in its discretion. Under the KESB Plan,
each year participants, if any, are selected by the Committee to receive an
award entitling each participant to receive shares of Common Stock of the
Company in a number equal to the quotient obtained by dividing 80% of the
participant's base salary by the fair market value of one share of Common Stock
on the first day of the year; provided that such award is earned by the Company
achieving a pre-determined earnings per share established by the Committee
within the first ninety (90) days of the year. In February 2003, the Committee
suspended participation in the KESB Plan for 2003. Since filing its petition for
relief under chapter 11 of the Bankruptcy Code, the Company has not issued any
stock pursuant to the KESB Plan. The Company does not anticipate issuing any
additional shares of its Common Stock pursuant to the KESB Plan and anticipates
the KESB Plan will be terminated in the chapter 11 case.

(3) Includes 41,351 shares under the Company's Supplemental Retirement Plan
("SRP"). The Company's SRP provides for payment of amounts that would have been
paid under the WestPoint Pension Plan but for the limitations on covered
compensation and benefits applicable to qualified retirement plans imposed by
the Internal Revenue Code of 1986, as amended (the "Code"). For certain
participants, the compensation taken into account under the Supplemental
Retirement Plan is limited to the lesser of (i) $300,000 or (ii) 120% of the
participant's base salary. The Supplemental Retirement Plan is not qualified
under Section 401(a) of the Code and benefits are paid from the general assets
of the Company. The SRP was not approved by the security holders of the Company.
The Company does not anticipate issuing any additional shares of its Common
Stock pursuant to the SRP and anticipates the SRP will be terminated in the
chapter 11 case.

ITEM 6. SELECTED FINANCIAL DATA

Intentionally Omitted.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CHAPTER 11 CASE AND BASIS OF PRESENTATION

As more fully disclosed in Note 2 to the consolidated financial statements, on
June 1, 2003, the Company and several of its subsidiaries each commenced with
the Bankruptcy Court a voluntary case under chapter 11 of the Bankruptcy Code.
The Bankruptcy Code prevents creditors and other parties in interest from taking
certain actions, including enforcement actions, against the Debtors, without
first obtaining prior approval of the Bankruptcy Court. In addition, the Company
has entered into the DIP Credit Agreement, which is more fully described below.
On August 28, 2003, one of the Company's foreign subsidiaries, WestPoint Stevens
(Europe) Ltd., commenced an insolvency proceeding in the United Kingdom and is
in the process of being liquidated, and inactive subsidiaries have applied to be
dissolved.

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States on a going
concern basis. Except as otherwise disclosed, these principles assume that
assets will be realized and liabilities will be discharged in the ordinary
course of business. The Company is currently operating as a debtor in possession
under chapter 11 of the Bankruptcy Code, and its continuation as a going concern
is contingent upon, among other things, the confirmation by the Bankruptcy Court
of a chapter 11 plan of reorganization and its ability to comply with the DIP
Credit Agreement, return to profitability, generate sufficient cash flows from
operations and obtain financing sources to meet future obligations. There is no
assurance that the Company will be able to achieve any of these results. The
Company's consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might result from the outcome
of these uncertainties.

Whether as a result of its case under chapter 11 or otherwise, the Company may
sell or otherwise dispose of assets, and liquidate or settle liabilities, for
amounts other than those reflected in the financial statements. Additionally,
the amounts reported on the consolidated balance sheets could materially change
because of changes in business strategies and the effects of any proposed plan
of reorganization.

The Company's consolidated financial statements are presented in accordance with
AICPA Statement of Position 90-7 ("Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code") ("SOP 90-7"). In the chapter 11 case,
substantially all unsecured liabilities as of the Petition Date are subject to
compromise or other treatment under a plan of reorganization which must be
confirmed by the Bankruptcy Court after submission to any required vote by
affected parties. For financial reporting purposes, the categories of
liabilities and obligations whose treatment and satisfaction are dependent on
the outcome of the chapter 11 case have been classified as Liabilities Subject
to Compromise in the consolidated balance sheets. The ultimate amount of and
settlement terms for the Company's pre-bankruptcy liabilities are subject to the
ultimate outcome of its chapter 11 case and, accordingly, are not presently
determinable. Pursuant to SOP 90-7, professional fees associated with the
chapter 11 case are expensed as incurred and reported as reorganization costs
(chapter 11 expenses). Also, interest expense will be reported only to the
extent that it will be paid during the pendency of the chapter 11 case or that
it is probable that it will be an allowed claim.

SENIOR CREDIT FACILITY AND SECOND-LIEN FACILITY AMENDMENTS

Effective March 31, 2003, the Company's Senior Credit Facility was amended
primarily to provide for an interim facility limitation and to add an unused
commitment fee. At the option of the Company and effective with the last
amendment to the Senior Credit Facility, interest under the Senior Credit
Facility was payable monthly, either at the prime rate plus 5.25% or at LIBOR
plus 7.00%, compared to prime rate plus 2.75% or LIBOR plus 4.50% in effect at
December 31, 2002. Effective with the chapter 11 filing, loans under the Senior
Credit Facility are no longer available to the Company. Prior to the Petition
Date, the Company was also obligated to pay a facility fee in an amount equal to
0.50% of each Bank's commitment under the Revolver, and an unused commitment fee
in an amount equal to 1.00% of the difference between the revolver commitment
and the daily outstanding loans and letters of credit. As of the Petition Date,
the Company is no longer obligated to pay a facility fee or an unused commitment
fee for the Senior Credit Facility.

At March 31, 2003 and prior to the petition date, the Company was not in
compliance with certain of its covenants under the Senior Credit Facility and
Second-Lien Facility during which time the Company engaged in active discussions
with its senior lenders to obtain an amendment or waiver of such non-compliance
(See Note 2. Chapter 11 Filing where the chronology of the circumstances causing
the Company to file voluntary petition for reorganization under chapter 11 of
the U. S. Bankruptcy Code is discussed).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

DIP CREDIT AGREEMENT

The Company is a party to the DIP Credit Agreement which provides a facility
consisting of revolving credit loans of up to $300 million (with a sublimit of
$75 million for letters of credit) with an initial term of one year and an
initial maturity date of June 2, 2004. At its option, the Company may extend the
term for up to two successive periods of six months each. On April 28, 2004 and
November 1, 2004, the Company exercised its options to extend the DIP Credit
Agreement for additional six month periods, revising the maturity date to June
2, 2005. In March 2005, the Company initiated discussions with its DIP lenders
to extend the maturity date of the DIP Credit Agreement beyond June 2, 2005, and
on May 17, 2005 the Bankruptcy Court approved an amendment to the DIP Credit
Agreement extending the maturity date to the earliest to occur of December 2,
2005 or the consummation of a sale, pursuant to Section 363 of the Bankruptcy
Code or pursuant to a confirmed plan of reorganization or liquidation pursuant
to chapter 11 of the Bankruptcy Code.

Initial advances under the DIP Credit Agreement bore interest at a fluctuating
rate per annum equal to LIBOR plus a margin of 2.75% or, at the Company's
option, prime plus a margin of 0.75%. Each margin is subject to quarterly
adjustments, commencing November 1, 2003, pursuant to a pricing matrix, based on
average availability, having a range of 2.25% to 3.00% for LIBOR based loans and
0.25% to 1.00% for prime based loans. The DIP Credit Agreement also has an
unused line fee of 0.625% per annum, subject to quarterly adjustments as above
having a range of 0.375% to 0.75%. Effective November 1, 2003, as a result of
average availability, interest rates under the DIP Credit Agreement decreased to
LIBOR plus 2.50% or, at the Company's option, prime plus 0.50% and the unused
line fee decreased to 0.50%. Effective February 1, 2004, as a result of average
availability, interest rates under the DIP Credit Agreement increased to LIBOR
plus 2.75% or, at the Company's option, prime plus 0.75% and the unused line fee
increased to 0.625%. Effective February 1, 2005, as a result of average
availability, interest rates under the DIP Credit Agreement decreased to LIBOR
plus 2.50% or, at the Company's option, prime plus 0.50% and the unused line fee
decreased to 0.50%.

The DIP Credit Agreement contains a number of covenants, including among others,
affirmative and negative covenants with respect to certain financial tests and
other indebtedness, as well as restrictions against the declaration or payment
of dividends, the making of certain intercompany advances and the disposition of
assets without consent. The DIP Credit Agreement also contains Events of Default
(as defined in the DIP Credit Agreement) including among others, a failure to
pay the principal and interest of the obligations when due, default with respect
to any Debt (as defined in the DIP Credit Agreement) and a failure by the
Company to comply with any provisions of the Financing Orders (as defined in the
DIP Credit Agreement).

During the third quarter of 2003, the Company's DIP Credit Agreement was amended
primarily to modify the minimum EBITDA covenant, add a minimum availability
covenant, permit certain restructuring, impairment and other charges and modify
other miscellaneous provisions. During the second quarter of 2004, the Company's
DIP Credit Agreement was amended to clarify certain asset sale provisions, and
during the third quarter of 2004, the DIP Credit Agreement was amended primarily
to modify the minimum EBITDA and minimum availability covenants to permit
certain inventory reduction plans. During the fourth quarter of 2004, the
Company's DIP Credit Agreement was amended primarily to permit certain
restructuring, impairment and other charges and modify the minimum EBITDA and
minimum availability covenants. During the second quarter of 2005, the Company's
DIP Credit Agreement was amended primarily to modify certain miscellaneous
provisions related to audited financial statements and to extend the maturity
date beyond the originally stated maturity date including extension options. At
December 31, 2004, the Company was in compliance with its covenants under the
DIP Credit Agreement.

There can be no assurance, however, that the Company will be able to comply with
the debt covenants or that, if it fails to do so, it will be able to obtain
amendments to or waivers of such covenants. Failure of the Company to comply
with covenants contained in its DIP Credit Agreement, if not waived, or to
adequately service debt obligations, could result in a default under the DIP
Credit Agreement. Any default under the Company's DIP Credit Agreement,
particularly any default that results in acceleration of indebtedness or
foreclosure on collateral, could have a material adverse effect on the Company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESTRUCTURING, IMPAIRMENT, AND OTHER CHARGES

In 2000, the Company announced that its Board of Directors had approved an
Eight-Point Plan, which was created to be the guiding discipline for the Company
in a global economy. The Board also approved a pretax charge for restructuring,
impairment and other charges to cover the initial cost of implementing the
Eight-Point Plan that was designed to streamline operations and improve
profitability. The Eight-Point Plan addresses the following points: 1) expand
brands; 2) explore new licensing opportunities; 3) rationalize manufacturing; 4)
reduce overhead; 5) increase global sourcing; 6) improve inventory utilization;
7) enhance supply chain and logistics; and 8) improve capital structure.

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of its retail stores division. The Company initially
expected the restructuring initiatives to result in a $36.5 million pretax
charge for restructuring, impairment and other charges, with approximately $20
million of the pretax charge expected to be non-cash items. As a result of
additions to the initial restructuring initiatives related to the closure of its
Rosemary (NC) towel fabrication and distribution facilities and its WestPoint
Stevens (Europe) Ltd. foreign subsidiary, the Company's restructuring
initiatives resulted in a $47.7 million pretax charge for restructuring,
impairment and other charges, with approximately $31.7 million of the pretax
charge being non-cash items. All charges were recorded in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 146, Accounting for
Costs Associated with Exit or Disposal Activities and SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. The restructuring charge
approved in 2002 was completed in the second quarter of 2004.

As a result of the restructuring initiatives begun in 2002, the Company
announced the closure of its Rosemary (NC) towel finishing facility, the
conversion of its Rosemary (NC) towel fabrication and distribution facilities to
basic bedding facilities and the closure of its Dalton (GA) utility bedding
facility. The Company announced on April 25, 2003 that the Rosemary (NC) towel
fabrication and distribution facilities that were previously disclosed as being
converted to basic bedding facilities would now be closed. The Company also
announced the closure of twenty-two retail stores and the closure of its
WestPoint Stevens (Europe) Ltd. foreign subsidiary.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment charge
of $6.6 million, before taxes, in 2002, a restructuring and impairment charge of
$12.6 million, before taxes, in 2003 and a restructuring and impairment charge
of $0.4 million, before taxes, in 2004. The components of the restructuring and
impairment charge in 2002 included $4.4 million for the impairment of fixed
assets and $2.2 million in reserves to cover cash expenses related primarily to
severance benefits. The components of the restructuring and impairment charge in
2003 included $7.0 million for the impairment of fixed assets and $5.6 million
in reserves to cover cash expenses related to severance benefits of $5.2 million
and other exit costs. The components of the restructuring and impairment charge
in 2004 included $0.4 million in reserves to cover cash expenses related to
severance benefits.

During 2002, 2003 and 2004 as a result of restructuring initiatives approved in
2002, the Company has terminated and agreed to pay severance (including
continuing termination benefits) to approximately 500 employees.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESTRUCTURING, IMPAIRMENT, AND OTHER CHARGES--CONTINUED

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

EMPLOYEE OTHER
WRITEDOWN TERMINATION EXIT TOTAL
ASSETS BENEFITS COSTS CHARGE
-------- ---------- --------- ---------

2002 Restructuring and Impairment Charge:
Third Quarter $ 4.3 $ 1.6 $ - $ 5.9
Fourth Quarter 0.1 0.5 0.1 0.7
-------- ---------- --------- ---------
Total 2002 Charge 4.4 2.1 0.1 6.6

2003 Restructuring and Impairment Charge:
First Quarter 0.2 0.8 0.4 1.4
Second Quarter 6.8 4.3 0.8 11.9
Third Quarter 0.8 0.2 - 1.0
Fourth Quarter (0.8) (0.1) (0.8) (1.7)
-------- ---------- --------- ---------
Total 2003 Charge 7.0 5.2 0.4 12.6

2004 Restructuring and Impairment Charge:
First Quarter - 0.2 - 0.2
Second Quarter - 0.2 - 0.2
-------- ---------- --------- ---------
Total 2004 Charge - 0.4 - 0.4

Writedown Assets to Net Recoverable Value (11.4) - - (11.4)
2002 Cash Payments - (1.5) - (1.5)
2003 Cash Payments - (4.6) (0.4) (5.0)
2004 Cash Payments - (1.6) (0.1) (1.7)
-------- ---------- --------- ---------
Balance at December 31, 2004 $ - $ - $ - $ -
======== ========== ========= =========

During 2002, other costs of the restructuring initiatives of $11.6 million,
before taxes, were recognized consisting of inventory writedowns of $10.5
million primarily related to the rationalization of its retail stores division
and other expenses of $1.1 million, consisting primarily of related unabsorbed
overhead, all reflected in cost of goods sold. During 2003, other costs of the
restructuring initiatives of $16.0 million, before taxes, were recognized
consisting of inventory writedowns of $8.4 million primarily related to the
closure of its foreign subsidiary and the rationalization of its retail stores
division, accounts receivable writedowns for claims of $1.4 million related to
the closure of its foreign subsidiary and other expenses of $6.2 million,
consisting primarily of $4.1 million of related unabsorbed overhead, $1.2
million for the relocation of machinery and other expenses of $0.9 million, all
reflected in cost of goods sold. During 2004, other costs of the restructuring
initiatives of $0.4 million, before taxes, were recognized for relocation of
machinery, all reflected in cost of goods sold.

- --------------------------------------------------------------------------------

During the third quarter of 2003, the Company's Board of Directors approved
additional restructuring initiatives to increase asset utilization, lower
manufacturing costs and increase cash flow and profitability through a further
realignment of manufacturing capacity. Costs of restructuring initiatives may
result in restructuring, impairment and other pretax charges of up to $84.3
million, of which up to $55.6 million of the pretax charge may relate to
non-cash items. The charges for the restructuring initiatives began in the
fourth quarter of 2003 and will continue into 2005 in accordance with SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities, SFAS No.
112, Employers' Accounting for Postemployment Benefits and SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESTRUCTURING, IMPAIRMENT, AND OTHER CHARGES--CONTINUED

As a result of the restructuring initiatives begun in 2003, the Company
announced the closure of its Dunson (GA) sheeting facility, its Dixie (GA) towel
facility, its Coushatta (LA) utility bedding facility, its Fairfax (AL) towel
greige facility and its Longview (NC) bed accessory facility (which was
announced on October 1, 2004). The Company also announced the conversion of its
Lanier (AL) sheeting facility to towel production and the conversion of its
Greenville (AL) blanket facility to a utility bedding facility. The Company is
in the process of determining any remaining facilities that may be affected by
its ongoing reorganization efforts. These plant closings and conversions will
provide the Company with greater production efficiency and better-aligned
capacity to compete more effectively in a global economy.

The cost of the manufacturing rationalization was reflected in a restructuring
and impairment charge of $37.0 million, before taxes, in 2003 and a
restructuring and impairment charge of $19.0 million, before taxes, in 2004. The
restructuring and impairment charge in 2003 reflected the impairment of fixed
assets. The components of the restructuring and impairment charge in 2004
included $9.4 million for the impairment of fixed assets and $9.6 million in
reserves to cover cash expenses related to severance benefits.

During 2004 and 2005 as a result of restructuring initiatives approved in 2003,
the Company has terminated and agreed to pay severance (including continuing
termination benefits) to approximately 650 employees.

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

EMPLOYEE OTHER
WRITEDOWN TERMINATION EXIT TOTAL
ASSETS BENEFITS COSTS CHARGE
---------- -------- --------- ---------

2003 Restructuring and Impairment Charge:
Fourth Quarter $ 37.0 $ - $ - $ 37.0

2004 Restructuring and Impairment Charge:
First Quarter - 4.6 - 4.6
Second Quarter 1.8 1.5 - 3.3
Third Quarter 7.6 2.8 - 10.4
Fourth Quarter - 0.7 - 0.7

Total 2004 Charge 9.4 9.6 - 19.0
---------- -------- --------- ---------
Writedown Assets to Net Recoverable Value (46.4) - - (46.4)
2004 Cash Payments - (6.8) - (6.8)
---------- -------- --------- ---------
Balance at December 31, 2004 $ - $ 2.8 $ - $ 2.8
========== ======== ========= =========

During 2003, other costs of the restructuring initiatives of $1.4 million,
before taxes, were recognized consisting of inventory writedowns of $1.0 million
and other expenses of $0.4 million, consisting of related unabsorbed overhead,
all reflected in cost of goods sold. During 2004, other costs of the
restructuring initiatives of $16.4 million, before taxes, were recognized
consisting of $1.7 million for inventory writedowns, $9.8 million of related
unabsorbed overhead, $4.7 million for the relocation of machinery and other
expenses of $0.2 million, all reflected in cost of goods sold.

- --------------------------------------------------------------------------------

During the third quarter of 2004, the Company's Board of Directors, as part of
the development of a revised business plan, approved additional restructuring
initiatives to increase asset utilization, lower manufacturing costs and
increase cash flow and profitability. Costs of restructuring initiatives may
result in restructuring, impairment and other pretax charges of up to $226.8
million, of which up to $139.1 million of the pretax charge may relate to
non-cash items (including accelerated depreciation expense). The charges for the
restructuring initiatives began in the fourth quarter of 2004 and will continue

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESTRUCTURING, IMPAIRMENT, AND OTHER CHARGES--CONTINUED

into 2006 in accordance with SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, SFAS No. 112, Employers' Accounting for
Postemployment Benefits and SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.

As a result of the restructuring initiatives begun in 2004, the Company
announced the closure of its Alamance (SC) sheet fabrication and distribution
facility, its Clemson (SC) greige sheeting, fabrication and distribution
facility, its Middletown (IN) utility bedding facility, its Sparks (NV) utility
bedding facility and its Drakes Branch (VA) towel greige facility. The Company
also announced a significant reduction in workforce at its Clemson (SC)
finishing plant. The Company is in the process of determining any remaining
facilities that may be affected by its ongoing reorganization efforts. These
plant closings will provide the Company with greater production efficiency and
better-aligned capacity to compete more effectively in a global economy.

The cost of the manufacturing rationalization was reflected in a restructuring
and impairment charge of $33.1 million, before taxes, in 2004 and consisted of
reserves to cover cash expenses related to severance benefits.

During 2005 as a result of restructuring initiatives approved in 2004, the
Company has terminated and agreed to pay severance (including continuing
termination benefits) to approximately 1,900 employees.

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

EMPLOYEE OTHER
WRITEDOWN TERMINATION EXIT TOTAL
ASSETS BENEFITS COSTS CHARGE
--------- ---------- -------- ---------

2004 Restructuring and Impairment Charge:
Fourth Quarter $ - $ 33.1 $ - $ 33.1

2004 Cash Payments - (0.1) - (0.1)
--------- ---------- -------- ---------
Balance at December 31, 2004 $ - $ 33.0 $ - $ 33.0
========= ========== ======== =========

EXECUTIVE SUMMARY

OVERVIEW

The Company operates exclusively in the home fashions industry and recognizes
revenue primarily through the sale of Home Fashion products to a variety of
retail and institutional customers. The Company also operates 34 retail outlets
that sell Home Fashion products including but not limited to WestPoint Stevens'
home fashion products. In addition, the Company receives a small portion of its
revenues through the licensing of its trade names. For a more detailed
description of the Company see "Item 1. Business."

INDUSTRY AND COMPANY PROFILE

Cyclicality

The home fashion textile industry has traditionally been a cyclical industry.
The practical effect of a down cycle on manufacturing companies, including the
Company, is stress on any balance sheet which has a large debt load and pressure
on profitability caused by under utilization of plant and equipment.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

EXECUTIVE SUMMARY--CONTINUED

INDUSTRY AND COMPANY PROFILE--CONTINUED

Growth of Imports

The easing of trade restrictions over time has led to growing competition from
low priced imported product. This issue will be amplified by the lifting of
import quotas on January 1, 2005. Imported sheets and towels have captured 50%
and 65%, respectively, of the U.S. market in 2004 according to U.S. Census data.
Domestic suppliers, including the Company, have contributed to the import total
by buying product overseas for resale domestically. Approximately 29% of the
Company's 2004 sales were of imported goods. During the past five years, the
Company has closed sixteen domestic manufacturing facilities in favor of
importing those products.

Retail Consolidation

Retailers of consumer goods have become fewer and more powerful over time. As
buying power has become more concentrated, pricing pressure on vendors has
grown. With the ability to buy imported product directly from the foreign
source, this pricing leverage has increased. The result has been a negative
effect on unit pricing and margins earned on domestically produced products. To
combat this trend, domestic producers, such as the Company, are aggressively
importing competitively priced goods and utilizing domestic distribution
capabilities and the ability to deliver large volumes on short notice to
maintain their value to the retail customers.

External Events

Sales and availability of consumer goods are directly impacted by external
events. The attacks of 9/11 severely impacted retail sales and vendor shipments
nationwide. The west coast dock strike in 2003 kept imported goods from reaching
their destinations and was an advantage for domestic suppliers. Snowstorms in
2004 slowed retail sales and closed production facilities.

Raw Material Pricing and Availability

Textile profitability is affected more by raw material pricing than any other
single variable. A one cent per pound change in cotton pricing can have an
enormous effect on product profitability. Over the past three years the price of
cotton has varied by as much as twenty cents per pound, both up and down. The
Company employs a hedging strategy to smooth the volatility of the cotton market
and to reduce uncertainty in costing. Other raw materials are feathers and down
for pillows and comforters and also polyester for sheeting and pillows. Feathers
and down are generally imported from China. Pricing is subject to vacillations
in supply caused by any number of things. Polyester prices vary with the price
of petroleum.

Working Capital Management

Inventory management is the most critical variable to the success of a textile
company. Inventory is produced or sourced prospectively based on customer
provided forecasts in order to be ready to ship on a quick response basis.
Growing sophistication of retail systems has provided the customer with the
ability to recognize trends rapidly and to change forecasts on much shorter
notice than in the past. This ability presents unique challenges to the
manufacturer who produces or sources inventory in advance of anticipated orders.
To manage inventory balances, the Company has moved to smaller lot sizes in some
cases, but most importantly, the Company has chosen to curtail production where
necessary in order not to create unwanted inventory. Curtailment has a negative
effect on profitability but preserves cash that would have otherwise been
invested in inventory.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RECONCILIATION TO GAAP

The 2004 consolidated financial statements presented in this document are
unaudited and are substantially in accordance with GAAP, but differ from GAAP in
regards to the recorded income tax provision. During the 2004 audit (that has
not yet been finalized), it was determined that the Company's income tax
contingency reserves were excessive, and that certain of the reserves should
have been released in prior periods, some dating back several years. Taking into
account the Company's overall tax situation (see Note 6. Income Taxes) and in
conjunction with proposed prior period restatements of the income tax
provisions, the 2004 income tax provision on a GAAP basis would be an income tax
expense of $5.2 million as opposed to the indicated income tax benefit of $17.1
million. The 2004 net loss on a GAAP basis would be a loss of $172.3 million as
opposed to the indicated loss of $150.0 million. Overall net deferred taxes
reflected in the December 31, 2004 unaudited balance sheet are recorded at zero
and would not be impacted. However, certain prior periods financial statements
would be impacted by the restatement, the amounts of which have not yet been
determined.

RESULTS OF OPERATIONS

The table below is a summary of the Company's operating results for the year
ended December 31, 2004 (in millions of dollars and as percentages of net
sales).

YEAR ENDED DECEMBER 31,
-------------------------------------
2004 2003 2002
---- ---- ----

Net sales $1,618.7

Gross earnings $ 223.7

Restructuring and impairment charge $ 52.5

Fixed asset impairment charge $ 7.9

Operating loss $ (46.4)

Interest expense $ 78.3

Other expense-net $ 7.8

Chapter 11 expenses $ 34.6

Loss from operations before taxes $ (167.1)

Net loss $ (150.0)

Gross margin 13.8%

Operating margin (2.9%)

2004 COMPARED WITH 2003

NET SALES. Net sales for the year ended December 31, 2004 decreased $27.5
million, or 1.7%, to $1,618.7 million compared with net sales of $1,646.2
million for the year ended December 31, 2003. The decrease resulted primarily
from lower bed products sales, lower retail store sales due to store closures
and the closure of our UK operation in 2003, which more than offset increased
bath product sales. From a channel perspective, growth with mass merchants and
specialty stores was offset by sales declines to department stores.

For the year ended December 31, 2004, bed product sales were $939.2 million
compared with $955.5 million in 2003, bath product sales were $558.3 million in
2004 compared with sales of $535.1 million in 2003 and other sales (consisting
primarily of sales from the Company's retail stores and foreign operations) were
$121.1 million compared with $155.6 million in 2003.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESULTS OF OPERATIONS--CONTINUED

2004 COMPARED WITH 2003--CONTINUED

GROSS EARNINGS/MARGIN. Gross earnings for the year ended December 31, 2004 of
$223.7 million decreased $60.2 million or 21.2%, compared with $283.9 million
for 2003 and reflect a gross margin of 13.8% in 2004 and 17.2% in 2003. Included
in gross earnings were costs related to restructuring initiatives of $16.8
million in 2004, the majority of which reflected costs for unabsorbed overhead
at affected facilities and equipment relocation and $17.4 million in 2003, which
reflected costs for unabsorbed overhead at affected facilities and inventory
write-offs primarily related to the rationalization of the retail stores
division. Gross earnings and margins decreased primarily as a result lower
sales, a higher level of sell-offs to reduce inventory levels, increased raw
material costs, accelerated depreciation related to anticipated plant closings
and reduced manufacturing efficiencies due to production curtailment which more
than offset favorable accounting adjustments to reserves for workers
compensation.

FIXED ASSET IMPAIRMENT CHARGE. The Company recognized a $7.9 million charge for
impairment of certain fixed assets for the year ended December 31, 2004 as a
result of an evaluation of the recoverability of the Company's fixed assets
during the third quarter of 2004.

GOODWILL IMPAIRMENT CHARGE. The Company recognized a $46.3 million goodwill
impairment charge in 2003 that resulted from certain triggering events that
occurred during the period including the Company's chapter 11 filing.

OPERATING EARNINGS/MARGIN. Selling, general and administrative expenses of
$209.6 million in 2004 were 9.5%, or $21.9 million, below 2003 selling, general
and administrative expenses of $231.5 million and resulted primarily from lower
selling expenses and administrative expenses due to the rationalization of the
retail stores division, the closure of our UK operation and other cost reduction
efforts, plus lower bad debt expenses and the elimination of the trade
receivables program.

Operating earnings for the year ended December 31, 2004 were a loss of $46.4
million compared with a loss of $43.6 million for 2003. Included in operating
earnings for the years ended December 31, 2004 and 2003 were costs related to
restructuring initiatives of $69.3 million and $67.1 million, respectively,
including a restructuring and impairment charge of $52.5 million and $49.6
million, respectively (see Restructuring, Impairment and Other Charges
previously discussed). The Company recorded a $7.9 million fixed asset
impairment charge related to certain anticipated plant closures with no
counterpart in 2003. In 2003 the Company recorded a $46.3 million goodwill
impairment charge with no counterpart in 2004.

INTEREST EXPENSE. Interest expense for the year ended December 31, 2004, of
$78.7 million decreased $23.6 million compared with interest expense for the
year ended December 31, 2003. Effective with the Company's chapter 11 filing,
interest is no longer accrued on the Senior Notes due 2005 and 2008, the impact
of which was $78.8 million for 2004 and $46.3 million for 2003. The decrease in
interest expenses was offset by higher interest rates on the Company's variable
rate bank debt compared with corresponding 2003 average interest rates.

OTHER EXPENSE-NET. Other expense-net decreased $9.8 million for the year ended
December 31, 2004, to $7.8 million from $17.6 million for the year ended
December 31, 2003. Charges in 2004 primarily included the amortization of
deferred financing fees of $12.5 million, less certain miscellaneous income
items including a $6.3 million gain on the sale of assets compared with other
expense-net in 2003 of $17.6 million that included $4.9 million in transaction
costs associated with an unsuccessful acquisition effort and the amortization of
deferred financing fees of $12.3 million.

CHAPTER 11 EXPENSES. The Company recognized $34.6 million in bankruptcy
reorganization related expenses in 2004 compared with $31.5 million of expenses
in 2003. In 2004 these expenses consisted primarily of $4.0 million related to
amortization of fees associated with the DIP Credit agreement, $0.5 million in
severance associated with the resignation of the Company's former Chairman and
Chief Executive Officer, $12.4 million for performance bonuses under a court
approved key employee retention program and $17.7 million related to fees
payable to professionals retained to assist with the chapter 11 case. In 2003

these expenses consisted primarily of $4.9 million related to the early
termination of the Company's Trade Receivables Program, $3.6 million related to
amortization of fees associated with the DIP Credit agreement, $1.3 million in
severance associated with the resignation of the Company's former Chairman and
Chief Executive Officer, $7.6 million for performance bonuses under a court
approved key employee retention program and $14.1 million related to fees
payable to professionals retained to assist with the chapter 11 case.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

RESULTS OF OPERATIONS--CONTINUED

2004 COMPARED WITH 2003--CONTINUED

INCOME TAX EXPENSE (BENEFIT). In 2004 and 2003, the Company recorded a tax
benefit of $17.1 million and $61.3 million, respectively. The Company's
effective tax rate was 10.2% in 2004 and 31.5% in 2003. The decrease in the
effective tax rate was due primarily to non-deductible items related to the
Company's chapter 11 expenses and the Company's overall net deferred tax
position. See Reconciliation to GAAP discussed above and Note 6 where income
taxes are discussed further.

NET LOSS. Net loss for fiscal year 2004 was $150.0 million, or a loss of $3.01
per share diluted, and net loss for 2003 was $133.3 million, or a loss of $2.67
per share diluted. Included in net loss for the years ended December 31, 2004,
and 2003 were costs related to restructuring initiatives, net of taxes, of $44.4
million and $42.9 million, respectively, as previously discussed, in addition to
charges for chapter 11 expenses, the fixed asset impairment charge and the
goodwill impairment charge, also previously discussed. See Reconciliation to
GAAP discussed above.

Diluted per share amounts are based on 49.9 million average shares outstanding
for 2004 and 2003, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

These policies are considered "critical" because they have the potential to have
a material impact on the Company's financial statements and because they require
judgments and estimation due to the uncertainty involved in measuring, at a
specific point in time, events which are continuous in nature.

The Company's Consolidated Financial Statements are prepared in accordance with
accounting principles generally accepted in the United States, which require the
Company to make estimates and assumptions. See Note 1 -- Summary of Significant
Accounting Policies in the Notes to Consolidated Financial Statements.
Management believes that the following are some of the more critical judgment
areas in the application of the Company's accounting policies that currently
affect financial condition and results of operations.

Basis of Presentation. The Company's consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States on a going concern basis. Except as otherwise disclosed, these
principles assume that assets will be realized and liabilities will be
discharged in the ordinary course of business. The Company is currently
operating as a debtor in possession under chapter 11 of the Bankruptcy Code, and
its continuation as a going concern is contingent upon, among other things,
confirmation by the Bankruptcy Court of a chapter 11 plan or reorganization and
its ability to comply with the DIP Credit Agreement, return to profitability,
generate sufficient cash flows from operations and obtain financing sources to
meet future obligations. There is no assurance that the Company will be able to
achieve any of these results. The Company's consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might result from the outcome of these uncertainties.

The Company's consolidated financial statements included elsewhere in this
report are presented in accordance with AICPA Statement of Position 90-7
("Financial Reporting by Entities in Reorganization Under the Bankruptcy Code")
("SOP 90-7"). In the chapter 11 case, substantially all unsecured liabilities as
of the Petition Date are subject to compromise or other treatment under a plan
of reorganization which must be confirmed by the Bankruptcy Court after
submission to any required vote by affected parties. For financial reporting
purposes, the categories of liabilities and obligations whose treatment and
satisfaction are dependent on the outcome of the chapter 11 case and classified
as Liabilities Subject to Compromise in the consolidated balance sheets under
SOP 90-7 are identified below (in thousands):

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

CRITICAL ACCOUNTING POLICIES AND ESTIMATES--CONTINUED

DECEMBER 31,
---------------------------------
2004 2003
---------- ----------

Senior Notes due 2005 and 2008:
Senior Notes outstanding $1,000,000
Related accrued interest 36,313
Related deferred financing fees
(less accumulated amortization of $16,569) (4,647)
---------- ----------
Total 1,031,666
Accounts payable 30,669
Pension liabilities 8,394
Other accrued liabilities 18,762
---------- ----------
Total $1,089,491
========== ==========

The ultimate amount of and settlement terms for the Company's pre-bankruptcy
liabilities are subject to the ultimate outcome of its chapter 11 case and,
accordingly, are not presently determinable. Pursuant to SOP 90-7, professional
fees associated with the chapter 11 case are expensed as incurred and reported
as reorganization costs (chapter 11 expenses). Also, interest expense will be
reported only to the extent that it will be paid during the pendency of the
chapter 11 case or that it is probable that it will be an allowed claim. During
2004, the Company recognized charges of $34.6 million for chapter 11 expenses
consisting of $12.4 million for performance bonuses under a court approved Key
Employee Retention Program, $4.0 million related to the amortization of fees
associated with the DIP Credit Agreement, $0.5 million in severance associated
with the resignation of the Company's former Chairman and Chief Executive
Officer and $17.7 million related to fees paid to professionals retained to
assist with the chapter 11 case. During 2003, the Company recognized charges of
$31.5 million for chapter 11 expenses, consisting of $4.9 million related to the
early termination of the Company's Trade Receivables Program, $1.3 million in
severance associated with the resignation of the Company's former Chairman and
Chief Executive Officer, $7.6 million for performance bonuses under a court
approved Key Employee Retention Program, $3.6 million related to the
amortization of fees associated with the DIP Credit Agreement and $14.1 million
related to fees payable to professionals retained to assist with the chapter 11
case.

Accounts Receivable. The Company maintains returns and allowances reserves as
well as reserves for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The estimation process
requires management to make assumptions based on historical results, future
expectations, the economic and competitive environment, changes in credit
worthiness of customers, and other relevant factors. Changes in these key
assumptions can have a significant impact on ultimate cash collections.

The Company believes that the accounting estimate related to the establishment
of the allowance for doubtful accounts and the associated provisions in the
results of operations is a "critical accounting estimate" because: (1) it
requires Company management to make assumptions about the future collectibility
of current balances due, as well as the future economic viability of the
Company's customer base; and (2) the impact of changes in actual collections
versus these estimates could have a material impact on the Company's financial
statements. In selecting these assumptions, the Company uses historical trending
of write-offs, returns and allowances, overdue status and credit ratings of its
customers, estimates of ultimate recoverability from customers in bankruptcy,
and other current market indicators about general economic conditions that might
impact the collectibility of accounts.

Management believes that its estimates are conservative; however, if the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

CRITICAL ACCOUNTING POLICIES AND ESTIMATES--CONTINUED

Inventories. The Company maintains market reserves for estimated obsolete,
excess, aged or off-quality inventories in order to properly state inventories
at lower of cost or market (net realizable value). Differences between the cost
of inventory and the estimated market value are based upon assumptions about
future demand, channels of distribution, and market conditions. Changes in these
market assumptions can have a significant impact on the estimated net realizable
value of inventories.

The Company believes that the accounting estimates related to the establishment
of inventory market reserves and the associated provisions in the results of
operations is a "critical accounting estimate" because: (1) it requires Company
management to make assumptions about future product demand and overall sales
prices; and (2) the impact of changes in realized sales prices versus these
estimates could have a material impact on the Company's financial statements. In
selecting these assumptions, the Company uses historical trending of write-downs
and other current market indicators about general economic conditions that might
impact the realizability of inventories. As a result of our consideration of
these factors, during 2004 the Company recorded $1.7 million of inventory
write-downs primarily related to plant closures, resulting from restructuring
initiatives.

Management believes that its estimates are conservative; however, if market
conditions were to deteriorate, resulting in a markdown of sales prices,
additional reserves may be required.

Long-lived Asset Recovery. A significant portion of the Company's total assets
consists of long-lived assets, consisting primarily of property, plant and
equipment ("PP&E"). Changes in the Company's intended use of these assets, as
well as changes in broad economic or industry factors, may cause the estimated
period of use or the value of these assets to change. As a part of the
bankruptcy process, the Company continues to review its domestic manufacturing
capacities which could result in future plant rationalizations.

PP&E are evaluated for impairment whenever indicators of impairment exist.
Accounting standards require that if an impairment indicator is present, the
Company must assess whether the carrying amount of the asset is unrecoverable by
estimating the sum of the future cash flows expected to result from the asset,
undiscounted and without interest charges. If the carrying amount is more than
the recoverable amount, an impairment charge must be recognized, based on the
fair value of the asset.

The Company believes that the accounting estimate related to asset impairment is
a "critical accounting estimate" because: (1) it requires Company management to
make assumptions about future revenues and costs of sales over the life of the
asset; and (2) the impact of recognizing an impairment could be material to the
Company's financial statements. Management's assumptions about future revenues
and cost of sales require significant judgment and could differ from actual
results due to changing market conditions and overall product demand.

During the third quarter of 2004, the Company recorded an impairment charge of
$7.9 million attributable to certain fixed assets. As a result of the Board of
Directors approval of certain restructuring initiatives that are contemplated in
the Company's revised business plan, the Company evaluated the recoverability of
long-lived assets and wrote down $7.9 million of fixed assets. The Company was
required to reduce the carrying value of certain fixed assets to fair value, and
recorded a fixed asset impairment charge because the carrying value of the
affected fixed assets exceeded the related projected future undiscounted cash
flows. Fair value was determined from market values obtained from third party
appraisers.

During 2004 and as a result of the Board of Directors approval of the Company's
revised business plan, the Company also recorded accelerated depreciation
expense of $34.2 million on certain fixed assets, other than those fixed assets
that were impacted by the long-lived asset impairment charge. The Company
adjusted the remaining depreciable lives for the affected fixed assets to be
consistent with assumptions in the Company's revised business plan. The
accelerated depreciation expense is reflected in cost of goods sold in the
accompanying statements of operations.

During 2004, the Company identified certain PP&E that became impaired as a
result of restructuring initiatives and related plant closures. The writedown of
PP&E during 2004 resulted in a total of $9.4 million of PP&E being impaired.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

CRITICAL ACCOUNTING POLICIES AND ESTIMATES--CONTINUED

Customer Incentives. The Company maintains reserves for accommodations and
incentives that are frequently granted to customers under its sales programs.
The estimation process requires management to make assumptions regarding
potential credits to be taken by customers based on historical experience and
contracted amounts. Changes in these key assumptions could have a significant
impact on ultimate credits granted.

The Company believes that the accounting estimates related to the establishment
of the reserves for customer accommodations and incentives and the associated
provisions in the results of operations is a "critical accounting estimate"
because: (1) it requires the Company to make assumptions regarding the customer
incentives to be taken and (2) the impact of actual incentives taken versus
these estimates could have a material impact on the Company's financial
statements.

Legal Reserves. We are a party to legal proceedings with respect to a variety of
matters in the ordinary course of business. Except as described in Note 10 to
the consolidated financial statements included herein, the Company does not
believe that any legal proceedings to which it is a party would have a material
adverse impact on its business or prospects.

In accordance with Statement of Financial Accounting Standards No. 5, Accounting
for Contingencies, the Company accrues legal costs that are expected to be
incurred to defend against certain litigation. Estimates of legal reserves are
determined in consultation with outside counsel. The Company believes that the
accounting estimate related to legal reserves is a "critical accounting
estimate" because: (1) it requires management to make estimates of the ultimate
legal liability to defend a case, and (2) changes in the estimated amount or
timing of legal costs can significantly impact results of operations. Outside of
foreseeable legal costs, if it is not currently possible to estimate the impact,
if any, that the ultimate resolution of legal proceedings will have on our
financial statements, no accrual is made, consistent with Statement 5.

Employee Benefit Plan Assumptions. Retirement benefits are a significant cost of
doing business for the Company and represent obligations that will be settled
far in the future. Retirement benefit accounting is intended to reflect the
recognition of the future benefit costs over the employee's approximate service
period based on the terms of the plans and the investment and funding decisions
made by the Company. The accounting requires that management make assumptions
regarding such variables as the return on assets, the discount rate and future
health care costs. Changes in these key assumptions can have a significant
impact on the projected benefit obligation and periodic benefit cost incurred by
the Company.

The Company believes that the accounting estimate related to retirement benefit
accounting is a "critical accounting estimate" because: (1) it requires Company
management to make assumptions about discount rates, future health care costs,
and future return on assets funding the obligation; and (2) the impact of
changes in actual performance versus these estimates would have on the projected
benefit obligation reported on our balance sheet and the benefit cost could be
material. The method of determining pension obligations requires assumptions
concerning market performance. Market performance has fluctuated in the recent
past and could have continued volatility in the future. In selecting these
assumptions, the Company uses historical experience as well as objective indices
as benchmarks, and tests the benchmarks against historical industry data on
these assumptions provided by an independent actuary.

An increase in the discount rate and in the expected return on assets would
reduce the reported benefit obligations and benefit costs. In contrast, if the
discount rate in 2004 were 25 basis points lower, it would generate a $12.0
million increase in the projected benefit obligations and a $1.2 million
increase in benefit costs. Similarly, if the expected return on assets
assumption were 25 basis points lower, it would generate a $0.6 million increase
in the benefit costs. Reasonable changes in the estimate of health care cost
assumptions would not materially affect the benefit obligations or related
benefit costs for a single year.

EFFECTS OF INFLATION

The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

LIQUIDITY AND CAPITAL RESOURCES

So long as the Company remains under the protection of chapter 11 of the
Bankruptcy Code, its principal sources of liquidity are expected to be cash
generated from its operations and funds available under the DIP Credit
Agreement. The maximum commitment under the DIP Credit Agreement is $300
million. At May 7, 2005, borrowing availability under the DIP Credit Agreement
was $140.0 million and consisted of a calculated borrowing base of $228.2
million less outstanding loans of $54.4 million, outstanding letters of credit
of $28.8 million and other reserves of $5.0 million. For additional information
about the DIP Credit Agreement, see "-- DIP Credit Agreement" above.

During the pendency of its chapter 11 case, the Company's principal uses of cash
will be administrative expenses of the chapter 11 case, operating expenses,
capital expenditures and debt service (including both interest payments under
the DIP Credit Agreement and whatever payments may be made in respect of
pre-petition debt in accordance with orders of the Bankruptcy Court).

At December 31, 2004, the Company's major contractual obligations were as
follows (in millions of dollars):

LATER
TOTAL 2005 2006 2007 2008 2009 PERIODS
----- ---- ---- ---- ---- ---- -------

Senior Notes (1) $1,000.0 $ 525.0 $ - $ - $475.0 $ - $ -
Senior Credit Facility (2) 483.9 483.9 - - - - -
Second-Lien Facility (3) 165.0 165.0 - - - - -
DIP Credit Agreement 58.1 58.1 - - - - -
Operating Leases 42.3 13.0 12.1 6.8 4.1 3.3 3.0
Inventory Contracts 31.6 31.6 - - - - -
Pension Contributions 14.1 14.1 - - - - -
-------- -------- ----- ----- ------ ----- -----
$1,795.0 $1,290.7 $12.1 $ 6.8 $479.1 $ 3.3 $ 3.0
======== ======== ===== ===== ====== ===== =====

(1) Classified as Liabilities Subject to Compromise.
(2) The Senior Credit Facility matured on November 30, 2004 and will be settled
as part of the chapter 11 proceedings.
(3) The Second-Lien Facility matured on February 28, 2005 and will be settled as
part of the chapter 11 proceedings.

Capital expenditures in 2005 are expected to total $35 million.

Purchase orders or contracts for the purchase of certain inventory and other
goods and services are not included in the table above. The Company is not able
to determine the aggregate amount of such purchase orders that represent
contractual obligations, as purchase orders may represent authorizations to
purchase rather than binding agreements. Purchase orders are based on the
Company's current needs and are fulfilled by vendors within short time horizons.
The Company does not have significant agreements for the purchase of inventory
or other goods specifying minimum quantities or set prices that exceed expected
requirements other than included in the above table.

ADEQUACY OF CAPITAL RESOURCES

As a result of the uncertainty surrounding the Company's current circumstances,
it is difficult to predict the Company's actual liquidity needs and sources at
this time. However, based on current and anticipated levels of operations and
efforts to effectively manage working capital, the Company anticipates that its
cash flows from operations, together with cash on hand, cash generated from
asset sales, and amounts available under the DIP Credit Agreement, will be
adequate to meet its anticipated cash requirements during the pendency of the
chapter 11 case.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED

ADEQUACY OF CAPITAL RESOURCES--CONTINUED

In the event that cash flows and available borrowings under the DIP Credit
Agreement are not sufficient to meet future cash requirements, the Company may
be required to reduce planned capital expenditures, sell assets or seek
additional financing. The Company can provide no assurances that reductions in
planned capital expenditures or proceeds from asset sales would be sufficient to
cover shortfalls in available cash or that additional financing would be
available or, if available, offered on acceptable terms.

As a result of the chapter 11 case, the Company's access to additional financing
is, and for the foreseeable future will likely continue to be, very limited. The
Company's long-term liquidity requirements and the adequacy of the Company's
capital resources are difficult to predict at this time, and ultimately cannot
be determined until a plan of reorganization has been developed and confirmed by
the Bankruptcy Court in connection with the chapter 11 case.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board (the "FASB") released
Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46").
FIN 46 requires that all primary beneficiaries of Variable Interest Entities
("VIE") consolidate that entity. FIN 46 was effective immediately for VIEs
created after January 31, 2003, and to VIEs to which an enterprise obtains an
interest after that date. It applied in the first fiscal year or interim period
beginning after June 15, 2003, to VIEs in which an enterprise held a variable
interest it acquired before February 1, 2003. In December 2003, the FASB
published a revision to FIN 46 ("FIN 46R") to clarify some of the provisions of
the interpretation and to defer the effective date of implementation for certain
entities. Under the guidance of FIN 46R, entities that do not have interests in
structures that are commonly referred to as special purpose entities were
required to apply the provisions of the interpretation in financial statements
for periods ending after March 14, 2004. The Company has not identified any
interests in special purpose entities applicable to the provisions of this
statement in applying the provisions of FIN 46R in its financial statements.

On October 13, 2004, the FASB concluded that SFAS No. 123R, Share-Based Payment,
as subsequently amended, would require all companies to measure compensation
cost for all share-based payments (including employee stock options) at fair
value, and would be effective for public companies (except small business
issuers as defined in SEC Regulation S-B) for annual periods beginning after
June 15, 2005. A calendar-year company therefore would be required to apply SFAS
No. 123R beginning January 1, 2006 and could choose to apply SFAS No. 123
retroactively. The cumulative effect of adoption, if any, would be measured and
recognized on January 1, 2006. The Company is currently evaluating the impact of
this standard.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various market risks, including changes in certain
commodity prices and interest rates. These exposures primarily relate to the
acquisition of raw materials and changes in interest rates.

Commodities Risk. The Company selectively uses commodity futures contracts,
forward purchase commodity contracts and option contracts primarily to manage
its exposure to cotton commodity price risk. The Company does not hold or issue
derivative instruments for trading purposes.

At December 31, 2004, the Company, in its normal course of business, had entered
into various commodity futures contracts and forward purchase commodity
contracts. Based on year-end forward cotton prices, the Company's futures
contracts and forward purchase contracts at December 31, 2004 (which covered a
portion of its 2005 needs) had a net deferred loss of approximately $1.2
million.

Based on a sensitivity analysis for commodities that assumes a decrease of 10%
in such commodity prices, the hypothetical net deferred loss for the combined
commodity positions at December 31, 2004, is estimated to be approximately $4.2
million. Actual commodity price volatility is dependent on many varied factors
impacting supply and demand that are impossible to forecast. Therefore, actual
changes in fair value over time could differ substantially from the hypothetical
change disclosed above.

Interest Rate Risk. At December 31, 2004, the Company's floating interest rate
debt outstanding was $707.0 million (of which $165.0 million was the Second-Lien
Facility). A 100 basis point increase in market rates would increase interest
expense and decrease income before income taxes by approximately $7.1 million
for the year ended December 31, 2004. The amount was determined by calculating
the effect of the hypothetical interest rate change on the Company's floating
interest rate debt.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WESTPOINT STEVENS INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
-----------------------------------
2004 2003
------------- -------------

ASSETS
Current Assets
Cash and cash equivalents........................................................ $ 10,632
Accounts receivable, net (less allowances of $14,045) 210,497
Inventories, net................................................................. 312,649
Prepaid expenses and other current assets........................................ 22,221
------------- -------------

Total current assets................................................... 555,999

Property, Plant and Equipment
Land............................................................................. 6,747
Buildings and improvements....................................................... 335,808
Machinery and equipment.......................................................... 963,586
Leasehold improvements........................................................... 11,226
------------- -------------
1,317,367
Less accumulated depreciation and amortization................................... (797,961)
------------- -------------

Net property, plant and equipment 519,406

Other Assets
Deferred financing fees, net (less accumulated amortization
of $38,506)................................................................. 1,353
Other assets..................................................................... 394
------------- -------------

Total other assets..................................................... 1,747
------------- -------------

$ 1,077,152
============= =============

See accompanying notes.

WESTPOINT STEVENS INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
------------------------------------------
2004 2003
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility................................................. $ 483,897
Second-Lien Facility................................................... 165,000
DIP Credit Agreement................................................... 58,149
Accrued interest payable............................................... 507
Accounts payable....................................................... 50,038
Accrued employee compensation.......................................... 53,954
Pension liabilities.................................................... 14,128
Accrued customer incentives............................................ 24,737
Other accrued liabilities.............................................. 38,235
------------- -------------

Total current liabilities............................... 888,645

Noncurrent Liabilities
Deferred income taxes.................................................. 5,190
Pension liabilities.................................................... 112,137
Other liabilities...................................................... 36,047
------------- -------------

Total noncurrent liabilities............................ 153,374

Liabilities Subject to Compromise.................................................. 1,089,491

Stockholders' Equity (Deficit)
Common Stock and capital in excess of par value:
Common Stock, $.01 par value; 200,000,000 shares authorized;
71,099,649 shares issued.......................................... 457,966
Accumulated deficit.................................................... (977,089)
Treasury stock; 21,202,240 at cost..................................... (416,133)
Accumulated other comprehensive income (loss).......................... (119,102)
------------- -------------

Total stockholders' equity (deficit).................... (1,054,358)
------------- -------------

$ 1,077,152
============= =============

See accompanying notes.

WESTPOINT STEVENS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2004 2003 2002
--------------- --------------- ---------------

Net sales.......................................................... $ 1,618,684
Cost of goods sold................................................. 1,395,026
--------------- --------------- ---------------

Gross earnings............................................... 223,658

Selling, general and administrative expenses....................... 209,634
Restructuring and impairment charge................................ 52,525
Fixed asset impairment charge...................................... 7,929
--------------- --------------- ---------------

Operating loss............................................... (46,430)

Interest expense (contractual interest of $157,013 for
the year ended December 31, 2004) 78,263
Other expense-net.................................................. 7,826
Chapter 11 expenses................................................ 34,605
--------------- --------------- ---------------

Loss from operations before income tax benefit............... (167,124)

Income tax benefit................................................. (17,077)
--------------- --------------- ---------------

Net loss..................................................... $ (150,047)
=============== =============== ===============

Basic and diluted net loss per common share........................ $ (3.01)
=============== =============== ===============

Basic and diluted average common shares outstanding................ 49,897
=============== =============== ===============

See accompanying notes.

WESTPOINT STEVENS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

COMMON
STOCK AND ACCUMULATED
CAPITAL IN OTHER
COMMON EXCESS OF TREASURY STOCK ACCUMULATED COMPREHENSIVE
SHARES PAR VALUE SHARES AMOUNT DEFICIT INCOME (LOSS) TOTAL
------ --------- ------ ------ ------- ------------- -----

Balance, January 1, 2004....................... 71,100 $404,399 (21,202) $(416,133) $(827,042) $(110,359) $(949,135)
Comprehensive income (loss):
Net loss................................. - - - - (150,047) - (150,047)
Minimum pension liability adjustment
net of tax of $4,209.................. - - - - - (7,482) (7,482)
Foreign currency translation adjustment.. - - - - - 563 563
Cash flow hedges:
Net derivative losses, net of tax of
$1,027................................ - - - - - (1,824) (1,824)
-----------
Comprehensive income (loss).............. (158,790)
-----------
Net operating loss benefit............... - 53,567 - - - 53,567
------ -------- ------- --------- --------- --------- -----------
Balance, December 31, 2004..................... 71,100 $457,966 (21,202) $(416,133) $(977,089) $(119,102) $(1,054,358)
====== ======== ======= ========= ========= ========= ===========

See accompanying notes.

WESTPOINT STEVENS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------------------
2004 2003 2002
----------- ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $ (150,047)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and other amortization...................................... 95,765
Deferred income taxes.................................................... (17,016)
Non-cash component of restructuring and impairment charge................ 9,421
Fixed asset impairment charge............................................ 7,929
Changes in assets and liabilities:
Accounts receivable............................................... 33,010
Inventories....................................................... 55,971
Prepaid expenses and other current assets......................... 1,772
Accrued interest payable.......................................... 395
Accounts payable and other accrued liabilities.................... 20,321
Other-net......................................................... (3,202)
----------- ----------- -----------

Total adjustments.......................................................... 204,366
----------- ----------- -----------

Net cash provided by operating activities............................................. 54,319
----------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (17,748)
Net proceeds from sale of assets................................................ 8,061
----------- ----------- -----------

Net cash used for investing activities................................................ (9,687)
----------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings................................................................... -
Repayments................................................................... (6,792)
DIP Credit Agreement:
Borrowings................................................................. 760,338
Repayments................................................................. (791,206)
----------- ----------- -----------

Net cash used for financing activities................................................ (37,660)
----------- ----------- -----------

Net increase in cash and cash equivalents............................................. 6,972
Cash and cash equivalents at beginning of period...................................... 3,660
----------- ----------- -----------

Cash and cash equivalents at end of period............................................ $ 10,632
=========== =========== ===========

See accompanying notes.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS. WestPoint Stevens Inc. (the "Company") is a manufacturer and marketer
of bed and bath products, including sheets, pillowcases, comforters, blankets,
bedspreads, pillows, mattress pads, towels and related products. The Company
conducts its operations in the consumer home fashions (bed and bath products)
industry.

BASIS OF PRESENTATION. The Company's consolidated financial statements are
prepared on a "going concern" basis. See Note 2 Chapter 11 Case for a further
discussion.

RECONCILIATION TO GAAP. The 2004 consolidated financial statements presented in
this document are unaudited and are substantially in accordance with GAAP, but
differ from GAAP in regards to the recorded income tax provision. During the
2004 audit (that has not yet been finalized), it was determined that the
Company's income tax contingency reserves were excessive, and that certain of
the reserves should have been released in prior periods, some dating back
several years. Taking into account the Company's overall tax situation (see Note
6. Income Taxes) and in conjunction with proposed prior period restatements of
the income tax provisions, the 2004 income tax provision on a GAAP basis would
be an income tax expense of $5.2 million as opposed to the indicated income tax
benefit of $17.1 million. The 2004 net loss on a GAAP basis would be a loss of
$172.3 million as opposed to the indicated loss of $150.0 million. Overall net
deferred taxes reflected in the December 31, 2004 unaudited balance sheet are
recorded at zero and would not be impacted. However, certain prior periods
financial statements would be impacted by the restatement, the amounts of which
have not yet been determined.

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the
Company include the accounts of the Company and all of its subsidiaries. All
material intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES. The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

RECLASSIFICATIONS. Certain amounts in the prior year financial statements have
been reclassified to conform to the current year presentation.

CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the
Company to significant concentrations of credit risk consist principally of cash
investments and trade accounts receivable.

The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of those financial institutions that
are considered in the Company's investment strategy.

Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base, however, as of December 31, 2004, substantially all of the Company's
receivables were from companies in the retail industry. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
These investments are carried at cost, which approximates market value.

INVENTORIES. Inventory costs include material, labor and factory overhead.
Inventories are stated at the lower of cost or market (net realizable value). At
December 31, 2004, approximately 88.0% of the Company's inventories are valued
at the lower of cost or market using the "dollar value" last-in, first-out
("LIFO") method. The remaining inventories (approximately $37.6 million at
December 31, 2004) are valued at the lower of cost or market using the first-in,
first-out method.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

INVENTORIES--CONTINUED. Inventories consisted of the following (in thousands of
dollars):

DECEMBER 31,
-------------------------------
2004 2003
---------- ----------

Finished goods........................ $ 127,499
Work in process....................... 142,016
Raw materials and supplies............ 43,134
LIFO reserve.......................... -
---------- ----------
$ 312,649
========== ==========

PROPERTY, PLANT AND EQUIPMENT. As a result of the adoption of Fresh Start
reporting, as of September 30, 1992, property, plant and equipment were adjusted
to their estimated fair values and historical accumulated depreciation was
eliminated. Additions since September 30, 1992, are stated at cost.

Depreciation is computed over estimated useful lives using the straight-line
method for financial reporting purposes and accelerated methods for income tax
reporting. Depreciation expense was approximately $95.8 million in the year
ended December 31, 2004. See Note 13. Impairment of Long-Lived Assets and
Accelerated Depreciation Expense.

Estimated useful lives for property, plant and equipment are as follows:

Buildings and improvements....................... 10 to 40 Years
Machinery and equipment.......................... 3 to 18 Years
Leasehold improvements........................... Lease Terms

DERIVATIVES. Statement of Financial Accounting Standard No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by Statement 137 and
Statement 138 requires the Company to recognize all derivative instruments on
the balance sheets at fair value. These statements also establish accounting
rules for hedging instruments, which depend on the nature of the hedge
relationship. A fair value hedge requires that the effective portion of the
change in the fair value of a derivative instrument be offset against the change
in the fair value of the underlying asset, liability, or firm commitment being
hedged through earnings. A cash flow hedge requires that the effective portion
of the change in the fair value of a derivative instrument be recognized in
Other Comprehensive Income (OCI), a component of Stockholders' Equity (Deficit),
and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. The ineffective portion of a derivative
instrument's change in fair value is immediately recognized in earnings. See
Note 8. Derivatives.

INCOME TAXES. The Company accounts for income taxes under Statement No. 109,
Accounting for Income Taxes. Under Statement 109, deferred income taxes are
provided at the enacted marginal rates on the differences between the financial
statement and income tax bases of assets and liabilities. See Note 6. Income
Taxes.

PENSION PLANS. The Company has defined benefit pension plans covering
essentially all employees. The benefits are based on years of service and
compensation. The Company's practice is to fund amounts that are required by the
Employee Retirement Income Security Act of 1974. See Note 4. Employee Benefit
Plans -- Pension Plans.

The Company also sponsors an employee savings plan covering eligible employees
who elect to participate. Participants in this plan make contributions as a
percent of earnings. The Company matches certain amounts of employee
contributions. See Note 4. Employee Benefit Plans -- Retirement Savings Plan.

OTHER EMPLOYEE BENEFITS. The Company accounts for post-retirement and
post-employment benefits in accordance with Statement No. 106, Employer's
Accounting for Post Retirement Benefits Other Than Pensions and Statement No.
112, Employer's Accounting for Postemployment Benefits. See Note 4. Employee
Benefit Plans -- Other Post-Retirement Benefit Plans.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

STOCK-BASED COMPENSATION. The Company grants stock options for a fixed number of
shares in accordance with certain of its benefit plans. The Company accounts for
stock option grants in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees, and, accordingly, recognizes no compensation expense for
the stock option grants if the exercise price is equal to or more than the fair
value of the shares at the date of grant. Pro forma information regarding net
income and earnings per share, as calculated under the provisions of Statement
No. 123, Accounting for Stock-Based Compensation, as amended by Statement 148,
are disclosed in Note 7. Stockholders' Equity (Deficit).

FAIR VALUE DISCLOSURES. Cash and cash equivalents: The carrying amounts reported
in the balance sheets for cash and cash equivalents approximate its fair value.

Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheets for accounts receivable and accounts payable approximate their
fair value.

Long-term and short-term debt: The fair value of the Company's outstanding debt
is estimated based on the quoted market prices for the same issues where
available or based on estimates. The fair value of the $1,707.0 million of
outstanding debt at December 31, 2004, was approximately $533.2 million.

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Company evaluates the recoverability of its
long-lived assets and related goodwill by comparing estimated future
undiscounted cash flows with the asset's carrying amount to determine if
impairment exists. Impairment, if any, is then measured by comparing carrying
value to market value or discounted cash flow. See Note 13. Impairment of
Long-Lived Assets and Accelerated Depreciation Expense.

REVENUE RECOGNITION. The Company recognizes revenue when title to the goods sold
passes to the buyer, which is based on contractual terms.

CUSTOMER INCENTIVES. Incentives are provided to customers primarily for new
sales programs. These incentives begin to accrue when a commitment has been made
to the customer and are recorded as a reduction to sales.

EARNINGS PER COMMON SHARE. Basic and diluted earnings per share are calculated
in accordance with Statement No. 128, Earnings per Share. Basic earnings per
share is based on the weighted average number of common shares outstanding, and
diluted earnings per share includes any dilutive effects of stock options and
the Company's stock bonus plan.

SEGMENT INFORMATION. The Company is in one business segment, the consumer home
fashions business, and follows the requirements of Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information.

ADVERTISING COSTS. Advertising costs are expensed as incurred and were $8.6
million in 2004.

ENVIRONMENTAL AND LEGAL MATTERS. Liabilities for environmental remediation and
legal indemnification and defense costs are recognized when it is probable a
liability has been incurred and the amount can be reasonably estimated. The
liabilities are developed based on currently available information and reflect
the participation of other potentially responsible parties, depending on the
parties' financial condition and probable contribution. The accruals are
recorded at undiscounted amounts and are reflected as liabilities on the
accompanying consolidated balance sheets.

WORKERS' COMPENSATION RESERVES. During 2004, the Company reviewed its workers'
compensation reserves in conjunction with information provided by its outside
actuaries, and as a result of that review reduced its workers' compensation
reserves by $8.1 million, which is reflected as a reduction of cost of goods
sold in the accompanying consolidated statements of operations. The Company will
continue to evaluate its estimates of workers' compensation liabilities in
consultation with its outside actuaries.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED

NEW ACCOUNTING PRONOUNCEMENTS. In January 2003, the Financial Accounting
Standards Board (the "FASB") released Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 requires that all primary
beneficiaries of Variable Interest Entities ("VIE") consolidate that entity. FIN
46 was effective immediately for VIEs created after January 31, 2003, and to
VIEs to which an enterprise obtains an interest after that date. It applied in
the first fiscal year or interim period beginning after June 15, 2003, to VIEs
in which an enterprise held a variable interest it acquired before February 1,
2003. In December 2003, the FASB published a revision to FIN 46 ("FIN 46R") to
clarify some of the provisions of the interpretation and to defer the effective
date of implementation for certain entities. Under the guidance of FIN 46R,
entities that do not have interests in structures that are commonly referred to
as special purpose entities were required to apply the provisions of the
interpretation in financial statements for periods ending after March 14, 2004.
The Company has not identified any interests in special purpose entities
applicable to the provisions of this statement in applying the provisions of FIN
46R in its financial statements.

2. CHAPTER 11 FILING

On June 1, 2003 (the "Petition Date"), the Company and several of its
subsidiaries (together with the Company, the "Debtors") each commenced a
voluntary case under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
The Debtors are authorized to operate their businesses and manage their
properties as debtors in possession pursuant to section 1107(a) and 1108 of the
Bankruptcy Code. A brief chronology of the circumstances that led to such filing
is set forth below.

Despite the restructuring initiatives which the Company undertook in 2000
through 2002, during 2003 the Company continued to experience financial
difficulty related primarily to restrictive covenants under its Senior Credit
Facility and its debt structure. The Company therefore entered into negotiations
with its Senior Credit Facility lenders to amend the Senior Credit Facility to
permit certain restructuring, impairment and other charges and to revise certain
financial ratios and minimum EBITDA covenants in its Senior Credit Facility. The
Company and such lenders were unable to agree to amend the Senior Credit
Facility and the Company continued to experience financial difficulties which
led to a default under its Senior Credit Facility and Second-Lien Facility.
Effective March 31, 2003, the Senior Credit Facility lenders and Second-Lien
Facility lenders agreed to refrain from exercising any rights or remedies with
respect to the Company's failure to comply with financial and other covenants
until June 10, 2003. As the June 10 deadline approached, the Company's Board of
Directors determined that, in order to be able to operate successfully in
today's market environment and compete with increasing foreign competition, it
would be necessary for the Company to reduce its debt burden and de-lever its
balance sheet. Thus, on May 16, 2003, the Board of Directors approved the
retention of an independent financial advisor to evaluate alternatives aimed at
reducing the existing debt structure and strengthening the balance sheet. After
negotiations with its Senior Lenders regarding various alternatives, the Company
concluded it would be in the best interests of its creditors to effect a
consensual restructuring under chapter 11 of the Bankruptcy Code and filed its
chapter 11 petition on June 1, 2003.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

2. CHAPTER 11 FILING--CONTINUED

On or about the Petition Date, the Company announced that it had reached an
agreement in principle with the holders of approximately 52% of the aggregate
principal amount of its Senior Notes on the terms of a financial restructuring
to be implemented through the chapter 11 process. The agreement in principle was
subject to numerous conditions and further agreements, including the entry of an
order confirming the plan of reorganization contemplated by the proposal as
required by the Bankruptcy Code. On October 17, 2003, the Company announced that
it had determined not to implement the previously announced agreement in
principle. Instead, the Company stated that it intended to negotiate new terms
for a chapter 11 plan of reorganization with all of its major creditor
constituencies. The Company filed a plan of reorganization on January 20, 2005.
The Company currently intends to sell substantially all of its assets, subject
to either Section 363 of the Bankruptcy Code or a confirmation of a new chapter
11 plan.

On June 2, 2003, the Bankruptcy Court entered a number of orders enabling the
Company to continue regular operations throughout the reorganization proceeding.
These orders authorized, among other things, normal payment of employee
salaries, wages and benefits; continued participation in workers' compensation
insurance programs; payment to vendors for post-petition delivery of goods and
services; payment of certain pre-petition obligations to customers; and
continued payment of utilities. The Bankruptcy Court also approved, under
interim order, access to $175 million in debtor in possession financing and
subsequently approved, under final order, access to $300 million of debtor in
possession financing for use by the Company, pursuant to a Post-Petition Credit
Agreement, dated as of June 2, 2003, among WestPoint Stevens Inc. and certain of
its subsidiaries, the financial institutions named therein and Bank of America,
N.A. and Wachovia Bank, National Association (the "DIP Credit Agreement").

The DIP Credit Agreement consists of revolving credit loans of up to $300
million (with a sublimit of $75 million for letters of credit) with an initial
term of one year and an initial maturity date of June 2, 2004. At its option,
the Company may extend the term for up to two successive periods of six months
each. On April 28, 2004 and November 1, 2004, the Company exercised its options
to extend the DIP Credit Agreement for additional six month periods, revising
the maturity date to June 2, 2005. In March 2005, the Company initiated
discussions with its DIP lenders to extend the maturity date of the DIP Credit
Agreement beyond June 2, 2005, and on May 17, 2005 the Bankruptcy Court approved
an amendment to the DIP Credit Agreement extending the maturity date to the
earliest to occur of December 2, 2005 or the consummation of a sale, pursuant to
Section 363 of the Bankruptcy Code or pursuant to a confirmed plan of
reorganization or liquidation pursuant to chapter 11 of the Bankruptcy Code.

Initial advances under the DIP Credit Agreement bore interest at a fluctuating
rate per annum equal to LIBOR plus a margin of 2.75% or, at the Company's
option, prime plus a margin of 0.75%. Each margin is subject to quarterly
adjustments, commencing November 1, 2003, pursuant to a pricing matrix, based on
average availability, having a range of 2.25% to 3.00% for LIBOR based loans and
0.25% to 1.00% for prime-based loans. The DIP Credit Agreement also has an
unused line fee of 0.625% per annum, subject to quarterly adjustments as above
having a range of 0.375% to 0.75%. Effective November 1, 2003, as a result of
average availability, interest rates under the DIP Credit Agreement decreased to
LIBOR plus 2.50% or, at the Company's option, prime plus 0.50% and the unused
line fee decreased to 0.50%. Effective February 1, 2004, as a result of average
availability, interest rates under the DIP Credit Agreement increased to LIBOR
plus 2.75% or, at the Company's option, prime plus 0.75% and the unused line fee
increased to 0.625%. Effective February 1, 2005, as a result of average
availability, interest rates under the DIP Credit Agreement decreased to LIBOR
plus 2.50% or, at the Company's option, prime plus 0.50% and the unused line fee
decreased to 0.50%.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

2. CHAPTER 11 FILING--CONTINUED

The Debtors are currently operating their businesses as debtors in possession
pursuant to the Bankruptcy Code. Pre-bankruptcy obligations of the Debtors,
including obligations under debt instruments, generally may not be enforced
against the Debtors, and any actions to collect such indebtedness are
automatically stayed, unless relief from the automatic stay is granted by the
Bankruptcy Court. The rights of and ultimate payments by the Company under
pre-bankruptcy obligations may be substantially altered. This could result in
claims being liquidated in the chapter 11 case at less (and possibly
substantially less) than 100% of their face value. The Debtors cannot presently
determine or reasonably estimate the ultimate liability that may result from
rejecting contracts or leases or from the filing of claims for any rejected
contracts or leases, and no provisions have yet been made for these items. The
amount of the claims to be filed by the creditors could be significantly
different than the amount of the liabilities recorded by the Company.

Since the Petition Date, the Debtors have conducted business in the ordinary
course. Management is continuing the process of stabilizing the business of the
Debtors and evaluating their operations as part of the development of a chapter
11 plan of reorganization. The Debtors currently intend to sell substantially
all of their assets, subject to either Section 363 of the Bankruptcy Code or
confirmation of a chapter 11 plan. The Debtors intend to seek the requisite
acceptance of such plan by security holders and confirmation of the plan by the
Bankruptcy Court, all in accordance with the applicable provisions of the
Bankruptcy Code. During the pendency of the chapter 11 case, the Debtors may,
with Bankruptcy Court approval, sell assets and settle liabilities, including
for amounts other than those reflected in the financial statements. The
administrative and reorganization expenses resulting from the chapter 11 case
will unfavorably affect the Debtors' results of operations. Future results of
operations may also be adversely affected by other factors related to the
chapter 11 case.

On August 28, 2003, one of the Company's foreign subsidiaries, WestPoint Stevens
(Europe) Ltd., commenced an insolvency proceeding in the United Kingdom and is
in the process of being liquidated, and inactive subsidiaries have applied to be
dissolved. The losses associated with the closure of the foreign subsidiary are
estimated to total approximately $5.3 million consisting of inventory writedowns
of $3.9 million and accounts receivable writedowns for claims of $1.4 million.
These charges are reflected in restructuring, impairment and other charges as
discussed in Note 12.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

2. CHAPTER 11 FILING--CONTINUED

BASIS OF PRESENTATION

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States applicable on
a going concern basis. Except as otherwise disclosed, these principles assume
that assets will be realized and liabilities will be discharged in the ordinary
course of business. The Company is currently operating as a debtor in possession
under chapter 11 of the Bankruptcy Code, and its continuation as a going concern
is contingent upon, among other things, confirmation by the Bankruptcy Court of
a chapter 11 plan of reorganization and its ability to comply with the DIP
Credit Agreement, return to profitability, generate sufficient cash flows from
operations and obtain financing sources to meet future obligations. There is no
assurance that the Company will be able to achieve any of these results. The
Company's consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might result from the outcome
of these uncertainties.

The Company's consolidated financial statements included elsewhere in this
report are presented in accordance with AICPA Statement of Position 90-7
("Financial Reporting by Entities in Reorganization Under the Bankruptcy Code")
("SOP 90-7"). In the chapter 11 case, substantially all unsecured liabilities as
of the Petition Date are subject to compromise or other treatment under a plan
of reorganization which must be confirmed by the Bankruptcy Court after
submission to any required vote by affected parties. For financial reporting
purposes, the categories of liabilities and obligations whose treatment and
satisfaction are dependent on the outcome of the chapter 11 case and classified
as Liabilities Subject to Compromise in the consolidated balance sheet under SOP
90-7 are identified below (in thousands):

DECEMBER 31,
---------------------------------
2004 2003
---------- ----------

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

2. CHAPTER 11 FILING--CONTINUED

BASIS OF PRESENTATION--CONTINUED

Assets of the Company's subsidiaries currently excluded from the bankruptcy case
total $10.6 million as of December 31, 2004, or 1.0% of the Company's
consolidated assets. Revenues of the subsidiaries totaled $26.5 million for the
year ended December 31, 2004, or 1.6% of the Company's consolidated revenues.

3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS

Indebtedness is as follows (in thousands of dollars):

DECEMBER 31,
------------

2004 2003
----------- -----------

Short-term indebtedness
Senior Credit Facility.............................................. $ 483,897
DIP Credit Agreement................................................ 58,149
Second-Lien Facility................................................ 165,000
----------- -----------

$ 707,046
=========== ===========

Short-term indebtedness classified as Liabilities Subject to Compromise
7-7/8% Senior Notes due 2005........................................ $ 525,000
7-7/8% Senior Notes due 2008........................................ 475,000
----------- -----------

$ 1,000,000
=========== ===========

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED

At December 31, 2004, the Company's Senior Credit Facility with certain lenders
(collectively, the "Banks") consisted of a $592.8 million revolving credit
facility ("Revolver") subject to interim facility limitations, with a Revolver
maturity date of November 30, 2004. Effective with the chapter 11 filing,
additional borrowings under the Senior Credit Facility are no longer available
to the Company. During 2003 the revolver commitment decreased $75.0 million as a
result of scheduled commitment reductions. During 2004, the revolver commitment
decreased $17.5 million as a result of a scheduled commitment reduction, and the
revolver commitment and outstanding loans decreased $6.8 million as a result of
certain proceeds from asset dispositions, which were used to reduce the loan
balance.

Effective March 31, 2003, the Senior Credit Facility was amended primarily to
provide for an interim facility limitation and to add an unused commitment fee.
At the option of the Company and effective with the last amendment to the Senior
Credit Facility, interest under the Senior Credit Facility was payable monthly,
either at the prime rate plus 5.25% or LIBOR plus 7.00%, compared to prime rate
plus 2.75%, or LIBOR plus 4.50% in effect at December 31, 2002. Effective with
the chapter 11 filing, loans under the Senior Credit Facility are no longer
available to the Company. Prior to the chapter 11 filing, the Company was
obligated to pay a facility fee in an amount equal to 0.50% of each Bank's
commitment under the Revolver, and an unused commitment fee in an amount equal
to 1.00% of the difference between the revolver commitment and the daily
outstanding loans and letters of credit. Effective with the chapter 11 filing,
the Company is no longer obligated to pay a facility fee or an unused commitment
fee for the Senior Credit Facility. The loans under the Senior Credit Facility
are secured by the pledge of all the stock of the Company's material
subsidiaries and a first priority lien on substantially all of the assets of the
Company.

The Company has a $165.0 million Second-Lien Senior Credit Facility
("Second-Lien Facility") with a maturity date of February 28, 2005. Effective
with the Company's chapter 11 filing, interest under the Second-Lien Facility is
payable monthly, as opposed to quarterly prior to the filing, at an interest
rate of prime plus 8% increasing each quarter after June 30, 2002, by .375% but
in no event less than 15%. Loans under the Second-Lien Facility are secured by a
second priority lien on the assets securing the existing Senior Credit Facility.

The 7-7/8% Senior Notes due 2005 and 7-7/8% Senior Notes due 2008 (together, the
"Senior Notes") are general unsecured obligations of the Company and rank pari
passu in right of payment with all existing or future unsecured and
unsubordinated indebtedness of the Company and senior in right of payment to all
subordinated indebtedness of the Company. The Senior Notes bear interest at the
rate of 7-7/8% per annum, and prior to the Company's chapter 11 filing were
payable semi-annually on June 15 and December 15 of each year. Effective with
the Company's chapter 11 filing, interest on the Senior Notes is no longer paid
or accrued. The Senior Notes are redeemable, in whole or in part, at any time at
the option of the Company at 100% of the principal amount thereof plus the
Make-Whole Premium (as defined) plus accrued and unpaid interest, if any, to the
date of purchase. In addition, in the event of a Change of Control (as defined),
the Company will be required to make an offer to purchase the notes at a price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. Neither the redemption option nor the Change of
Control provisions are relevant in the Company's chapter 11 case.

The Company's credit agreements contain a number of customary covenants
including, among others, restrictions on the incurrence of indebtedness,
transactions with affiliates, and certain asset dispositions as well as
limitations on restricted debt and equity payments and capital expenditures.
Certain provisions require the Company to maintain certain financial ratios, a
minimum interest coverage ratio, a minimum debt to EBITDA ratio, a minimum
EBITDA, a minimum consolidated net worth (as defined) and a minimum
availability. The Company can no longer make restricted debt and equity
payments. At December 31, 2004, the Company was in compliance with its covenants
under the DIP Credit Agreement but was not in compliance with the covenants
under its various other credit agreements, primarily as a result of the chapter
11 filing and failure to meet certain financial covenants.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED

At March 31, 2003, and prior to the petition date, the Company was not in
compliance with certain of its covenants under the Senior Credit Facility and
Second-Lien Facility during which time the Company engaged in active discussions
with its senior lenders to obtain an amendment or waiver of such non-compliance
(See Note 2 where the chronology of the circumstances causing the Company to
file voluntary petitions for reorganization under chapter 11 of the U.S.
Bankruptcy Code is discussed). At December 31, 2004, the Company classified all
of its outstanding debt under its Senior Credit Facility, Second-Lien Facility
and Senior Notes as current liabilities as a result of the potential for the
acceleration of the loans outstanding under the related agreements.

As of December 31, 2004, the maturity of long-term debt excluding the DIP Credit
Agreement was as follows: $1,173.9 million in 2005 (including the Senior Credit
Facility that matured on November 30, 2004), zero in 2006 and 2007, and $475.0
million in 2008.

4. EMPLOYEE BENEFIT PLANS

PENSION PLANS

The Company has defined benefit pension plans covering essentially all
employees. Benefits are based on years of service and compensation, and the
Company's practice is to fund amounts that are required by the Employee
Retirement Income Security Act of 1974. Effective January 1, 2005 and as a
result of the Company's financial restructuring during bankruptcy, the Company's
pension plans were amended to cease all future benefit accruals. The Company
uses December 31 as the measurement date of its defined benefit pension plans.

The following tables set forth data for the Company's pension plans and amounts
recognized in the accompanying Consolidated Balance Sheet at December 31, 2004
(in thousands of dollars):

YEAR ENDED DECEMBER 31,
---------------------------------------
2004 2003
------------- -------------

Change in benefit obligation:
Projected benefit obligation at beginning of year........................... $ 381,773
Service cost................................................................ 9,849
Interest cost............................................................... 23,004
Actuarial losses............................................................ 17,318
Benefit payments............................................................ (30,010)
Curtailments................................................................ (1,906)
------------- -------------
Projected benefit obligation at end of year $ 400,028
============= =============

YEAR ENDED DECEMBER 31,
---------------------------------------
2004 2003
------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year.............................. $ 251,135
Actual return on plan assets................................................ 24,669
Employer contributions...................................................... 19,742
Benefit payments............................................................ (30,010)
------------- -------------
Fair value of plan assets at end of year $ 265,536
============= =============

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED

4. EMPLOYEE BENEFIT PLANS--CONTINUED

PENSION PLANS--CONTINUED

DECEMBER 31,
---------------------------------------
2004 2003
------------- -------------
Funded status:
Projected benefit obligation.................................................. $ (400,028)
Fair value of assets.......................................................... 265,536
------------- -------------
Funded status................................................................. (134,492)
------------- -------------
Unrecognized amounts:
Prior service cost......................................................... -
Net actuarial losses....................................................... 170,827
------------- -------------
Total unrecognized......................................................... 170,827
------------- -------------
Prepaid pension cost at year-end $ 36,335
============= =============

Amounts recognized in the Consolidated Balance Sheets:
Accrued liability (Includes $8,394 classified as
Liabilities Subject to Compromise) $ (134,659)
Intangible asset........................................................... 52
Accumulated other comprehensive income..................................... 170,942
------------- -------------
Net amount recognized $ 36,335
============= =============

The accumulated benefit obligations and the fair value of assets for pension
plans with accumulated benefit obligations in excess of plan assets were $400.0
million and $265.5 million, respectively, as of December 31, 2004.

The following assumptions were used for the pension plans to determine the
projected benefit obligation and the net periodic pension cost for the fiscal
year:
DECEMBER 31,
---------------------
2004 2003
---- ----
Weighted average assumptions as of December 31:
Discount rate................................. 6.00%
Expected return on plan assets................ 8.75%
Rate of compensation increase................. 3.50%

In determining its expected long-term return on plan assets, the Company
considered historical experience, its asset allocation, expected long-term rates
of return for each major asset class and an assumed long-term inflation rate.
The expected long-term return on plan assets is adjusted when there are
fundamental changes in expected returns on the plan investments.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. EMPLOYEE BENEFIT PLANS--CONTINUED

PENSION PLANS--CONTINUED

YEAR ENDED DECEMBER 31,
---------------------------------------------------
2004 2003 2002
------------- ------------- -------------

Components of net periodic pension cost (benefit):
Service cost............................................ $ 9,849
Interest cost........................................... 23,004
Expected return on plan assets.......................... (21,785)
Net amortization........................................ 11,109
------------- ------------- -------------

Net periodic pension expense 22,177
One-time credit due to curtailment...................... (9,634)
------------- ------------- -------------

Total periodic pension expense................................... $ 12,543
============= ============= =============

Plan assets are primarily invested in United States Government and corporate
debt securities and equity securities. The percentage of fair value to total
assets by asset category for the Company's pension plans as of the measurement
date are as follows:

DECEMBER 31,
------------------------
2004 2003
---- ----
Asset category:
Equity funds............................. 55.0%
Fixed income funds....................... 32.6%
Alternative investments.................. 7.7%
Cash..................................... 4.7%

Total............................................ 100.0%

Based on actuarial information available at December 31, 2004, the Company
estimates that contributions to its pension plans in 2005 will total
approximately $14.1 million, reflecting both quarterly and annually required
contributions.

The Company's investment strategy for its pension plans is to obtain an optimum
rate of investment return on the total investment portfolio consistent with the
assumption of a reasonable level of risk. To achieve these investment
objectives, assets are invested among asset classes and investment management
styles to produce a prudent level of diversification and investment return over
long-term time periods. Cash balances are expected to arise from residual
uninvested funds and from liquidity requirements to fund benefits within a short
period of time. Certain plan obligations accrued prior to 1985 are secured under
a participating annuity contract.

Target allocations for 2005 are 52% equity funds, 40% fixed income funds and 8%
alternative investments. The target asset allocation has been selected as the
plan's long-term strategy asset allocation based on a strategic asset-liability
study, which evaluated the plan's liability structure, expected cash flows and
funded status under a variety of capital market environments.

Assets are managed by qualified investment managers on a discretionary basis,
but subject to risk management policies set forth by the Company. Risk
management policies include supervision and monitoring of investment managers
through the use of investment guidelines and restrictions and performance
measurement standards. The Company also applies a disciplined rebalancing policy
to control risk. The use of leverage is prohibited. Derivatives shall not be
used for speculative purposes and no leverage shall be introduced through the
use of derivatives.

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. EMPLOYEE BENEFIT PLANS--CONTINUED

RETIREMENT SAVINGS PLAN

The Company matches 50% of each employee's before-tax contributions up to 2% of
the employee's compensation. Company contributions could be made either in cash
or in shares of Common Stock of the Company. Effective with the bankruptcy
filing, contributions are made solely in cash. During 2004, the Company charged
$1.8 million to expense in connection with the Retirement Savings Plan.