<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-3157
------------------------------
INTERNATIONAL PAPER COMPANY
(Exact name of Company as specified in its charter)
NEW YORK 13-0872805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577
(Address of principal executive (Zip Code)
offices)
COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE: 914-397-1500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------------------------------------ ------------------------
<S> <C>
Cumulative $4 Preferred Stock, without par value --
Common Stock, $1 per share par value New York Stock Exchange
5 1/8% Debentures due 2012 New York Stock Exchange
</TABLE>
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /x/
The aggregate market value of the common stock of the Company outstanding
as of February 28, 1995, held by non-affiliates of the Company was
$9,628,865,930, calculated on the basis of the closing price on the Composite
Tape on February 28, 1995. For this computation, the Company has excluded the
market value of all common stock beneficially owned by all executive officers
and directors of the Company and their associates as a group and treasury stock.
Such exclusion is not to signify in any way that members of this group are
'affiliates' of the Company.
The number of shares outstanding of the Company's common stock, as of
February 28, 1995:
OUTSTANDING IN TREASURY
----------- -----------
128,243,966 1,645,851
The following documents are incorporated by reference into the parts of
this report indicated below:
<TABLE>
<S> <C>
1994 ANNUAL REPORT TO SHAREHOLDERS
(PP. 1 AND 4 THROUGH 60) PARTS I, II AND IV
PROXY STATEMENT, DATED MARCH 31, 1995 PART III
</TABLE>
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
International Paper Company,* a New York corporation incorporated in 1941
as the successor to the New York corporation of the same name organized in 1898,
is a worldwide producer of printing and writing papers, paperboard and packaging
and wood products; and distributes paper and office supply products in both the
United States and Europe. It also produces pulp, laminated products, and
specialty products, including photosensitive films and papers, nonwovens,
chemicals and minerals.
In the United States, the Company operates 24 pulp and paper mills, 53
converting and packaging plants, 43 wood products facilities, 15 specialty
panels and laminated products plants, six nonwoven products facilities and two
envelope plants. Production facilities in Europe, Asia, Latin America and Canada
include 13 pulp and paper mills, 29 converting and packaging plants, two wood
products facilities, four specialty panels and laminated products plants and
five nonwoven products facilities.
The Company distributes fine paper, printing and industrial products and
building materials, primarily manufactured by other companies, through over 280
distribution branches located primarily in the United States. In addition, the
Company produces photosensitive films and papers and photographic equipment
(three U.S. and six international locations) and specialty chemicals (seven U.S.
and two international locations), and engages in domestic oil and gas and real
estate activities.
In January 1995, the Company acquired the assets of two Michigan-based
paper distributors, Carpenter Paper Company and Seaman-Patrick Holding Company.
In March 1994, the Company, through a subsidiary, acquired from Brierley
Investments Limited an additional 8 percent interest in Carter Holt Harvey
Limited (Carter Holt), a major New Zealand forest and paper products company
with substantial assets in Chile. The purchase increased the Company's ownership
of Carter Holt to 24 percent. In July 1994, the Company, through a subsidiary,
acquired certain assets of Papelera Kif and Ogi Papel, distributors of printing
papers in Juarez and Chihuahua, Mexico. In December 1994, the Company completed
a merger with Kirk Paper Corporation, a paper distributor located in Downey,
California using the pooling-of-interests accounting method, and acquired
additional stock of Zanders Feinpapiere AG.
In April 1993, the Company acquired certain assets of the Los Angeles-based
Ingram Paper Company, a distributor of industrial and fine printing papers. In
December, J.B. Papers, Inc., a paper distribution company located in Union,
N.J., was purchased. Also in December, the assets of Monsanto Company's
Kentucky-based Fome-Cor division, a manufacturer of polystyrene foam products,
were acquired.
In the first quarter of 1992, the operating assets of Western Paper Company
(Western Pacific), a printing and industrial paper distribution business based
in Portland, Oregon, were purchased. In the second quarter, the Company acquired
an equity interest in Scitex Corporation Ltd., an Israel-based world leader in
digital visual information communication for the graphic design, printing,
publishing and video industries. In the third quarter, Zaklady
Celulozowa-Papierniecze S.A. w Kwidzynie (Kwidzyn) was acquired from the
Government of the Republic of Poland. Kwidzyn is Poland's largest white papers
manufacturer and the only integrated bleached pulp and paper company. In the
fourth quarter, certain assets of the chemical division of Norway-based M.
Peterson & Son AS were acquired.
All of the 1994, 1993 and 1992 acquisitions, except the merger with Kirk
Paper Corporation, were accounted for using the purchase method. The effects of
these mergers and acquisitions, both individually and in the aggregate, were not
significant to the Company's consolidated financial statements.
A further discussion of mergers and acquisitions can be found on page 51 of
the Company's 1994 Annual Report to Shareholders (the 'Annual Report'), which
information is incorporated herein by reference.
------------------
* Unless otherwise indicated by the context, the terms 'Company' and
'International Paper' are used interchangeably to describe International Paper
Company and its consolidated subsidiaries.
2
<PAGE>
From 1990 through 1994, International Paper's capital expenditures
approximated $5.9 billion, excluding mergers and acquisitions. These
expenditures reflect continuing efforts to improve product quality and
environmental performance, lower costs, expand production capacity, and acquire
and improve forestlands. Capital spending in 1994 was $1.1 billion and is
expected to exceed $1.3 billion in 1995. A further discussion of capital
expenditures can be found on pages 12, 40 and 41 of the Annual Report, which
information is incorporated herein by reference.
The Company, which owns a majority interest in IP Timberlands, Ltd., a
Texas limited partnership ('IPT'), controlled approximately 6.1 million acres of
forestlands in the United States at December 31, 1994. IPT was formed to succeed
to substantially all of International Paper's forest products business for the
period 1985 through 2035, unless earlier terminated.
FINANCIAL INFORMATION CONCERNING INDUSTRY SEGMENTS
The financial information concerning industry segments is set forth on
pages 40 and 44 of the Annual Report, which information is incorporated herein
by reference.
FINANCIAL INFORMATION ABOUT INTERNATIONAL AND DOMESTIC OPERATIONS
The financial information concerning international and domestic operations
and export sales is set forth on page 43 of the Annual Report, which information
is incorporated herein by reference.
COMPETITION AND COSTS
Despite the size of the Company's manufacturing capacities for paper,
paperboard, packaging and pulp products, the markets in all of the cited product
lines are large and highly fragmented. The markets for wood and specialty
products are similarly large and fragmented. There are numerous competitors, and
the major markets, both domestic and international, in which the Company sells
its principal products are very competitive. These products are in competition
with similar products produced by others, and in some instances, with products
produced by other industries from other materials.
Many factors influence the Company's competitive position, including
prices, costs, product quality and services. Information on the impact of prices
and costs on operating profits is contained on pages 28 through 42 of the Annual
Report, which information is incorporated herein by reference.
MARKETING AND DISTRIBUTION
Paper and packaging products are sold through the Company's own sales
organization directly to users or converters for manufacture. Sales offices are
located throughout the United States as well as internationally. Significant
volumes of products are also sold through paper merchants and distributors,
including facilities in the Company's distribution network.
The Company's U.S. production of lumber and plywood is marketed through
independent and Company-owned distribution centers. Specialty products are
marketed through various channels of distribution.
3
<PAGE>
DESCRIPTION OF PRINCIPAL PRODUCTS
The Company's principal products are described on pages 4 through 39 of the
Annual Report, which information is incorporated herein by reference.
Production of major products for 1994, 1993 and 1992 was as follows:
PRODUCTION BY PRODUCTS
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
PRINTING PAPERS
(IN THOUSANDS OF TONS)
White papers and bristols................. 3,173 2,920 2,845
Coated papers............................. 1,036 972 1,038
Market pulp(1)............................ 1,834 1,529 1,495
PACKAGING
(IN THOUSANDS OF TONS)
Containerboard............................ 2,164 2,084 2,135
Bleached packaging board.................. 1,044 1,004 959
Industrial papers......................... 610 573 573
Industrial and consumer packaging(2)...... 3,126 2,933 2,667
FOREST PRODUCTS
(IN MILLIONS)
Panels (sq. ft. 3/8" basis)(3)............ 822 778 737
Lumber (board feet)....................... 953 952 915
</TABLE>
------------------
(1) This excludes market pulp purchases of approximately 700,000 tons annually.
(2) A significant portion of this tonnage was fabricated from paperboard and
paper produced at the Company's own mills and included in the
containerboard, bleached packaging board and industrial papers figures in
this table.
(3) Panels include plywood and oriented strand board.
RESEARCH AND DEVELOPMENT
The Company operates research and development centers at Sterling Forest,
New York; Mobile, Alabama; Erie, Pennsylvania; Kaukauna, Wisconsin; Binghamton,
New York; South Walpole, Massachusetts; St. Charles, Illinois; Orange Park,
Florida; Holyoke, Massachusetts; Odenton, Maryland; Mobberley, United Kingdom;
Morley, United Kingdom; Munich, Germany; Fribourg, Switzerland; Saint-Priest,
France; and Annecy, France; a regional center for applied forest research in
Bainbridge, Georgia; and several product laboratories. Research and development
activities are directed to short-term, long-term and technical assistance needs
of customers and operating divisions; process, equipment and product
innovations; and improvements of profits through tree generation and propagation
research. Activities include studies on improved forest species and management;
innovation and improvement of pulping, bleaching, chemical recovery, papermaking
and coating processes; innovation and improvement of photographic materials and
processes, printing plates, pressroom/plate chemistries and plate processors;
reduction of environmental discharges; re-use of raw materials in manufacturing
processes; recycling of consumer and packaging paper products; energy
conservation; applications of computer controls to manufacturing operations;
innovations and improvement of products; and development of various new
products. Product development efforts specifically address product safety as
well as the minimization of solid waste. The cost to the Company of its research
and development operations was $102.6 million in 1994, $94.7 million in 1993,
and $91.1 million in 1992.
4
<PAGE>
ENVIRONMENTAL PROTECTION
Control over discharges of pollutants into the air, water, soil and
groundwater to avoid significant adverse impacts on the environment and to
achieve 100% compliance with regulations is a continuing objective of the
Company. The Company has invested substantial funds to modify facilities to
assure compliance with applicable environmental quality laws and plans to make
substantial capital expenditures for these purposes in the future. A total of
$95 million was spent in 1994 to control air and water pollution and to assure
environmentally sound disposal of solid and hazardous waste. The Company expects
to spend approximately $160 million in 1995 for similar capital programs.
Amounts to be spent for environmental control facilities in future years will
depend on new laws and regulations and other changes in legal requirements,
changes in environmental concerns and changes in technology. Taking these
uncertainties into account, the Company's preliminary estimate for additional
environmental appropriations during the period 1996 through 1997 is in the range
of $400 to $600 million. In December 1993, the United States Environmental
Protection Agency ('EPA') proposed new guidelines for air emissions and water
discharges for the pulp and paper industry to meet in 1998 known as 'Cluster
Rulemaking'. It also proposed regulations implementing the Great Lakes
Initiative ('GLI') covering water quality and implementation procedures. Future
spending will be heavily influenced by the final standards included within each
of the regulations. Last year, the Company estimated future capital spending to
comply with the Cluster Rulemaking and GLI requirements to be between $700
million and $1.5 billion depending upon the methods allowed by the final
regulations to meet requirements. While there are ongoing discussions with the
EPA and Congress concerning these rules, there have been no announced changes to
the proposals and thus the estimates remain valid at this time. As a result of
these ongoing discussions, there is some basis to expect that the EPA will make
moderating adjustments to these rules and, if so, the range of estimated capital
spending would be adjusted downward. Last year, the Company estimated that
annual operating costs, excluding depreciation, would increase between $60
million and $120 million when these regulations are fully implemented in 1998 or
1999. This estimate will also be adjusted to the extent the EPA makes moderating
changes. The Company expects the significant effort it has made in the analysis
of environmental issues and the development of environmental control technology
to enable it to keep costs for compliance with environmental regulations at, or
below, industry averages. A further discussion of environmental issues can be
found on pages 22 through 26, 41 and 42 of the Annual Report, which information
is incorporated herein by reference.
As of December 31, 1994, $848 million of industrial and pollution control
revenue bonds, secured by Company contractual obligations, were outstanding in
57 political subdivisions of various states, counties and municipalities,
primarily to finance environmental control projects located at or in conjunction
with the Company's plants in those subdivisions. It is contemplated that
additional industrial revenue bonds will be issued from time to time to finance
other environmental control projects, provided tax law changes do not curtail
the Company's access to the municipal bond market.
EMPLOYEES
As of December 31, 1994, the Company had approximately 70,000 employees, of
whom approximately 52,000 were located in the United States and the remainder
overseas. Of these, approximately 44,500 are hourly employees, approximately
16,000 of whom are represented by the United Paperworkers International Union.
During 1994, new labor agreements were reached at the Camden, Natchez and
Pine Bluff mills. Currently, negotiations are still in progress at the Erie
mill. Two mills, Turners Falls and Ward, closed.
During 1995, labor agreements are scheduled to be negotiated at the
following mills: Georgetown and Hudson River. During 1996 labor agreements are
scheduled to be negotiated at the following mills: Gardiner, Pineville,
Texarkana, Thilmany, Ticonderoga and Woronoco.
During 1994, labor agreements expired at 10 packaging plants, three
chemical plants, three wood products plants, four land and timber operations,
two specialty products plants and eight distribution operations. Multiyear labor
agreements were negotiated at each location except one land and timber operation
and two distribution operations where negotiations were still in progress at
year end. One packaging plant has a contract remaining open from a previous
year.
5
<PAGE>
RAW MATERIALS
For information as to the sources and availability of raw materials
essential to the Company's business, see Item 2 'Properties.'
ITEM 2. PROPERTIES.
FORESTLANDS
The principal raw material used by International Paper is wood in various
forms. At December 31, 1994, IPT, a limited partnership in which the Company has
a majority ownership interest, controlled approximately 5.9 million acres of
forestlands in the U.S. while an additional 0.2 million acres are held under
short-term leases to International Paper.
During 1994, such forestlands supplied 1.3 million cords of roundwood to
the Company's U.S. facilities. This amounted to the following percentages of the
roundwood requirements of its mills and forest products facilities: 13% in its
Northern mills, 12% in its Southern mills and none in its Western mill. The
balance was acquired from other private industrial and nonindustrial forestland
owners, as well as the United States government. In addition, 2.9 million cords
of IPT's wood were sold to other users in 1994.
In November 1994, the Company adopted the Sustainable Forestry Principles
developed by the American Forest and Paper Association in August 1994.
MILLS AND PLANTS
A listing of the Company's production facilities can be found in Appendix I
hereto, which information is incorporated herein by reference.
The Company's facilities are in good operating condition and are suited for
the purposes for which they are presently being used. The Company continues to
study the economics of modernizing or adopting other alternatives for higher
cost facilities. Further discussions of new mill and plant projects can be found
on pages 12, 40 and 41 of the Annual Report, which information is incorporated
herein by reference.
CAPITAL INVESTMENTS AND DISPOSITIONS
Given the size, scope and complexity of its business interests,
International Paper continuously examines and evaluates a wide variety of
business opportunities and planning alternatives, including possible
acquisitions and sales or other dispositions of properties. Planned capital
investments for 1995, as of December 31, 1994, are set forth on pages 12, 40 and
41 of the Annual Report, which information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
DIOXIN LITIGATION
On June 11, 1993, a lawsuit purporting to be a class action was filed by
individuals against the Company, Dow Chemical and other individual employees of
both companies in the 18th Judicial District of Louisiana seeking compensatory
and punitive damages of an unspecified amount, alleging that the Company
polluted Staulkinghead Creek and all waterways south thereof, by discharging
chemicals, including dioxin, from its Bastrop, Louisiana mill. The case was
removed to the U.S. District Court for the Middle District of Louisiana. On June
22, 1994, the Court entered an order dismissing Dow and its employees from the
case. The plaintiff is appealing that ruling, as well as the Federal
jurisdictional issue. Oral argument in the Fifth Circuit Court of Appeals is set
for April 3, 1995, with a ruling expected before the end of this year.
Beginning in November of 1990, the Company has been named as a defendant in
88 lawsuits by individuals filed in state or federal court in Mississippi
alleging that it has polluted and damaged the Pascagoula, Leaf and Escatawpa
Rivers by releasing dioxin and over 40 other chemicals into those rivers.
Georgia-Pacific was initially
6
named in most of these suits but an order severing it from the Company in all
the then pending cases was entered on September 15, 1992. Following the
severance order, nine of the state cases were removed from state court to
<PAGE>
Federal District Court for the Southern District of Mississippi. Of the nine
cases that were removed, four have been dismissed. The remaining five cases are
set for trial on April 17, 1995.
On May 24, 1993, a wrongful death action was filed in Mississippi state
court against the Company claiming that decedent's death was related to exposure
to hazardous and toxic substances from the Moss Point mill. The lawsuit also
included the independent survivorship claims of the widow. The complaint raises
claims similar to those in the previously-filed lawsuits and also contains
specific allegations relating to the disposal of sludge by the mill. The
plaintiff seeks compensatory damages of $1 million and punitive damages of $20
million. The case has been removed to the U.S. District Court for the Southern
District of Mississippi and is currently scheduled for trial in August 1995.
Through a series of pre-trial rulings by the Court and voluntary dismissals by
the plaintiff, the claims in this lawsuit have been reduced to a claim for
wrongful death based on fish consumption and claims for negligent and
intentional infliction of emotional distress.
All of the 70 cases currently pending in the Mississippi state court have
been consolidated before one judge. A proposed scheduling order has been
presented requesting that the first trial of these cases be set in November
1995. The judge has not yet entered a scheduling order.
On December 15, 1992, a lawsuit purporting to be a class action was filed
against the Company in U.S. District Court for the Southern District of
Mississippi (Biloxi). The plaintiffs seek unspecified compensatory and punitive
damages for the alleged violation by the Company of Federal environmental laws
relating to dioxin and other chemicals associated with the operations of the
Moss Point mill. On February 18, 1994, the judge denied the plaintiffs' motion
to certify the class. The plaintiffs obtained a voluntary dismissal of this case
over the objections of the Company shortly thereafter.
In summary, taking into account various dismissals and new filings, there
are 70 cases pending in state court and six pending in Federal Court for a total
of 76 Mississippi cases as of February 28, 1995. In these cases, both state and
federal, there are a total of 5,090 plaintiffs seeking total compensatory
damages of approximately $1.0 billion, punitive damages of approximately $8.2
billion and injunctive relief. While any of this litigation has an element of
uncertainty, the Company believes that the outcome of any of these proceedings,
lawsuits or claims, pending or threatened, or all of them combined, will not
have a materially adverse effect on its consolidated financial position or
results of operations.
OTHER LITIGATION
On October 14, 1993, the Town of Jay, Maine assessed a penalty of $394,000
against the Company's Androscoggin mill for violations of its air permit under
the Town's Environmental Control and Improvement Ordinance attributable to
excess emissions of particulate from one of the mill's lime kilns, as well as
violations of certain reporting requirements. The Town's penalty assessment was
appealed. On September 28, 1994, the Maine Superior Court vacated most of the
penalty the Town had assessed, leaving $22,000 in place but providing the Town
with the opportunity to reassess the penalty on four violations. The Town
appealed this decision to the Law Court, the State's highest court. The Company
has also appealed the findings adverse to it.
The Maine Department of Environmental Protection proposed on October 15,
1992 that the Androscoggin mill enter into an Administrative Consent Agreement
and Enforcement Order and pay a civil penalty of $217,892 because the
particulate emissions from the same lime kiln which was the subject of the
foregoing proceeding with the Town of Jay, had exceeded the limits in the state
air license. Settlement discussions are no longer being conducted and the State
has filed a lawsuit against the Company. Further proceedings in this litigation
have been suspended until the aforementioned litigation by the Town of Jay has
been resolved by the Law Court. Although no specific amount is claimed in the
complaint, presumably the State will seek civil penalties in excess of the
amount it had originally proposed.
On November 15, 1993, the Thilmany division of the Company agreed with the
EPA, Region 5, to pay a penalty of $150,000 for alleged violations of the Clean
Air Act in 1988 at the Thilmany mill located in Kaukauna, Wisconsin. The
settlement was approved by the Federal Court having jurisdiction of the civil
action on August 3, 1994, terminating this action.
7
In 1990, the Missouri Attorney General's office notified the Company that
it was preparing an enforcement action alleging violations of the hazardous
waste management rules at the Company's treated wood plant in
<PAGE>
Joplin, Missouri. On July 18, 1994, the Company entered into a consent decree
with the Attorney General's office and the Department of Natural Resources,
which resolved the enforcement action. The settlement included a civil penalty
of $273,500.
In 1989, Masonite Corporation, a wholly-owned subsidiary of the Company
('Masonite'), modified a production line to make a new product at a facility in
Ukiah, California. The facility obtained the necessary Authority to Construct
permits from the appropriate authority. In May 1992 the EPA, Region 9, issued an
order alleging that an additional Prevention of Significant Deterioration permit
was required for the new product line. On January 18, 1995, a consent decree
which resolved this matter was lodged with the U.S. District Court for the
Northern District of California. The consent decree includes a civil penalty of
$600,000.
On September 29, 1994, Arizona Chemical Company ('Arizona'), a wholly-owned
subsidiary of the Company, entered into a Consent Agreement and Consent Order
with the EPA which resolves an enforcement action alleging violations of rules
which govern the burning of hazardous waste fuel in a boiler at an Arizona
facility in Panama City, Florida. The settlement includes a civil penalty of
$200,000.
On September 26, 1994, the EPA issued a Complaint and Compliance Order
alleging that an Arizona facility in Gulfport, Mississippi violated regulations
governing the burning of hazardous waste fuel in an industrial boiler. The
Complaint seeks a civil penalty of $712,350. The Company has filed its Answer to
the Complaint and Compliance Order.
The Company was advised in 1993 by the State of New York of an impending
enforcement action concerning emissions from the power boiler at the Company's
Ticonderoga, New York, paper mill. In July 1994 the Company entered into an
Order on Consent with the State, which settles with the State all outstanding
emissions matters concerning the mill's power boiler. The Order requires the
Company to install new control equipment on the power boiler in accordance with
a schedule and assessed a penalty against the Company of $175,000, of which
$25,000 was suspended so long as the Company complies with the provisions of the
Order.
As of March 30, 1995, there were no other pending judicial proceedings,
brought by governmental authorities against the Company, for alleged violations
of applicable environmental laws or regulations. The Company is engaged in
various administrative proceedings that arise under applicable environmental and
safety laws or regulations, including approximately 71 active proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act
('CERCLA') and comparable state laws. Most of these proceedings involve the
cleanup of hazardous substances at large commercial landfills that received
waste from many different sources. While joint and several liability is
authorized under the CERCLA, as a practical matter, liability for CERCLA
cleanups is allocated among the many potential responsible parties. Based upon
previous experience with respect to the cleanup of hazardous substances and upon
presently available information, the Company believes that it has no or de
minimus liability with respect to 27 of these sites; that liability is not
likely to be significant at 28 sites; and that estimates of liability at 16 of
these sites is likely to be significant but not material to the Company's
consolidated financial position or results of operations.
The Company is also involved in other contractual disputes, administrative
and legal proceedings and investigations of various types. While any litigation,
proceeding or investigation has an element of uncertainty, the Company believes
that the outcome of any proceeding, lawsuit or claim that is pending or
threatened, or all of them combined, will not have a materially adverse effect
on its consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1994.
8
<PAGE>
SPECIAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY.
INTERNATIONAL PAPER COMPANY
EXECUTIVE OFFICERS
AS OF MARCH 31, 1995
INCLUDING NAME, AGE, OFFICES AND POSITIONS HELD* AND
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
JOHN A. GEORGES, 64, chief executive officer and chairman of the board of
directors of the Company since 1985.
JOHN T. DILLON, 56, executive vice president-packaging since 1987.
JAMES P. MELICAN, 54, executive vice president-legal and external affairs
and general counsel. He was elected senior vice president and general counsel in
1987 and assumed the position of executive vice president-legal and external
affairs in 1991. In 1994 he assumed the general counsel position.
C. WESLEY SMITH, 55, executive vice president-printing papers. He was
elected president-International Paper Europe in 1989 and assumed his present
position in 1992.
MARK A. SUWYN, 52, executive vice president-distribution, forest and
specialty products. He was senior vice president-imaging systems, medical
products and corporate marketing with E.I. DuPont De Nemours & Company from 1990
to 1991. He joined the Company in his present position in 1992.
ROBERT C. BUTLER, 64, senior vice president and chief financial officer
since 1988.
ROBERT M. BYRNES, 57, senior vice president-human resources since 1989.
ANDREW R. LESSIN, 52, controller since 1990.
------------------
* Officers of International Paper are elected to hold office until the next
annual meeting of the board of directors following the annual meeting of
shareholders and until election of successors, subject to removal by the
board.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Dividend per share data on the Company's common stock and the high and low
sale prices for the Company's common stock for each of the four quarters in 1994
and 1993 are set forth on page 60 of the Annual Report and are incorporated
herein by reference.
As of March 24, 1995, there were 29,226 holders of record of the Company's
common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The comparative columnar table showing selected financial data for the
Company is set forth on pages 58 and 59 of the Annual Report and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's review and comments on the consolidated financial statements
are set forth on pages 28 through 42 of the Annual Report and are incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated financial statements, the notes thereto and the
reports of the independent public accountants and Company management are set
forth on pages 45 through 57 of the Annual Report and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company and their business experience are set forth on
pages 7 through 10 of the Company's Notice of 1995 Annual Meeting and Proxy
Statement, dated March 31, 1995 (the 'Proxy Statement') and are incorporated
herein by reference. The discussion of executive officers of the Company is
included in Part I under 'Executive Officers of the Company.'
ITEM 11. EXECUTIVE COMPENSATION.
A description of the compensation of the Company's executive officers is
set forth on pages 11, 12 and 14 through 17 of the Proxy Statement and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company knows of no one owning beneficially more than five percent (5%)
of the Company's common stock other than the State Street Bank and Trust Co.,
N.A., as Trustee of the Company's Salaried Savings Plan and Retirement Savings
Plan, respectively, which in the aggregate own 8.30% of the Company's shares of
common stock as of December 31, 1994. State Street Bank and Trust Co., N.A.
holds 9.10% of the Company's common stock and disclaims beneficial ownership of
the 8.30% which it holds as Trustee for the Company's benefit plans. The table
showing ownership of the Company's common stock by directors and by directors
and executive officers as a group is set forth on pages 5 and 6 of the Proxy
Statement, which information is incorporated herein by reference.
In 1989, the Company announced that it had authorized the purchase, from
time to time, of additional shares of its common stock for use in the Company's
benefit and shareholder plans and for general corporate purposes. As of December
31, 1994, 4.9 million common shares may be repurchased under this program.
10
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None, other than those described under Item 11.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
EXHIBITS:
<TABLE>
<S> <C>
(10) (a) Form of Termination Agreement, Tier I*
(b) Form of Termination Agreement, Tier II*
(c) Form of Termination Agreement, Tier III*
(d) Revolving Credit Agreement, dated January 24, 1995
(11) Statement of Computation of Per Share Earnings
(12) Computation of Ratio of Earnings to Fixed Charges
(13) 1994 Annual Report to Shareholders of the Company
(18) Letter on a Change in Accounting Principles
(21) List of Significant Subsidiaries
(22) Proxy Statement, dated March 31, 1995
(23) Consent of Independent Public Accountants
(24) Power of Attorney
(27) Financial Data Schedule
(99) (a) Management Incentive Plan*
(b) Long-Term Incentive Compensation Plan*
(c) Unfunded Savings Plan for Senior Managers
(d) Non-Funded Deferred Compensation Plan for Non-Employee Directors
</TABLE>
------------------
* Previously filed in the Annual Report on Form 10-K, for the year ended
December 31, 1992.
REPORTS ON FORM 8-K
Current Reports on Form 8-K were filed by the Company on October 17, 1994,
December 6, 1994, January 13, 1995, January 17, 1995 and March 6, 1995.
FINANCIAL STATEMENT SCHEDULES
The consolidated balance sheets as of December 31, 1994 and 1993 and the
related consolidated statements of earnings, cash flows and common shareholders'
equity for each of the three years ended December 31, 1994 and the related Notes
to Consolidated Financial Statements, together with the report thereon of Arthur
Andersen LLP, dated February 9, 1995, appearing on pages 45 through 57 of the
Annual Report, are incorporated herein by reference. With the exception of the
aforementioned information and the information incorporated by reference in
Items 1, 2 and 5 through 8, the Annual Report is not to be deemed filed as part
of this report. The following additional financial data should be read in
conjunction with the financial statements in the Annual Report. Schedules not
included with this additional financial data have been omitted because they are
not applicable, or the required information is shown in the financial statements
or notes thereto.
11
<PAGE>
ADDITIONAL FINANCIAL DATA
1994, 1993 AND 1992
<TABLE>
<S> <C>
Report of Independent Public Accountants on Financial Statement Schedule ... 13
Consolidated Schedule:
II -- Valuation and Qualifying Accounts................................ 14
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
TO INTERNATIONAL PAPER COMPANY:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Company's 1994 Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 9, 1995. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the accompanying index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, N.Y.
February 9, 1995
13
<PAGE>
SCHEDULE II
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
ADDITIONS BALANCE
BALANCE AT ADDITIONS CHARGED TO DEDUCTIONS AT END
BEGINNING CHARGED TO OTHER FROM OF
DESCRIPTION OF PERIOD EARNINGS ACCOUNTS RESERVES PERIOD
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied
Against Specific
Assets Shown on
Balance Sheet:
Doubtful
accounts--current... $ 104 $21 $0 $(28)(A) $ 97
========== === === ========= =======
</TABLE>
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------------------------------------
ADDITIONS BALANCE
BALANCE AT ADDITIONS CHARGED TO DEDUCTIONS AT END
BEGINNING CHARGED TO OTHER FROM OF
DESCRIPTION OF PERIOD EARNINGS ACCOUNTS RESERVES PERIOD
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied
Against Specific
Assets
Shown on Balance
Sheet:
Doubtful
accounts--current... $ 91 $29 $0 $(16)(A) $104
=== === === ========= =======
</TABLE>
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31, 1992
--------------------------------------------------------------------------------
ADDITIONS BALANCE
BALANCE AT ADDITIONS CHARGED TO DEDUCTIONS AT END
BEGINNING CHARGED TO OTHER FROM OF
DESCRIPTION OF PERIOD EARNINGS ACCOUNTS RESERVES PERIOD
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves Applied
Against Specific
Assets
Shown on Balance
Sheet:
Doubtful
accounts--current... $ 74 $23 $9 $(15)(A) $ 91
=== === === ========= =======
</TABLE>
------------------
(A) Primarily write-offs, less recoveries, of accounts determined to be
uncollectible.
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
INTERNATIONAL PAPER COMPANY
By: JAMES W. GUEDRY
-----------------------------------
JAMES W. GUEDRY, SECRETARY
March 31, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
NAME TITLE DATE
---------------------------------------- ---------------------- --------------
<S> <C> <C>
JOHN A. GEORGES Chairman of the Board, March 31, 1995
---------------------------------------- Chief Executive
(JOHN A. GEORGES) Officer and Director
JOHN T. DILLON* Executive Vice March 31, 1995
---------------------------------------- President and Director
(JOHN T. DILLON)
WILLARD C. BUTCHER* Director March 31, 1995
----------------------------------------
(WILLARD C. BUTCHER)
ROBERT J. EATON* Director March 31, 1995
----------------------------------------
(ROBERT J. EATON)
STANLEY C. GAULT* Director March 31, 1995
----------------------------------------
(STANLEY C. GAULT)
THOMAS C. GRAHAM* Director March 31, 1995
----------------------------------------
(THOMAS C. GRAHAM)
ARTHUR G. HANSEN* Director March 31, 1995
----------------------------------------
(ARTHUR G. HANSEN)
DONALD F. MCHENRY* Director March 31, 1995
----------------------------------------
(DONALD F. MCHENRY)
PATRICK F. NOONAN* Director March 31, 1995
----------------------------------------
(PATRICK F. NOONAN)
JANE C. PFEIFFER* Director March 31, 1995
----------------------------------------
(JANE C. PFEIFFER)
EDMUND T. PRATT, JR.* Director March 31, 1995
----------------------------------------
(EDMUND T. PRATT, JR.)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---------------------------------------- ---------------------- --------------
<S> <C> <C>
CHARLES R. SHOEMATE* Director March 31, 1995
----------------------------------------
(CHARLES R. SHOEMATE)
ROGER B. SMITH* Director March 31, 1995
----------------------------------------
(ROGER B. SMITH)
ROBERT C. BUTLER Senior Vice President March 31, 1995
---------------------------------------- and Chief Financial
(ROBERT C. BUTLER) Officer
ANDREW R. LESSIN Controller and Chief March 31, 1995
---------------------------------------- Accounting Officer
(ANDREW R. LESSIN)
*By JAMES W. GUEDRY
-------------------------------------
(JAMES W. GUEDRY, ATTORNEY-IN-FACT)
</TABLE>
16
<PAGE>
APPENDIX I
1994 LISTING OF FACILITIES
PRINTING PAPERS
PULP, COATED AND UNCOATED
PAPERS AND BRISTOLS
Domestic:
Mobile, Alabama
Selma, Alabama
(Riverdale Mill)
Camden, Arkansas
Pine Bluff, Arkansas
Bastrop, Louisiana
(Louisiana Mill)
Springhill, Louisiana
Jay, Maine
(Androscoggin Mill)
Miller Falls, Massachusetts
Westfield, Massachusetts
West Springfield,
Massachusetts
Woronoco, Massachusetts
Moss Point, Mississippi
Natchez, Mississippi
Corinth, New York
(Hudson River Mill)
Ticonderoga, New York
Hamilton, Ohio
Erie, Pennsylvania
Lock Haven, Pennsylvania
Georgetown, South Carolina
International:
Cali, Colombia
Coloto, Colombia
Strasbourg, France
(La Robertsau Mill)
Clermont-Ferrand, France
(Corimex Mill)
Saillat, France
Grenoble, France
(Lancey and
Pont De Claix Mills)
Maresquel, France
Saint Die, France
(Anould Mill)
Bergisch Gladbach, Germany
(Gorhrsmuhle Mill)
Duren, Germany
(Reflex Mill)
Kwidzyn, Poland
PACKAGING
CONTAINERBOARD
Domestic:
Mansfield, Louisiana
Pineville, Louisiana
Vicksburg, Mississippi
Oswego, New York
Gardiner, Oregon
International:
Arles, France
CORRUGATED CONTAINER
Domestic:
Mobile, Alabama
Russellville, Arkansas
Carson, California
Modesto, California
San Jose, California
Stockton, California
Putnam, Connecticut
Auburndale, Florida
Chicago, Illinois
Shreveport, Louisiana
Springhill, Louisiana
Detroit, Michigan
Minneapolis, Minnesota
Geneva, New York
Tallman, New York
Statesville, North Carolina
Cincinnati, Ohio
Wooster, Ohio
Mount Carmel, Pennsylvania
Georgetown, South Carolina
Nashville, Tennessee
Dallas, Texas
Edinburg, Texas
El Paso, Texas
Delevan, Wisconsin
Fond du Lac, Wisconsin
International:
Las Palmas, Canary Islands
Arles, France
Chalon-sur-Saone, France
Chantilly, France
Creil, France
LePuy, France
Mortagne, France
Guadeloupe, French West
Indies
Bellusco, Italy
Catania, Italy
Pedemonte, Italy
Pomezia, Italy
San Felice, Italy
Barcelona, Spain
Bilbao, Spain
Valladolid, Spain
Winsford, United Kingdom
BLEACHED BOARD
Pine Bluff, Arkansas
Moss Point, Mississippi
Georgetown, South
Carolina
Texarkana, Texas
LIQUID PACKAGING
Domestic:
Turlock, California
Plant City, Florida
Atlanta, Georgia
Cedar Rapids, Iowa
Kansas City, Kansas
Framingham, Massachusetts
Kalamazoo, Michigan
Raleigh, North Carolina
Philadelphia, Pennsylvania
International:
Edmonton, Alberta, Canada
London, Ontario, Canada
Longueil, Quebec, Canada
Santiago, Dominican Republic
Tel Aviv, Israel
Perugia, Italy
Kingston, Jamaica
Tokyo, Japan
Seoul, Korea
Taipei, Taiwan
Caracas, Venezuela
FOLDING CARTON
Clinton, lowa
Hopkinsville, Kentucky
Cincinnati, Ohio
Richmond, Virginia
LABEL
Commerce, California
Peoria, Illinois
Bowling Green, Kentucky
KRAFT PAPER
Mobile, Alabama
Camden, Arkansas
A-1
<PAGE>
GROCERY BAGS & SACKS
Mobile, Alabama
Jackson, Tennessee
MULTIWALL BAGS
Camden, Arkansas
Pittsburg, Kansas
Wilmington, Ohio
ENVELOPES
Glendale, California
San Francisco, California
DISTRIBUTION
WHOLESALE AND RETAIL DISTRIBUTION
(283 distribution branches)
ResourceNet International
Domestic:
Arvey Paper and Office Products
Chicago, Illinois
23 locations nationwide
Dillard Paper
Greensboro, North Carolina
84 branches in the Middle
Atlantic States and
Southeast
Dixon Paper Company
Denver, Colorado
23 branches in the West and
Midwest
Industrial Materials
Distributors
Erlanger, Kentucky
13 branches in New England,
and Middle Atlantic States,
Midwest, South and West
Ingram Paper
City of Industry, California
7 locations in the
Southwest and Hawaii
Kirk Paper Company
Downey, California
26 locations in the
West, Southwest,
and Northwest
Leslie Paper
Minneapolis, Minnesota
15 locations in the
Midwest
Northeast Region
Erlanger, Kentucky
39 branches in New England,
Middle Atlantic States,
Midwest and
District of Columbia
Western Pacific
Portland, Oregon
3 locations in the Northwest
Western Paper Company
Overland Park, Kansas
43 branches in the West,
Midwest and South
International:
Plastic & Paper Sales, Ltd.
Toronto, Ontario, Canada
Chihuahua, Chihuahua, Mexico
3 locations
Other International:
Aussedat Rey France
Distribution S.A., Pantin,
France
Scaldia Papier BV,
Nijmegen, Netherlands
Aalbers Paper Products
Veenendaal, Netherlands
FOREST PRODUCTS
FORESTLANDS
Approximately 6.1 million
acres in the South, Northeast
and Northwest
WOOD PRODUCTS
Domestic:
Maplesville, Alabama
Tuscaloosa, Alabama
Gurdon, Arkansas
Leola, Arkansas
Whelen Springs, Arkansas
DeRidder, Louisiana
Springhill, Louisiana
Morton, Mississippi
Wiggins, Mississippi
Joplin, Missouri
Pleasant Hill, Missouri
Madison, New Hampshire
Sampit, South Carolina
Henderson, Texas
Mineola, Texas
Nacogdoches, Texas
New Boston, Texas
Building Products
Ukiah, California
Lisbon Falls, Maine
Laurel, Mississippi
Towanda, Pennsylvania
Fiberboard
Spring Hope, North Carolina
Pilot Rock, Oregon
Marion, South Carolina
Particleboard
Danville, Virginia
Stuart, Virginia
Waverly, Virginia
Slaughter
Dallas, Texas
2 branches in the Southwest
and Northwest
McEwen Lumber Company
High Point, North Carolina
14 branches in the Southeast
International:
INTAMASA
Cella, Spain
Masonite Africa Limited
Estcourt Plant
REALTY PROJECTS
Haig Point Plantation
Daufuskie Island, South Carolina
SPECIALTY PRODUCTS
NONWOVEN PRODUCTS
Domestic:
Athens, Georgia
Griswoldville, Massachusetts
Walpole, Massachusetts
Lewisburg, Pennsylvania
Bethune, South Carolina
Green Bay, Wisconsin
International:
Liege, Belgium
Toronto, Ontario, Canada
Yokohama, Japan
San Jose Ituebide, Mexico
IMAGING PRODUCTS
Domestic:
Jacksonville, Florida
Holyoke, Massachusetts
Binghamton, New York
International:
Melbourne, Australia
Saint-Priest, France
Munich, Germany
Mobberley, Great Britain
Morley, Great Britain
Fribourg, Switzerland
A-2
<PAGE>
CHEMICAL PRODUCTS
Domestic:
Panama City, Florida
Pensacola, Florida
Port St. Joe, Florida
Oakdale, Louisiana
Springhill, Louisiana
Gulfport, Mississippi
Picayune, Mississippi
International:
Sandarne, Sweden
Greaker, Norway
MINERALS
Alvin, Texas
Houston, Texas
Midland, Texas
SPECIALTY PANELS AND LAMINATED
PRODUCTS
Domestic:
Chino, California
Ukiah, California
Cordele, Georgia
Glasgow, Kentucky
Louisville, Kentucky
Monticello, Kentucky (2 plants)
Odenton, Maryland
Laurel, Mississippi
Statesville, North Carolina
Tarboro, North Carolina
Towanda, Pennsylvania
Portland, Tennessee
Waverly, Virginia
Oshkosh, Wisconsin
International:
Pori, Finland
Bergerac, France (Couze Mill)
Ussel, France
Barcelona, Spain (Durion Mill)
INDUSTRIAL AND PACKAGING PAPERS
Thilmany Pulp & Paper Company
Knoxville, Tennessee
Kaukauna, Wisconsin
Nicolet Paper Company
De Pere, Wisconsin
Jay, Maine
(Androscoggin Mill)
Akrosil
Domestic:
Menasha, Wisconsin
Lancaster, Ohio
International:
Limburg, Netherlands
A-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description
------- -------------------
<S> <C>
(10) (a) Form of Termination Agreement, Tier I*
(b) Form of Termination Agreement, Tier II*
(c) Form of Termination Agreement, Tier III*
(d) Revolving Credit Agreement, dated January 24, 1995
(11) Statement of Computation of Per Share Earnings
(12) Computation of Ratio of Earnings to Fixed Charges
(13) 1994 Annual Report to Shareholders of the Company
(18) Letter on a Change in Accounting Principles
(21) List of Significant Subsidiaries
(22) Proxy Statement, dated March 31, 1995
(23) Consent of Independent Public Accountants
(24) Power of Attorney
(27) Financial Data Schedule
(99) (a) Management Incentive Plan*
(b) Long-Term Incentive Compensation Plan*
(c) Unfunded Savings Plan for Senior Managers
(d) Non-Funded Deferred Compensation Plan for Non-Employee Directors
</TABLE>
------------------
* Previously filed in the Annual Report on Form 10-K, for the year ended
December 31, 1992.
[CONFORMED COPY]
************************************************************
INTERNATIONAL PAPER COMPANY
_____________________________
CREDIT AGREEMENT
Dated as of January 24, 1995
______________________________
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
************************************************************
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience only.
Page
Section 1. Definitions and Accounting Matters . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . 14
Section 2. Commitments . . . . . . . . . . . . . . . . . . 15
2.01 Syndicated Loans . . . . . . . . . . . . . . . . . 15
2.02 Borrowings of Syndicated Loans . . . . . . . . . . 16
2.03 Money Market Borrowings. . . . . . . . . . . . . . 17
2.04 Changes of Commitments . . . . . . . . . . . . . . 22
2.05 Facility Fee . . . . . . . . . . . . . . . . . . . 22
2.06 Lending Offices. . . . . . . . . . . . . . . . . . 22
2.07 Several Obligations; Remedies Independent. . . . . 22
2.08 Notes. . . . . . . . . . . . . . . . . . . . . . . 23
2.09 Prepayments. . . . . . . . . . . . . . . . . . . . 23
2.10 Borrowings by Approved Borrowers . . . . . . . . . 24
Section 3. Payments of Principal and Interest . . . . . . . 24
3.01 Repayment of Loans . . . . . . . . . . . . . . . . 24
3.02 Interest . . . . . . . . . . . . . . . . . . . . . 24
Section 4. Payments; Pro Rata Treatment; Computations;
Etc.. . . . . . . . . . . . . . . . . . . . . . 25
4.01 Payments . . . . . . . . . . . . . . . . . . . . . 25
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . 27
4.03 Computations . . . . . . . . . . . . . . . . . . . 27
4.04 Non-Receipt of Funds by the Administrative Agent . 27
4.05 Sharing of Payments, Etc.. . . . . . . . . . . . . 28
Section 5. Yield Protection and Illegality. . . . . . . . . 29
5.01 Additional Costs . . . . . . . . . . . . . . . . . 29
5.02 Limitation on Types of Loans . . . . . . . . . . . 32
5.03 Illegality . . . . . . . . . . . . . . . . . . . . 33
5.04 Treatment of Affected Loans. . . . . . . . . . . . 33
5.05 Compensation . . . . . . . . . . . . . . . . . . . 33
5.06 Foreign Taxes. . . . . . . . . . . . . . . . . . . 34
5.07 U.S. Taxes . . . . . . . . . . . . . . . . . . . . 35
Section 6. Guarantee. . . . . . . . . . . . . . . . . . . . 36
6.01 Guarantee. . . . . . . . . . . . . . . . . . . . . 36
6.02 Obligations Unconditional. . . . . . . . . . . . . 37
6.03 Reinstatement. . . . . . . . . . . . . . . . . . . 38
6.04 Subrogation. . . . . . . . . . . . . . . . . . . . 38
6.05 Remedies . . . . . . . . . . . . . . . . . . . . . 38
6.06 Continuing Guarantee . . . . . . . . . . . . . . . 38
Section 7. Conditions Precedent . . . . . . . . . . . . . . 39
7.01 Effectiveness . . . . . . . . . . . . . . . . . . 39
7.02 Initial Loan to any Approved Borrower. . . . . . . 40
7.03 Initial and Subsequent Loans . . . . . . . . . . . 41
Section 8. Representations and Warranties. . . . . . . . . . 42
Part A. Representations and Warranties of the Company. . . . 42
8.01 Corporate Existence. . . . . . . . . . . . . . . . 42
8.02 Financial Condition. . . . . . . . . . . . . . . . 42
8.03 Litigation . . . . . . . . . . . . . . . . . . . . 43
8.04 No Breach. . . . . . . . . . . . . . . . . . . . . 43
8.05 Corporate Action of the Company. . . . . . . . . . 43
8.06 Approvals. . . . . . . . . . . . . . . . . . . . . 43
8.07 Use of Loans . . . . . . . . . . . . . . . . . . . 43
8.08 ERISA. . . . . . . . . . . . . . . . . . . . . . . 44
8.09 Taxes. . . . . . . . . . . . . . . . . . . . . . . 44
8.10 Investment Company Act . . . . . . . . . . . . . . 44
8.11 Public Utility Holding Company Act . . . . . . . . 44
8.12 Credit Agreements. . . . . . . . . . . . . . . . . 44
8.13 Hazardous Materials and Environmental Matters. . . 45
8.14 Full Disclosure. . . . . . . . . . . . . . . . . . 45
Part B. Representations and Warranties of the Approved
Borrowers. . . . . . . . . . . . . . . . . . . . . 46
8.15 Corporate Existence of Approved Borrower . . . . . 46
8.16 No Breach. . . . . . . . . . . . . . . . . . . . . 46
8.17 Corporate Action . . . . . . . . . . . . . . . . . 46
8.18 Approvals. . . . . . . . . . . . . . . . . . . . . 47
8.19 Taxes on Payments of Approved Borrowers. . . . . . 47
Section 9. Covenants of the Company . . . . . . . . . . . . 47
9.01 Financial Statements . . . . . . . . . . . . . . . 47
9.02 Litigation . . . . . . . . . . . . . . . . . . . . 50
9.03 Corporate Existence, Etc.. . . . . . . . . . . . . 50
9.04 Insurance. . . . . . . . . . . . . . . . . . . . . 51
9.05 Prohibition of Fundamental Changes . . . . . . . . 51
9.06 Limitation on Liens. . . . . . . . . . . . . . . . 52
9.07 Total Debt to Total Capital Ratio. . . . . . . . . 54
9.08 Minimum Tangible Net Worth . . . . . . . . . . . . 54
9.09 Use of Proceeds. . . . . . . . . . . . . . . . . . 54
Section 10. Events of Default. . . . . . . . . . . . . . . . 54
Section 11. The Agents. . . . . . . . . . . . . . . . . . . 58
11.01 Appointment, Powers and Immunities. . . . . . . . 58
11.02 Reliance by the Agents. . . . . . . . . . . . . . 58
11.03 Defaults. . . . . . . . . . . . . . . . . . . . . 59
11.04 Rights as a Bank. . . . . . . . . . . . . . . . . 59
11.05 Indemnification . . . . . . . . . . . . . . . . . 59
11.06 Non-Reliance on the Agents and Other
Banks . . . . . . . . . . . . . . . . . . . . . 60
11.07 Failure to Act. . . . . . . . . . . . . . . . . . 60
11.08 Resignation or Removal of Agent . . . . . . . . . 60
11.09 Agents' Fees. . . . . . . . . . . . . . . . . . . 61
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . 61
12.01 Waiver. . . . . . . . . . . . . . . . . . . . . . 61
12.02 Notices . . . . . . . . . . . . . . . . . . . . . 61
12.03 Expenses, Etc.. . . . . . . . . . . . . . . . . . 62
12.04 Amendments, Etc.. . . . . . . . . . . . . . . . . 62
12.05 Successors and Assigns. . . . . . . . . . . . . . 63
12.06 Assignments and Participations. . . . . . . . . . 63
12.07 Survival. . . . . . . . . . . . . . . . . . . . . 65
12.08 Captions. . . . . . . . . . . . . . . . . . . . . 65
12.09 Counterparts. . . . . . . . . . . . . . . . . . . 65
12.10 Governing Law; Submission to Jurisdiction;
Service of Process. . . . . . . . . . . . . . . 65
12.11 Judgment Currency . . . . . . . . . . . . . . . . 66
12.12 Waiver of Jury Trial. . . . . . . . . . . . . . . 66
12.13 Confidentiality . . . . . . . . . . . . . . . . . 66
SCHEDULE 1 - Material Agreements
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Designation Letter
EXHIBIT B-2 - Form of Termination Letter
EXHIBIT C-1 - Form of Opinion of Counsel to the Company
EXHIBIT C-2 - Form of Opinion of Counsel to the Approved Borrowers
EXHIBIT D - Form of Opinion of Special Counsel for the Agents
EXHIBIT E - Form of Money Market Quote Request
EXHIBIT F - Form of Money Market Quote
EXHIBIT G - Form of Confidentiality Agreement
CREDIT AGREEMENT dated as of January 24, 1995 among: INTERNATIONAL
PAPER COMPANY, a corporation duly organized and validly existing under the laws
of the State of New York (the "Company"); each of the banks that is a signatory
hereto (individually, a "Bank" and, collectively, the "Banks"); THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), as administrative agent for the Banks (in
such capacity, together with its successors in such capacity, the
"Administrative Agent"); and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
documentation agent (in such capacity, together with its successors in such
capacity, the "Documentation Agent").
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Agents" shall mean the Administrative Agent and the Documentation
Agent.
"Applicable Lending Office" shall mean, for each Bank and for each
type of Loan, the "Lending Office" of such Bank (or of an affiliate of such
Bank) designated for such type of Loan on the signature pages hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Administrative Agent and the Company as the
office by which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean: (a) with respect to Base Rate Loans,
0% per annum; (b) with respect to CD Loans (i) during any Level I Period, .245
of 1% per annum, (ii) during any Level II Period, .275 of 1% per annum, (iii)
during any Level III Period, .40 of 1% per annum, (iv) during any Level IV
Period, .45 of 1% per annum and (v) during any Level V Period, .625 of 1% per
annum; and (c) with respect to Eurodollar Loans (i) during any Level I Period,
.12 of 1% per annum, (ii) during any Level II Period, .15 of 1% per annum, (iii)
during any Level III Period, .275 of 1% per annum, (iv) during any Level IV
Period, .325 of 1% per annum and (v) during any Level V Period, .50 of 1% per
annum. Any change in the Applicable Margin for any type of Loan by reason of a
change in the Standard & Poor's Rating or the Moody's Rating shall become
effective on the date of announcement or publication by the respective rating
agencies of a change in such rating or, in the absence of such announcement or
publication, on the effective date of such changed rating.
"Approved Borrower" shall mean any Wholly-Owned Consolidated
Subsidiary of the Company as to which a Designation Letter has been delivered to
the Documentation Agent and as to which a Termination Letter shall not have been
delivered to the Documentation Agent, which Subsidiary has been approved as a
borrower hereunder by all of the Banks, all in accordance with Section 2.10
hereof.
"Assessment Rate" shall mean, for any CD Loan, the effective annual
assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%)
payable by Chase to the Federal Deposit Insurance Corporation (or any successor)
for deposit insurance for Dollar time deposits with Chase at the Principal
Office during the Interest Period for such Loan, as reasonably estimated by the
Administrative Agent.
"Aussedat Rey" shall mean Aussedat Rey S.A., a French Corporation.
"Base Rate" shall mean, for any day, the higher of (a) the Federal
Funds Rate for such day plus 1/2 of 1% per annum and (b) the Prime Rate for such
day. Each change in any interest rate provided for herein based upon the Base
Rate resulting from a change in the Base Rate shall take effect at the time of
such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans which bear interest at
rates based upon the Base Rate.
"Borrowers" shall mean the Company and each Approved Borrower.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and, if such day relates to the
giving of notices or quotes in connection with a LIBOR Auction or to a borrowing
of, a payment or prepayment of principal of or interest on, or the Interest
Period for, a Eurodollar Loan or a LIBOR Market Loan or a notice by the Company
with respect to any such borrowing, payment, prepayment or Interest Period,
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CD Loans" shall mean Syndicated Loans the interest rates on which are
determined on the basis of rates referred to in clause (b) of the definition of
"Fixed Base Rate" in this Section 1.01.
"Chase" shall mean The Chase Manhattan Bank (National Association).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean, as to each Bank, the obligation of such Bank
to make Syndicated Loans pursuant to Section 2.01 hereof in an aggregate amount
at any one time outstanding up to but not exceeding the amount set opposite such
Bank's name on the signature pages hereof under the caption "Commitment" (as the
same may be reduced at any time or from time to time pursuant to Section 2.04 or
12.06(b) or increased from time to time pursuant to Section 12.06(b)).
"Commitment Termination Date" shall mean January 24, 2000 (or if such
day is not a Business Day, the next succeeding Business Day).
"Consolidated Subsidiary" shall mean, as to any Person, each
Subsidiary of such Person (whether now existing or hereafter created or
acquired) the financial statements of which shall be (or should have been)
consolidated with the financial statements of such Person in accordance with
GAAP.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Designation Letter" shall have the meaning assigned to such term in
Section 2.10 hereof.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Effective Date" shall mean the date this Agreement becomes effective
in accordance with Section 7.01.
"Environmental Laws" shall mean any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company or is under common control
(within the meaning of Section 414(c) of the Code) with the Company.
"Eurodollar Loans" shall mean Syndicated Loans the interest rates on
which are determined on the basis of rates referred to in clause (a) of the
definition of "Fixed Base Rate" in this Section 1.01.
"Event of Default" shall have the meaning assigned to such term in
Section 10 hereof.
"Existing Credit Agreements" shall mean the Credit Agreement dated as
of November 29, 1990 among the Company, the banks parties thereto, Morgan, as
administrative agent, and Chase and Morgan, as co-agents, and the Credit
Agreement dated as of January 1, 1993 between the Company and Credit Lyonnais,
each as amended to the date of this Agreement.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to Chase on such day on such transactions as determined by the
Administrative Agent.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate Loan:
(a) if such Loan is a Eurodollar Loan or a LIBOR Market Loan, the
arithmetic mean, as determined by the Administrative Agent, of the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by each
Reference Bank at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of the
Interest Period for such Loan for the offering by such Reference Bank to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan or LIBOR Market Loan to be made by such Reference Bank for
such Interest Period; and
(b) if such Loan is a CD Loan, the arithmetic mean, as determined by
the Administrative Agent, of the rate per annum (rounded upwards, if necessary,
to the nearest 1/20 of 1%) determined by each Reference Bank to be the average
of the bid rates quoted to such Reference Bank at approximately 10:00 a.m. New
York time (or as soon thereafter as practicable) on the first day of the
Interest Period for such Loan by at least two certificate of deposit dealers of
recognized national standing selected by such Reference Bank for the purchase at
face value of certificates of deposit of such Reference Bank having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the CD Loan to be made by such Reference Bank for such Interest
Period.
If any Reference Bank is not participating in any Fixed Rate Loan, the Fixed
Base Rate for such Loan shall be determined by reference to the amount of the
Loan which such Reference Bank would have made had it been participating in such
Loan; provided that in the case of any LIBOR Market Loan, the Fixed Base Rate
for such Loan shall be determined with reference to deposits of $10,000,000. If
any Reference Bank does not timely furnish such information for determination of
any Fixed Base Rate, the Administrative Agent shall determine such Fixed Base
Rate on the basis of information timely furnished by the remaining Reference
Banks.
"Fixed Rate" shall mean, for any Fixed Rate Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Administrative Agent to be equal to (a) in the case of a CD Loan, the sum of (i)
the Fixed Base Rate for such Loan for the Interest Period for such Loan divided
by 1 minus the Reserve Requirement for such Loan for such Interest Period plus
(ii) the Assessment Rate for such Interest Period and (b) in the case of a
Eurodollar Loan, the Fixed Base Rate for such Loan for the Interest Period for
such Loan.
"Fixed Rate Loans" shall mean CD Loans, Eurodollar Loans and, for the
purposes of the definition of "Fixed Base Rate" in this Section 1.01 and in
Section 5 hereof, LIBOR Market Loans.
"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those which, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with the terms of this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock of any corporation, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of his, her or its
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank to open a letter of credit for the benefit of
another Person, but excluding endorsements for collection or deposit in the
ordinary course of business. The terms "Guarantee" and "Guaranteed" used as a
verb shall have a correlative meaning.
"Guarantor" shall mean the Company in its capacity as the guarantor
under Section 6 hereof.
"Indebtedness" shall mean, as to any Person: (a) indebtedness created,
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for the account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Interest Period" shall mean:
(a) with respect to any Eurodollar Loan, the period commencing on the
date such Eurodollar Loan is made and ending on the numerically corresponding
day in the first, second, third or sixth calendar month thereafter, as the
Company (on its own behalf and on behalf of any other Borrower) may select as
provided in Section 2.02 hereof, except that each Interest Period which
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month;
(b) with respect to any CD Loan, the period commencing on the date
such CD Loan is made and ending on the day 30, 60, 90 or 180 days thereafter, as
the Company (on its own behalf and on behalf of any other Borrower) may select
as provided in Section 2.02 hereof;
(c) with respect to any Base Rate Loan, the period commencing on the
date such Base Rate Loan is made and ending on the date 30 days thereafter;
(d) with respect to any Set Rate Loan, the period commencing on the
date such Set Rate Loan is made and ending on any Business Day not less than 15
days but not more than 180 days thereafter, as the Company (on its own behalf
and on behalf of any other Borrower) may select as provided in Section 2.03(b)
hereof; and
(e) with respect to any LIBOR Market Loan, the period commencing on
the date such LIBOR Market Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company (on its own behalf and on behalf of any other
Borrower) may select as provided in Section 2.03(b) hereof, except that each
Interest Period which commences on the last Business Day of a calendar month (or
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Commitment Termination Date as in effect at the beginning of such Interest
Period; (ii) each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (or, in the
case of an Interest Period for Eurodollar Loans or LIBOR Market Loans, if such
next succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and (iii) notwithstanding clause (i) above, no
Interest Period for any Fixed Rate Loans or LIBOR Market Loans shall have a
duration of less than one month (in the case of Eurodollar Loans and LIBOR
Market Loans) or 30 days (in the case of CD Loans) and, if the Interest Period
for any Fixed Rate Loans or LIBOR Market Loans would otherwise be a shorter
period, such Loans shall not be available hereunder.
"IPISA" shall mean International Paper Investments S.A., a French
corporation.
"Kwidzyn" shall mean International Paper Kwidzyn S.A., a Polish joint
stock company.
"Kwidzyn Entity" shall mean (i) Kwidzyn, (ii) as long as it holds no
assets other than (A) interests in Kwidzyn, (B) cash and cash equivalents and
(C) "political risk" insurance policies with respect to Kwidzyn, Kwidzyn France
and (iii) as long as it holds no assets other than (A) interests in and
contracts with Kwidzyn, (B) unless Kwidzyn France is not then a Kwidzyn Entity,
interests in Kwidzyn France and (C) cash and cash equivalents, International
Paper Investments (Poland), Inc., a Delaware corporation.
"Kwidzyn France" shall mean Celuose et Papiers de Pologne, S.A., a
French corporation.
"Level I Period" shall mean any period during which (a) no Event of
Default has occurred and is continuing and (b) the Standard & Poor's Rating is
at or above AA- (or any successor rating) or the Moody's Rating is at or above
Aa3 (or any successor rating).
"Level II Period" shall mean any period, other than a Level I Period,
during which (a) no Event of Default has occurred and is continuing and (b) the
Standard & Poor's Rating is at or above A- (or any successor rating) or the
Moody's Rating is at or above A3 (or any successor rating).
"Level III Period" shall mean any period, other than a Level I Period
or a Level II Period, during which (a) no Event of Default has occurred and is
continuing and (b) the Standard & Poor's Rating is at or above BBB (or any
successor rating) or the Moody's Rating is at or above Baa2 (or any successor
rating).
"Level IV Period" shall mean any period, other than a Level I Period,
a Level II Period or a Level III Period, during which (a) no Event of Default
has occurred and is continuing and (b) the Standard & Poor's Rating is at or
above BBB- (or any successor rating) or the Moody's Rating is at or above Baa3
(or any successor rating).
"Level V Period" shall mean any period other than a Level I Period, a
Level II Period, a Level III Period or a Level IV Period.
"LIBO Rate" shall mean, for any LIBOR Market Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Administrative Agent to be equal to the rate of interest specified in clause (a)
of the definition of "Fixed Base Rate" in this Section 1.01 for the Interest
Period for such Loan.
"LIBOR Auction" shall mean a solicitation of Money Market Quotes
setting forth Money Market Margins based on the LIBO Rate pursuant to Section
2.03 hereof.
"LIBOR Market Loans" shall mean Money Market Loans interest rates on
which are determined on the basis of LIBOR Rates pursuant to a LIBOR Auction.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For purposes of this Agreement, the Company or any of its Subsidiaries
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loans" shall mean Money Market Loans and Syndicated Loans.
"Majority Banks" shall mean Banks having at least 66-2/3% of the
aggregate amount of the Commitments; provided that, if the Commitments shall
have terminated, Majority Banks shall mean Banks holding at least 66-2/3% of the
aggregate unpaid principal amount of the Loans.
"Margin Stock" shall mean margin stock within the meaning of
Regulations U and X.
"Material Subsidiary" shall mean, at any time, any Subsidiary of the
Company that (a) is an Approved Borrower or (b) has total assets (as shown on
the most recent balance sheet of such Subsidiary prepared in accordance with
generally accepted accounting principles) of $150,000,000 or more.
"Money Market Borrowing" shall have the meaning assigned to such term
in Section 2.03(b) hereof.
"Money Market Loans" shall mean the loans provided for by Section 2.03
hereof.
"Money Market Margin" shall have the meaning assigned to such term in
Section 2.03(d)(ii)(C) hereof.
"Money Market Notice" shall have the meaning assigned to such term in
Section 2.03(b) hereof.
"Money Market Quote" shall mean an offer in accordance with Section
2.03(c) hereof by a Bank to make a Money Market Loan with one single specified
interest rate.
"Money Market Quote Request" shall have the meaning assigned to such
term in Section 2.03(b) hereof.
"Money Market Rate" shall have the meaning assigned to such term in
Section 2.03(d)(ii)(D) hereof.
"Moody's" shall mean Moody's Investors Services, Inc., or any
successor corporation thereto.
"Moody's Rating" shall mean, at any time, the then current rating
(including the failure to rate) by Moody's of the Company's senior unsecured
long term public debt.
"Morgan" shall mean Morgan Guaranty Trust Company of New York.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Non-OECD Country" shall mean a country that is not a member of the
Organization for Economic Cooperation and Development.
"Notes" shall mean the promissory notes provided for by Section 2.08
hereof.
"Obligors" shall mean the Borrowers and the Guarantor.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrowers under this Agreement or any
Note that is not paid when due (whether at stated maturity, by acceleration or
otherwise), a rate per annum during the period from and including the due date
to but excluding the date on which such amount is paid in full equal to 2% above
the Base Rate as in effect from time to time (provided that, if the amount so in
default is principal of a Fixed Rate Loan or a Money Market Loan and the due
date thereof is a day other than the last day of the Interest Period therefor,
the "Post-Default Rate" for such principal shall be, for the period from and
including such due date to but excluding the last day of the Interest Period for
such Loan, 2% above the interest rate for such Loan as provided in Section 3.02
hereof and, thereafter, the rate provided for above in this definition).
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime lending rate.
"Principal Office" shall mean the principal office of the
Administrative Agent and Chase, presently located at 1 Chase Manhattan Plaza,
New York, New York 10081.
"Project Indebtedness" shall mean (i) Indebtedness of any Kwidzyn
Entity or (ii) Indebtedness of the Company, IPISA or Aussedat Rey that
constitutes Indebtedness of such Person due solely to the pledge, on a
non-recourse basis, by such Person of Indebtedness or capital stock of any
Kwidzyn Entity held by such Person to secure Indebtedness of any Kwidzyn Entity
to any other Person or Persons or (iii) Indebtedness of the Company or any
Subsidiary incurred to finance the acquisition, construction or development of
Project Assets (as defined in Section 9.06(i)); provided in the case of this
clause (iii) that (x) such Indebtedness is non-recourse to any other assets and
(y) the aggregate principal amount of such Indebtedness may at no time exceed
$200,000,000.
"Quarterly Dates" shall mean the last Business Day of each March,
June, September and December in each year the first of which shall be the first
such day after the date of this Agreement.
"Reference Banks" shall mean Chase, Morgan and Credit Suisse (or their
Applicable Lending Offices, as the case may be).
"Regulations D, U and X" shall mean, respectively, Regulations D, U
and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be amended or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including such Bank of or under any United States Federal, state
or foreign law or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" shall mean, for any Interest Period for any CD
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against non-
personal Dollar time deposits in an amount of $100,000 or more. Without
limiting the effect of the foregoing, the Reserve Requirement shall include any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the Fixed Base Rate for CD Loans is to be
determined as provided in the definition of "Fixed Base Rate" in this Section
1.01 or (b) any category of extensions of credit or other assets which includes
CD Loans.
"Set Rate Auction" shall mean a solicitation of Money Market Quotes
setting forth Money Market Rates pursuant to Section 2.03 hereof.
"Set Rate Loans" shall mean Money Market Loans the interest rates on
which are determined on the basis of Money Market Rates pursuant to a Set Rate
Auction.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group or any
successor thereto.
"Standard & Poor's Rating" shall mean, at any time, the then current
rating (including the failure to rate) by Standard & Poor's of the Company's
senior unsecured long term public debt.
"Subsidiary" shall mean, as to any Person, (a) any corporation of
which at least a majority of the outstanding shares of stock whose class or
classes have by the terms thereof ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether or not at
the time stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an ownership or controlling
interest (whether in the form of voting or participation in profits or capital
contribution) of more than 50%. "Wholly-Owned Subsidiary" shall mean any
Subsidiary of which all of such shares or ownership interests, other than (in
the case of a corporation) directors' qualifying shares, are so owned or
controlled.
"Syndicated Loans" shall mean the loans provided for by Section 2.01
hereof.
"Tangible Assets" shall mean, at any time, Total Assets minus the sum
of the items identified in clause (c) of the definition in this Section 1.01 of
the term "Tangible Net Worth".
"Tangible Net Worth" shall mean, at any time, the sum of the following
for the Company and its Consolidated Subsidiaries determined on a consolidated
basis (without duplication) in accordance with GAAP:
(a) the amount of capital stock, plus
(b) the amount of surplus and retained earnings (or, in the case of a
surplus or retained earnings deficit, minus the amount of such deficit), minus
(c) the sum of the following: cost of treasury shares and the book
value of all assets of the Company and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained earnings)
but in any event including goodwill, research and development costs, trademarks,
trade names, copyrights, patents and franchises, unamortized debt discount
and expense, and any write-up in the book value of assets resulting from a
revaluation thereof subsequent to September 30, 1994 (other than any write-up,
at the time of its acquisition, in the book value of any asset acquired
subsequent to September 30, 1994).
"Termination Letter" shall have the meaning assigned to such term in
Section 2.10 hereof.
"Total Assets" shall mean, at any time, the total assets of the
Company and its Consolidated Subsidiaries at such time determined on a
consolidated basis (without duplication) in accordance with GAAP.
"Total Capital" shall mean, at any time, Tangible Net Worth plus Total
Debt.
"Total Debt" shall mean, at any time, the aggregate outstanding
principal amount of all Indebtedness of the Company and its Consolidated
Subsidiaries at such time determined on a consolidated basis (without
duplication) in accordance with GAAP.
"U.S. Person" shall mean a citizen, national or resident of the United
States of America, a corporation, partnership or other entity created or
organized in or under any laws of the United States of America, or any estate or
trust that is subject to United States Federal income taxation regardless of the
source of its income.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Banks hereunder shall (unless otherwise disclosed to the Banks in writing at the
time of delivery thereof in the manner described in subsection (b) below) be
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that used in the preparation of the latest financial
statements furnished to the Banks hereunder (which, until the first financial
statements are delivered under Section 9.01 hereof, shall mean the financial
statements referred to in Section 8.02 hereof). All calculations made for the
purposes of determining compliance with the terms of this Agreement shall
(except as otherwise expressly provided herein) be made by application of
generally accepted accounting principles applied on a basis consistent with that
used in the preparation of the annual or quarterly financial statements
furnished to the Banks pursuant to Section 9.01 hereof unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Banks shall so object
in writing within 30 days after delivery of such financial statements, in either
of which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 9.01 hereof, shall mean
the financial statements referred to in Section 8.02 hereof).
(b) The Company shall deliver to the Banks at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01
hereof a description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above, and reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Company will not change
the last day of its fiscal year from December 31 of each year, or the last days
of the first three fiscal quarters in each of its fiscal years from March 31,
June 30 and September 30 of each year, respectively, without giving prior notice
of such change to each Bank and Agent.
Section 2. Commitments.
2.01 Syndicated Loans. Each Bank severally agrees, on the terms of
this Agreement, to make loans to the Borrowers in Dollars during the period from
and including the date hereof to but not including the Commitment Termination
Date in an aggregate principal amount as to all Borrowers at any one time
outstanding up to but not exceeding the amount of such Bank's Commitment.
Subject to the terms of this Agreement, during such period the Borrowers may
borrow, repay and reborrow the amount of the Commitments; provided that the
aggregate principal amount of all Money Market Loans, together with the
aggregate principal amount of all Syndicated Loans, at any one time outstanding
shall not exceed the aggregate amount of the Commitments at such time; and
provided, further, that there may be no more than fifteen different Interest
Periods for both Syndicated Loans and Money Market Loans outstanding at the same
time (for which purpose Interest Periods described in different lettered clauses
of the definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous). The Syndicated Loans may be Base
Rate Loans, CD Loans or Eurodollar Loans (each a "type" of Syndicated Loans).
2.02 Borrowings of Syndicated Loans. The Company (on its own behalf
and on behalf of any other Borrower) shall give the Administrative Agent (which
shall promptly notify the Banks) notice of each borrowing hereunder of
Syndicated Loans, which notice shall be irrevocable and effective only upon
receipt by the Administrative Agent, shall specify with respect to the
Syndicated Loans to be borrowed (i) the Borrower, (ii) the aggregate amount
(which shall be at least $15,000,000 and multiples of $1,000,000 in excess
thereof), (iii) the type and date (which shall be a Business Day), and (iv) (in
the case of Fixed Rate Loans) the duration of the Interest Period therefor and
shall be given not later than 10:30 a.m. New York time (in the case of Base Rate
Loans) and 11:00 a.m. New York time (in the case of all Syndicated Loans other
than Base Rate Loans) on the day which is not less than the number of Business
Days prior to the date of such borrowing specified below opposite the type of
such Loans:
Type Number of Business Days
Base Rate Loans same day
CD Loans 2
Eurodollar Loans 3
Except as otherwise provided in Section 4.01(b) hereof, not later than 1:00 p.m.
New York time on the date specified for each borrowing of Syndicated Loans
hereunder, each Bank shall make available the amount of the Syndicated Loan to
be made by it on such date to the Administrative Agent, at account number 900-
9-000002 maintained by the Administrative Agent with Chase at the Principal
Office, in immediately available funds, for account of the relevant Borrower.
The amount so received by the Administrative Agent shall, subject to the terms
and conditions of this Agreement, be made available to the relevant Borrower by
depositing the same, in immediately available funds, in an account of such
Borrower maintained with Chase at 1 Chase Manhattan Plaza, New York, New York
10081 and designated by the Company.
2.03 Money Market Borrowings.
(a) The Money Market Option. In addition to Syndicated Loans
pursuant to Section 2.01 hereof, the Company (on its own behalf or on behalf of
any other Borrower) may, as set forth in this Section 2.03, request the
Administrative Agent to solicit the Banks during the period from and including
the date hereof to but not including the Commitment Termination Date to make
offers to make Money Market Loans to any Borrower in Dollars. The Banks may,
but shall have no obligation to, make such offers and such Borrower may, but
shall have no obligation to, accept any such offers in the manner set forth in
this Section. Money Market Loans may be LIBOR Market Loans or Set Rate Loans
(each a "type" of Money Market Loan), provided that:
(i) there may be no more than fifteen different Interest Periods
for both Syndicated Loans and Money Market Loans outstanding at the same time
(for which purpose Interest Periods described in different lettered clauses of
the definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous); and
(ii) the aggregate principal amount of all Money Market Loans,
together with the aggregate principal amount of all Syndicated Loans, at any one
time outstanding shall not exceed the aggregate amount of the Commitments at
such time.
(b) Money Market Notice. When the Company wishes to request offers
to make Money Market Loans under this Section 2.03, it shall transmit to the
Administrative Agent by telex or facsimile transmission a notice (a "Money
Market Notice"), containing up to three requests (each a "Money Market Quote
Request"), substantially in the form of Exhibit E hereto, so as to be received
no later than (x) 9:00 a.m. (New York City time) on the fourth Business Day
prior to the date of borrowing proposed therein, in the case of a LIBOR Auction
or (y) 11:00 a.m. (New York City time) on the Business Day next preceding the
date of borrowing proposed therein, in the case of a Set Rate Auction (or, in
either case, such other time and date as the Company and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Set Rate Auction for which such change is to be effective), specifying:
(i) the Borrower and the proposed date of borrowing, which shall
be a Business Day;
(ii) the aggregate amount of such borrowing, which shall be at
least $15,000,000 or multiples of $1,000,000 in excess thereof;
(iii) the duration of the Interest Period or Interest Periods
applicable thereto, subject to the provisions of the definition in Section 1.01
hereof of the term "Interest Period"; and
(iv) whether the Money Market Quotes requested for a particular
Interest Period are to set forth a Money Market Margin or a Money Market Rate.
The Company may request offers to make Money Market Loans for up to three
different Interest Periods in a single Money Market Notice (for which purpose
Interest Periods in different lettered clauses of the definition in Section 1.01
hereof of the term "Interest Period" shall be deemed to be different Interest
Periods even if they are coterminous); provided that the request for each
separate Interest Period shall be deemed to be a separate Money Market Quote
Request for a separate borrowing (a "Money Market Borrowing"). No Money Market
Notice shall be given within five Business Days (or such other number of days as
the Company and the Administrative Agent may agree) of any other Money Market
Notice.
(c) Invitation for Money Market Quotes. Promptly upon receipt of one
or more Money Market Quote Requests, the Administrative Agent shall notify the
Banks by telex or facsimile transmission of the provisions thereof, which shall
constitute an invitation by the Company to each Bank to submit Money Market
Quotes offering to make the Money Market Loans to which each such Money Market
Quote Request relates in accordance with this Section 2.03.
(d) Submission and Contents of Money Market Quotes.
(i) Each Bank may submit up to five separate Money Market
Quotes, each containing an offer to make a Money Market Loan at a specified
Money Market Margin or a Money Market Rate, as the case may be, in response to
any single Money Market Quote Request; provided that such Bank may make a single
submission containing all of such Quotes. Each Money Market Quote must comply
with the requirements of this subsection (d) and must be submitted to the
Administrative Agent by telex or facsimile transmission at its offices specified
in or pursuant to Section 12.02 hereof not later than (x) 4:00 p.m. (New York
City time) on the fourth Business Day prior to the proposed date of Borrowing,
in the case of a LIBOR Auction or (y) 9:00 a.m. (New York City time) on the
proposed date of borrowing, in the case of a Set Rate Auction (or, in either
case, such other time and date as the Company and the Administrative Agent shall
have mutually agreed and shall have notified to the Banks not later than the
date of the Money Market Quote Request for the first LIBOR Auction or Set Rate
Auction for which such change is to be effective); provided that Money Market
Quotes submitted by Chase (or its Applicable Lending Office) may be submitted,
and may only be submitted, if Chase (or its Applicable Lending Office) notifies
the Company of the terms of the offer contained therein not later than (x) 3:00
p.m. (New York City time) on the fourth Business Day prior to the proposed date
of borrowing, in the case of a LIBOR Auction or (y) 8:45 a.m. (New York City
time) on the proposed date of borrowing, in the case of a Set Rate Auction.
Subject to Sections 5.02(b), 5.03, 7.03 and 10 hereof, any Money Market Quote so
made shall be irrevocable except with the written consent of the Administrative
Agent given on the instructions of the Company.
(ii) Each Money Market Quote shall be in substantially the form
of Exhibit F hereto and shall in any case specify:
(A) the Borrower and the proposed date of borrowing and the
Interest Period therefor;
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be in multiples of $1,000,000,
(y) may not exceed the aggregate principal amount of Money Market Loans for
which offers were requested and (z) may be subject to an aggregate limitation as
to the principal amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted;
(C) in the case of a LIBOR Auction, the margin above or below
the applicable LIBO Rate (the "Money Market Margin") offered for each such Money
Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%)
to be added to or subtracted from the applicable LIBO Rate;
(D) in the case of a Set Rate Auction, the rate of interest per
annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Rate")
offered for each such Money Market Loan; and
(E) the identity of the quoting Bank.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit F hereto or
does not specify all of the information required by subsection (d)(ii);
(B) except as expressly permitted by clause (z) of subsection
(d)(ii)(B), contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Money Market Quote Request; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Company. The Administrative Agent shall promptly
notify the Company of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Company shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market Rates,
as the case may be, so offered by each Bank (identifying the Bank that made each
Money Market Quote), and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) Acceptance and Notice by Company. Not later than (x) 11:00 a.m.
(New York City time) on the third Business Day prior to the proposed date of
borrowing, in the case of a LIBOR Auction or (y) 10:00 a.m. (New York City time)
on the proposed date of borrowing, in the case of a Set Rate Auction (or, in
either case, such other time and date as the Company and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Set Rate Auction for which such change is to be effective), the Company shall
notify the Administrative Agent (which shall promptly notify each Bank) of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Company may accept any Money Market
Quote in whole or in part (provided that any Money Market Quote accepted in part
shall be in multiples of $1,000,000); provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related Money
Market Quote Request;
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Rates, as the case may be; and
(iv) the Company may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements of
this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Administrative Agent among such Banks as nearly as possible (in
multiples of $1,000,000) in proportion to the aggregate principal amount of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
(h) Funding of Money Market Loans. Except as otherwise provided in
Section 4.01(b) hereof, any Bank whose offer to make any Money Market Loan has
been accepted shall, not later than 1:00 p.m. New York time on the date
specified for the making of such Loan, make the amount of such Loan available to
the Administrative Agent at account number 900-9-000002 maintained by the
Administrative Agent with Chase at the Principal Office in immediately available
funds, for account of the relevant Borrower. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to such Borrower on such date by depositing the
same, in immediately available funds, in an account of such Borrower maintained
with Chase at 1 Chase Manhattan Plaza, New York, New York 10081 and designated
by the Company.
2.04 Changes of Commitments.
(a) The aggregate amount of the Commitments shall be automatically
reduced to zero on the Commitment Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) so long as no Loans are outstanding, to terminate the Commitments or (ii) to
reduce the aggregate unused amount of the Commitments, upon not less than 3
Business Days' prior notice to the Administrative Agent (which shall promptly
notify the Banks) of each such termination or partial reduction, which notice
shall specify the effective date thereof and the amount of any such partial
reduction (which shall be at least $20,000,000 and in multiples of $5,000,000 in
excess thereof) and shall be irrevocable and effective only upon receipt by the
Administrative Agent.
(c) The Commitments once terminated or reduced may not be reinstated.
2.05 Facility Fee. The Company shall pay to the Administrative Agent
for account of each Bank a facility fee (each, a "Facility Fee") on the
aggregate amount of such Bank's Commitment as then in effect at a rate per annum
equal to (a) .08 of 1% during any Level I Period, (b) .10 of 1% during any Level
II Period, (c) .125 of 1% during any Level III Period, (d) .175 of 1% during any
Level IV Period and (e) .25 of 1% during any Level V Period. Each Facility Fee
shall accrue from and including the date hereof to and including the earlier of
(i) the Commitment Termination Date and (ii) the termination of such Bank's
Commitment and shall be payable on each Quarterly Date and on the earlier of (i)
the Commitment Termination Date and (ii) the termination of such Bank's
Commitment. Any change in a Facility Fee by reason of a change in the Standard
& Poor's Rating or the Moody's Rating shall become effective on the date of
announcement or publication by the respective rating agencies of a change in
such rating or, in the absence of such announcement or publication, on the
effective date of such changed rating.
2.06 Lending Offices. The Loans of each type made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office for Loans of
such type.
2.07 Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor any Agent shall be responsible for the failure of any
other Bank to make a Loan to be made by such other Bank. The amounts payable by
the Borrowers at any time hereunder and under the Notes to each Bank shall be a
separate and independent debt and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall not
be necessary for any other Bank or any Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.
2.08 Notes.
(a) The Loans made by each Bank to any Borrower shall be evidenced by
a single promissory note of such Borrower, with the guarantee of the Company
endorsed thereon in the case of an Approved Borrower, substantially in the form
of Exhibit A hereto, dated the date of the delivery of such Note to the
Documentation Agent under this Agreement, payable to such Bank and otherwise
duly completed. The date, amount, type, interest rate and maturity date of each
Loan made by each Bank to any Borrower, and each payment made on account of the
principal thereof, shall be recorded by such Bank on its books and, prior to any
transfer of the Note of such Borrower held by it, endorsed by such Bank on the
schedule attached to such Note or any continuation thereof.
(b) Each Bank may, by notice to the Borrower and the Documentation
Agent, request that its Loans of a particular type to any Borrower be evidenced
by a separate Note in an amount equal to the aggregate unpaid principal amount
of such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" or "Notes" of such Bank shall be deemed to refer to and include any or
all of such Notes, as the context may require.
(c) No Bank shall be entitled to have its Note(s) subdivided (except
as set forth in paragraph (b) above), by exchange for promissory notes of lesser
denominations or otherwise, except in connection with a permitted assignment of
all or any portion of such Bank's Commitment, Loans and Note(s) pursuant to
Section 12.06 hereof.
2.09 Prepayments
Any Borrower may prepay its Base Rate Loans upon not less than one
Business Day's prior notice by the Company to the Administrative Agent (which
shall promptly notify the Banks), which notice shall specify the prepayment date
(which shall be a Business Day) and the amount of the prepayment (which, in the
case of any partial prepayment, shall be at least $15,000,000 and multiples of
$1,000,000 in excess thereof) and shall be irrevocable and effective only upon
receipt by the Administrative Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the prepayment date.
The Borrowers may not prepay any Fixed Rate Loans or a Money Market Loan
(provided that this sentence shall not affect the obligations of the Borrowers
pursuant to Section 10 hereof).
2.10 Borrowings by Approved Borrowers. The Company may, at any time
or from time to time, designate one or more Wholly- Owned Consolidated
Subsidiaries as Borrowers hereunder by furnishing to the Documentation Agent a
letter (a "Designation Letter") in duplicate, substantially in the form of
Exhibit B-1 hereto, duly completed and executed by the Company and such
Subsidiary. Upon approval by all of the Banks (which approval shall not be
unreasonably withheld) of such Subsidiary as an Approved Borrower, which
approval shall be evidenced by the Documentation Agent signing and returning to
the Company a copy of such Designation Letter, such Subsidiary shall be an
Approved Borrower. There may be no more than five Approved Borrowers at any one
time. So long as all principal and interest on all Loans of any Approved
Borrower and all other amounts payable by such Approved Borrower hereunder have
been paid in full, the Company may terminate its status as an Approved Borrower
hereunder by furnishing to the Documentation Agent a letter (a "Termination
Letter"), substantially in the form of Exhibit B-2 hereto, duly completed and
executed by the Company and such Approved Borrower. Any Termination Letter
furnished in accordance with this Section 2.10 shall be effective upon receipt
by the Documentation Agent. Notwithstanding the foregoing, the delivery of a
Termination Letter with respect to any Approved Borrower shall not affect any
obligation of such Approved Borrower theretofore incurred.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. Each Borrower hereby promises to pay to the
Administrative Agent for account of each Bank the principal of each Loan made by
such Bank to such Borrower, and each Loan shall mature, on the last day of the
Interest Period therefor.
3.02 Interest. Each Borrower hereby promises to pay to the
Administrative Agent for account of each Bank interest on the unpaid principal
amount of each Loan made by such Bank to such Borrower for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) if such Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin (if any);
(b) if such Loan is a Fixed Rate Loan, the Fixed Rate for such Loan
for the Interest Period for such Loan plus the Applicable Margin;
(c) if such Loan is a LIBOR Market Loan, the LIBO Rate for such Loan
for the Interest Period therefor plus (or minus) the Money Market Margin quoted
by the Bank making such Loan in accordance with Section 2.03 hereof; and
(d) if such Loan is a Set Rate Loan, the Money Market Rate for such
Loan for the Interest Period therefor quoted by the Bank making such Loan in
accordance with Section 2.03 hereof.
Notwithstanding the foregoing, each Borrower hereby promises to pay to the
Administrative Agent for account of each Bank interest at the applicable
Post-Default Rate on any principal of any Loan made by such Bank to such
Borrower, and on any other amount payable by such Borrower hereunder or under
the Notes of such Borrower held by such Bank to or for account of such Bank,
which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise), for the period from and including the due date
thereof to but excluding the date the same is paid in full. Accrued interest on
each Loan shall be payable on the last day of the Interest Period therefor and,
if such Interest Period is longer than 90 days (in the case of a CD Loan or a
Set Rate Loan) or three months (in the case of a Eurodollar Loan or a LIBOR
Market Loan), at 90-day or three-month intervals, respectively, following the
first day of such Interest Period, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand and interest on
any Fixed Rate Loan that is converted into a Base Rate Loan (pursuant to Section
5.04 hereof) shall be payable on the date of conversion (but only to the extent
so converted). Promptly after the determination of any interest rate provided
for herein or any change therein, the Administrative Agent shall give notice
thereof to the Banks to which such interest is payable and to the relevant
Borrower (through notification to the Company).
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Obligors under this
Agreement and the Notes shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
at account number 900-9-000002 maintained by the Administrative Agent with Chase
at the Principal Office, not later than 1:00 p.m. New York time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day).
(b) Anything herein to the contrary notwithstanding, if a new Loan is
to be made to any Borrower by any Bank on a date such Borrower is to repay any
principal of an outstanding Loan of such Bank, such Bank shall apply the
proceeds of such new Loan to the payment of the principal to be repaid and only
an amount equal to the excess of the principal to be borrowed over the principal
to be repaid shall be made available by such Bank to the Administrative Agent as
provided in Sections 2.02 or 2.03(h) hereof or if the principal to be repaid
exceeds the principal to be borrowed, only an amount equal to such excess shall
be paid by such Borrower to the Administrative Agent pursuant to Section 4.01(a)
hereof.
(c) Any Bank for whose account any such payment is to be made, may
(but shall not be obligated to) debit the amount of any such payment which is
not made by 5:00 p.m. New York time on such due date to any ordinary deposit
account of any Borrower with such Bank (with notice to such Borrower through
notification to the Company).
(d) Each Borrower shall, at the time of making each payment under
this Agreement or any Note for account of any Bank, specify to the
Administrative Agent (which will so notify such Bank) the Loans or other amounts
payable by such Borrower hereunder to which such payment is to be applied (and
in the event that such Borrower fails to so specify, or if an Event of Default
has occurred and is continuing, such Bank may apply such payment received by it
from the Administrative Agent to such amounts then due and owing to such Bank
hereunder as such Bank may determine).
(e) Each payment received by the Administrative Agent under this
Agreement or any Note for account of a Bank shall be paid promptly to such Bank,
in immediately available funds.
(f) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day such date shall be
extended to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing from the Banks under Section 2.01 hereof shall be
made from the Banks, each payment of facility fee under Section 2.05 hereof
shall be made for account of the Banks, and each termination or reduction of the
amount of the Commitments under Section 2.04 hereof shall be applied to the
Commitments of the Banks, pro rata according to the amounts of their respective
Commitments; (b) each payment of principal of Syndicated Loans by any Borrower
shall be made for account of the Banks pro rata in accordance with the
respective unpaid principal amounts of the Syndicated Loans held by the Banks;
and (c) each payment of interest on Syndicated Loans by any Borrower shall be
made for account of the Banks pro rata in accordance with the amounts of
interest on Syndicated Loans due and payable to the respective Banks.
4.03 Computations. Interest on Money Market Loans, Fixed Rate Loans,
Base Rate Loans that bear interest based on the Federal Funds Rate and facility
fees shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable and interest on Base Rate Loans that bear interest
based on the Prime Rate shall be computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
4.04 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or any Borrower prior to
the date on which such Bank or such Borrower is to make payment to the
Administrative Agent of (in the case of a Bank) the proceeds of a Loan to be
made by it hereunder or (in the case of a Borrower) a payment to the
Administrative Agent for account of one or more of the Banks hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that such Bank or such Borrower does not intend to make
the Required Payment to the Administrative Agent, the Administrative Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date and, if such Bank or such Borrower, as
the case may be, has not in fact made the Required Payment to the Administrative
Agent, the recipient(s) of such payment shall, on demand, repay to the
Administrative Agent the amount so made available together with interest thereon
in respect of each day during the period commencing on the date such amount was
so made available by the Administrative Agent until the date the Administrative
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such day and, if such recipient(s) shall fail promptly to make such payment,
the Administrative Agent shall be entitled to recover such amount, on demand,
from such Bank or such Borrower, as the case may be, together with interest as
aforesaid.
4.05 Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, at its option, to offset balances held by it
for account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Bank's Loans to
such Obligor or any other amount payable by such Obligor to such Bank hereunder,
which is not paid when due (regardless of whether such balances are then due to
such Obligor), in which case it shall promptly notify such Obligor (through
notification to the Company) and the Administrative Agent thereof, provided that
such Bank's failure to give such notice shall not affect the validity thereof.
(b) If any Bank shall obtain payment of any principal of or interest
on any Loan made by it from any Obligor under this Agreement through the
exercise of any right of set-off, banker's lien or counterclaim or similar right
or otherwise, and, as a result of such payment, such Bank shall have received a
greater percentage of the principal or interest then due hereunder by such
Obligor to such Bank than the percentage received by any of the other Banks, it
shall promptly purchase from such other Banks participations in (or, if and to
the extent specified by such Bank, direct interests in) the Loans made by such
other Banks (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to the
end that all the Banks shall share the benefit of such excess payment (net of
any expenses which may be incurred by such Bank in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal and/or interest
on the Loans held by each of the Banks. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Each Obligor agrees that any Bank so purchasing a participation
(or direct interest) in the Loans (or in interest due thereon, as the case may
be) made by other Banks may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Bank were a direct holder of Loans in the amount of such participation.
(d) Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor.
(e) If, under any applicable bankruptcy, insolvency or other similar
law, any Bank receives a secured claim in lieu of a set-off to which this
Section 4.05 applies, such Bank shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Banks entitled under this Section 4.05 to share in the benefits of any
recovery on such secured claim.
Section 5. Yield Protection and Illegality.
5.01 Additional Costs.
(a) Each Borrower shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate it for any
costs which such Bank determines are attributable to its making or maintaining
of any Fixed Rate Loans to such Borrower or its obligation to make any Fixed
Rate Loans hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such
Bank by such Borrower under this Agreement or its Note(s) in respect of any of
such Loans (other than taxes imposed on or measured by the overall net income of
such Bank or of its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Bank has its principal office or such Applicable
Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the determination
of the Fixed Rate for CD Loans or, in the case of any Bank for any period as to
which such Borrower is required to pay any amount under paragraph (e) below, the
reserves against "Eurocurrency liabilities" under Regulation D therein referred
to) relating to any extensions of credit or other assets of, or any deposits
with or other liabilities of, such Bank (including any of such Loans or any
deposits referred to in the definition of "Fixed Base Rate" in Section 1.01
hereof), or any commitment of such Bank (including the Commitment of such Bank
hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Note(s) (or any of such extensions of credit or liabilities) or its Commitment.
If any Bank requests compensation from any Borrower under this Section 5.01(a),
the Company may, by notice to such Bank (with a copy to the Administrative
Agent), suspend the obligation of such Bank to make additional Loans to such
Borrower of the type with respect to which such compensation is requested (in
which case the provisions of Section 5.04 hereof shall be applicable) until the
Regulatory Change giving rise to such request ceases to be in effect.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of such Bank which includes deposits by reference to which the interest rate on
Eurodollar Loans or CD Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Bank which includes
Eurodollar Loans or CD Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, if
such Bank so elects by notice to the Borrowers (through the Company with a copy
to the Administrative Agent), the obligation of such Bank to make additional
Loans of such type hereunder shall be suspended (in which case the provisions of
Section 5.04 hereof shall be applicable) until such Regulatory Change ceases to
be in effect.
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Bank from time to time on request such amounts as such Bank may determine to be
necessary to compensate such Bank (or, without duplication, the bank holding
company of which such Bank is a subsidiary) for any costs which it determines
are attributable to the maintenance by such Bank (or any Applicable Lending
Office or such bank holding company), pursuant to any Regulatory Change
(including, without limitation, the coming into effect after the date hereof of
any risk-based capital guideline or requirement (whether or not having the force
of law and whether or not the failure to comply therewith would be unlawful)
issued by any government or governmental or supervisory authority implementing
at the national level the Basle Accord), of capital in respect of its Commitment
or Loans (such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of such Bank (or any
Applicable Lending Office or such bank holding company) to a level below that
which such Bank (or any Applicable Lending Office or such bank holding company)
could have achieved but for such law, regulation, interpretation, directive or
request); provided that the Company shall not be required to compensate any Bank
(or any bank holding company of which such Bank is a Subsidiary) for any costs
attributable to the maintenance of capital pursuant to any risk-based capital
guideline or other requirement (i) heretofore issued by any bank supervisory
authority (even if compliance is not required until some future date) or (ii)
hereafter issued by any bank supervisory authority to the extent that such
guideline or other requirement does not establish requirements that are
materially higher than those established by the Basle Accord as in effect on the
date hereof. For purposes of this Section 5.01(c), "Basle Accord" shall mean
the proposals for risk-based capital framework described by the Basle Committee
on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
(d) Each Bank will notify the Company of any event occurring after
the date of this Agreement that will entitle such Bank to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within 45 days, after such Bank obtains actual knowledge thereof;
provided, however, that if any Bank fails to give such notice within 45 days
after it obtains actual knowledge of such an event, such Bank shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of any
costs resulting from such event, only be entitled to payment under this Section
5.01 for costs incurred from and after the date that such Bank does give such
notice; and provided, further, that each Bank will designate a different
Applicable Lending Office for the Loans of such Bank affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Bank, be disadvantageous
to such Bank, except that such Bank shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Bank
will furnish to the Company a certificate setting forth the basis and amount of
each request by such Bank for compensation under paragraph (a) or (c) of this
Section 5.01. Determinations and allocations by any Bank for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or
(b) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Bank
under this Section 5.01, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis and in good faith.
(e) Without limiting the effect of the foregoing, each Borrower shall
pay to each Bank on the last day of each Interest Period for each Eurodollar
Loan made by such Bank to such Borrower so long as such Bank is maintaining
reserves against "Eurocurrency liabilities" under Regulation D (or, unless the
provisions of paragraph (b) above are applicable, so long as such Bank is, by
reason of any Regulatory Change, maintaining reserves against any other category
of liabilities which includes deposits by reference to which the interest rate
on Eurodollar Loans is determined as provided in this Agreement or against any
category of extensions of credit or other assets of such Bank which includes any
Eurodollar Loans) an additional amount (determined by such Bank and notified to
the Company through such Bank with a copy to the Administrative Agent) equal to
the product of the following for each Eurodollar Loan for each day during such
Interest Period:
(i) the principal amount of such Eurodollar Loan outstanding on
such day; and
(ii) the remainder of (x) a fraction the numerator of which is
the rate (expressed as a decimal) at which interest accrues on such Eurodollar
Loan for such Interest Period as provided in this Agreement (less the Applicable
Margin) and the denominator of which is one minus the effective rate (expressed
as a decimal) at which such reserve requirements are imposed on such Bank on
such day minus (y) such numerator; and
(iii) 1/360.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Fixed Base Rate for
any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits referred
to in the definition of "Fixed Base Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for any type of Fixed Rate Loans as provided
herein; or
(b) the Majority Banks determine (or any Bank that has outstanding a
Money Market Quote with respect to a LIBOR Market Loan determines), which
determination shall be conclusive, and notify (or notifies, as the case may be)
the Administrative Agent that the relevant rates of interest referred to in the
definition of "Fixed Base Rate" in Section 1.01 hereof upon the basis of which
the rate of interest for Eurodollar Loans or CD Loans (or LIBOR Market Loans, as
the case may be) for such Interest Period is to be determined are not likely to
cover adequately the cost to such Banks (or to such quoting Bank) of making or
maintaining such type of Loans;
then the Administrative Agent shall give prompt notice thereof to the Company
and each Bank, and so long as such condition remains in effect, the Banks (or
such quoting Bank) shall be under no obligation to make additional Loans of such
type.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans or
LIBOR Market Loans hereunder, then such Bank shall promptly notify the Company
thereof (with a copy to the Administrative Agent) and such Bank's obligation to
make Eurodollar Loans shall be suspended until such time as such Bank may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable), and such Bank shall no longer be obligated to make
any LIBOR Market Loan that it has offered to make.
5.04 Treatment of Affected Loans. If the obligation of any Bank to
make a particular type of Fixed Rate Loans shall be suspended pursuant to
Section 5.01 or 5.03 hereof (Loans of such type being herein called "Affected
Loans" and such type being herein called the "Affected Type"), all Loans (other
than Money Market Loans) which would otherwise be made by such Bank as Loans of
the Affected Type shall be made instead as Base Rate Loans and, if an event
referred to in Section 5.01(b) or 5.03 hereof has occurred and such Bank so
requests by notice to the Company with a copy to the Administrative Agent, all
Affected Loans of such Bank then outstanding shall be automatically converted
into Base Rate Loans on the date specified by such Bank in such notice and, to
the extent that Affected Loans are so made (or converted), all payments of
principal which would otherwise be applied to such Bank's Affected Loans shall
be applied instead to such Base Rate Loans.
5.05 Compensation. Each Borrower shall pay to the Administrative
Agent for account of each Bank, upon the request of such Bank through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
which such Bank determines is attributable to:
(a) any payment or conversion of a Fixed Rate Loan or a Set Rate Loan
made by such Bank to such Borrower for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by such Borrower for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
7 hereof to be satisfied) to borrow a Fixed Rate Loan or a Set Rate Loan (with
respect to which, in the case of a Money Market Loan, such Borrower has accepted
a Money Market Quote) from such Bank on the date for such borrowing specified in
the relevant notice of borrowing given by the Company pursuant to Section 2.02
or 2.03(b) hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or converted
or not borrowed for the period from the date of such payment, conversion or
failure to borrow to the last day of the Interest Period for such Loan (or, in
the case of a failure to borrow, the Interest Period for such Loan which would
have commenced on the date specified for such borrowing) at the applicable rate
of interest for such Loan provided for herein over (ii) the interest component
of the amount such Bank would have bid in the London interbank market (if such
Loan is a Eurodollar Loan or a LIBOR Market Loan) or the United States secondary
certificate of deposit market (if such Loan is a CD Loan or a Set Rate Loan) for
Dollar deposits of leading banks in amounts comparable to such principal amount
and with maturities comparable to such period (as reasonably determined by such
Bank).
5.06 Foreign Taxes. Each Approved Borrower that is not a U.S. Person
agrees to pay to each Bank such additional amounts as are necessary in order
that the net payment of any amount payable by such Approved Borrower to such
Bank hereunder and under its Note, after deduction for or withholding in respect
of any present or future tax, assessment or other charge or levy imposed by or
on behalf of the government of the country in which such Approved Borrower is
organized, domiciled or resident (or any taxing authority thereof or therein)
("Foreign Taxes") on or with respect to such payment, will not be less than the
amount stated herein and in such Note to be payable. Without in any way
affecting any Approved Borrower's obligations under this Section 5.06, if any
such Approved Borrower is required by applicable law or regulation to make any
deduction or withholding of any Foreign Taxes in respect of any payment
hereunder to any Bank, such Approved Borrower agrees to furnish to such Bank (i)
within 45 days of such payment, the originals or certified copies of all
governmental tax receipts in respect of such Foreign Taxes and (ii) promptly at
the request of such Bank, any other information, documents and receipts that
such Bank may reasonably require (and that such Approved Borrower can obtain
with reasonable efforts) to establish to its satisfaction the full and timely
payment of such Foreign Taxes and to permit such Bank to claim such Foreign
Taxes as a credit or a deduction in the computation of the income taxes imposed
on such Bank by or on behalf of the government of the country in which such Bank
is organized, domiciled or resident.
5.07 U.S. Taxes.
(a) The Company and each other Borrower that is a U.S. Person agrees
to pay to the Administrative Agent and each Bank that is not a U.S. Person such
additional amounts as are necessary in order that the net payment of any amount
due to such non-U.S. Person hereunder after deduction for or withholding in
respect of any U.S. Tax imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Tax by such non-U.S. Person), will not be less
than the amount stated herein to be then due and payable, provided that the
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Bank hereunder if such Bank is not, on the
date hereof (or on the date it becomes a Bank as provided in Section 12.06(b)
hereof) and on the date of any change in the Applicable Lending Office of such
Bank, either entitled to submit a Form 1001 (relating to such Bank and entitling
it to a complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest to be
received by such Bank hereunder in respect of the Loans), or
(ii) to any U.S. Tax that would not have been imposed but for the
failure by such non-U.S. Person to comply with applicable certification,
information, documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United States of
America of such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Tax.
For the purposes of this Section 5.07(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates) and (y) "U.S. Taxes" shall mean any present or
future tax, assessment or other charge or levy imposed by or on behalf of the
United States of America or any taxing authority thereof or therein.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Bank from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
(on its own behalf and on behalf of the other Borrowers that are U.S. Persons)
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Section 6. Guarantee.
6.01 Guarantee. The Guarantor hereby guarantees to each Bank and
Agent and their respective successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Loans made by the Banks to, and the Note held
by each Bank of, any Approved Borrower and all other amounts from time to time
owing to the Banks or the Administrative Agent by any Approved Borrower under
this Agreement pursuant to its Designation Letter and under the Notes, in each
case strictly in accordance with the terms thereof (such obligations being
herein collectively called the "Guaranteed Obligations"). The Guarantor hereby
further agrees that if any Approved Borrower shall fail to pay in full when due
(whether at stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantor will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
6.02 Obligations Unconditional. The obligations of the Guarantor
under Section 6.01 hereof are absolute and unconditional irrespective of the
value, genuineness, validity, regularity, legality or enforceability of the
obligations of any Approved Borrower under this Agreement, the Notes or any
other agreement or instrument referred to herein or therein (including, without
limitation, any Designation Letter), or any substitution, release or exchange of
any other guarantee of or security for any of the Guaranteed Obligations, and,
to the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor (including any immunity, sovereign
or otherwise, to which any Approved Borrower may be entitled), it being the
intent of this Section 6.02 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances. Without
limiting the generality of the foregoing, it is agreed that the occurrence of
any one or more of the following shall not affect the liability of the Guarantor
hereunder:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein shall be done or omitted; or
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement or the
Notes or any other agreement or instrument referred to herein or therein shall
be waived or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that any Agent or Bank
exhaust any right, power or remedy or proceed against any Approved Borrower
under this Agreement or the Notes or any other agreement or instrument referred
to herein or therein, or against any other Person under any other guarantee of,
or security for, any of the Guaranteed Obligations.
6.03 Reinstatement. The obligations of the Guarantor under this
Section 6 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Approved Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Guarantor agrees that it will
indemnify the Administrative Agent and each Bank on demand for all reasonable
costs and expenses (including, without limitation, fees of counsel) incurred by
the Administrative Agent or such Bank in connection with such rescission or
restoration.
6.04 Subrogation. The Guarantor hereby waives all rights of
subrogation or contribution, whether arising by operation of law (including,
without limitation, any such right arising under the Federal Bankruptcy Code) or
otherwise, by reason of any payment by it pursuant to the provisions of this
Section 6 and further agrees that for the benefit of each of its creditors
(including, without limitation, each Bank and the Administrative Agent) that any
such payment by it of the Guaranteed Obligations of any Approved Borrower shall
constitute a contribution of capital by the Guarantor to such Approved Borrower
or, if evidenced by an instrument in form and substance (and containing terms of
subordination) satisfactory to the Majority Banks, indebtedness subordinated in
right of payment to the principal of and interest (including post-petition
interest) on the Loans owing by such Approved Borrower.
6.05 Remedies. The Guarantor agrees that, as between the Guarantor
and the Banks, the obligations of any Approved Borrower under this Agreement and
the Notes may be declared to be forthwith due and payable as provided in Section
10 hereof (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 10) for purposes of Section 6.01
hereof notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against any Approved Borrower and that, in the event of such declaration (or
such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by such Approved Borrower)
shall forthwith become due and payable by the Guarantor for purposes of said
Section 6.01.
6.06 Continuing Guarantee. The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
Section 7. Conditions Precedent.
7.01 Effectiveness. This Agreement shall become effective on the
date that each of the following conditions shall have been satisfied (or waived
in accordance with Section 12.01):
(a) Corporate Action. The Documentation Agent shall have received
(with sufficient copies for each Bank) certified copies of the charter and
by-laws of the Company and all corporate action taken by the Company approving
this Agreement and the Notes and approving borrowings and the guarantee of the
Company hereunder (including, without limitation, a certificate setting forth
the resolutions of the Board of Directors of the Company adopted in respect of
the transactions contemplated hereby).
(b) Incumbency. The Documentation Agent shall have received (with
sufficient copies for each Bank) a certificate of the Company identifying each
of its officers (i) who is authorized to sign on its behalf this Agreement or
the Notes and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby (and each Agent and Bank
may conclusively rely on such certificate until it receives notice in writing
from the Company to the contrary).
(c) Opinion of Counsel to the Company. The Documentation Agent shall
have received (with sufficient copies for each Bank) an opinion of James Guedry,
Esq., Associate General Counsel of the Company, substantially in the form of
Exhibit C-1 hereto.
(d) Opinion of Counsel for the Agents. The Documentation Agent shall
have received (with sufficient copies for each Bank) an opinion of Davis Polk &
Wardwell, special counsel for the Agents, substantially in the form of Exhibit D
hereto.
(e) Notes. The Documentation Agent shall have received for each Bank
its Note duly completed and executed by the Company.
(f) Existing Credit Agreements. The Documentation Agent shall have
received evidence satisfactory to it of the payment of all principal of and
interest on any loans outstanding under, and of all other amounts payable under,
the Existing Credit Agreements.
(g) Other Documents. The Documentation Agent shall have received
such other documents as the Agents or special counsel for the Agents may
reasonably request.
The Company and the Banks that are parties to the Existing Credit Agreements
agree that the commitments under such agreements shall terminate in their
entirety simultaneously with and subject to the effectiveness of this Agreement
and that the Company shall be obligated to pay on the Effective Date accrued
fees under the Existing Credit Agreements to but excluding the Effective Date.
7.02 Initial Loan to any Approved Borrower. The obligation of any
Bank to make its initial Loan hereunder to any Approved Borrower is subject to
the following additional conditions precedent, each of which shall have been
fulfilled to the satisfaction of such Bank:
(a) Corporate Action. The Documentation Agent shall have received
(with sufficient copies for each Bank) certified copies of the charter and
by-laws of such Approved Borrower and all corporate action taken by such
Approved Borrower approving this Agreement and the Notes and approving
borrowings of such Approved Borrower hereunder (including, without limitation, a
certificate setting forth the resolutions of the Board of Directors of such
Borrower adopted in respect of the transactions contemplated hereby).
(b) Incumbency. The Documentation Agent shall have received (with
sufficient copies for each Bank) a certificate of such Approved Borrower in
respect of each of its officers (i) who is authorized to sign on its behalf its
Designation Letter or the Notes and (ii) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its representative
for the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby (and each Agent and Bank may conclusively rely on such
certificate until it receives notice in writing from the Company (on behalf of
such Borrower) to the contrary).
(c) Opinion of Counsel to such Approved Borrower. The Documentation
Agent shall have received (with sufficient copies for each Bank) an opinion of
counsel (satisfactory to the Documentation Agent) to such Approved Borrower,
substantially in the form of Exhibit C-2 hereto, with such changes therein as
the Documentation Agent may request to address matters of foreign law.
(d) Notes. The Documentation Agent shall have received for each Bank
its Note duly completed and executed by such Approved Borrower.
(e) Designation Letter. The Documentation Agent shall have received
a Designation Letter, duly executed by such Approved Borrower and the Company
and acknowledged by the Documentation Agent.
(f) Financial Statements. The Documentation Agent shall have
received (with sufficient copies for each Bank) the financial statements of such
Approved Borrower required pursuant to the fourth paragraph of such Approved
Borrower's Designation Letter.
(g) Other Documents. The Documentation Agent shall have received
such other documents as the Agents or special counsel for the Agents may
reasonably request.
7.03 Initial and Subsequent Loans. The obligation of any Bank to
make any Loan (including any Money Market Loan and such Bank's initial
Syndicated Loan) to any Borrower upon the occasion of each borrowing hereunder
is subject to the further conditions precedent that, both immediately prior to
such Loan and also after giving effect thereto: (a) no Event of Default shall
have occurred and be continuing; (b) no Default shall have occurred and be
continuing if such borrowing is a Money Market Loan or will increase the
aggregate outstanding principal amount of the Syndicated Loans; (c) the
representations and warranties made by the Company in Part A of Section 8 hereof
(other than the last sentence of Section 8.02 hereof and Section 8.03 hereof)
shall each be true and complete on and as of the date of the making of such Loan
with the same force and effect as if made on and as of such date; (d) the
representation and warranty contained in Section 8.03 shall be true and complete
on and as of the date of the making of such Loan with the same force and effect
as if made on and as of such date, if such borrowing is a Money Market Loan or
will increase the aggregate outstanding principal amount of the Syndicated
Loans; (e) in the case of any borrowing by an Approved Borrower, the
representations and warranties made by such Approved Borrower in Part B of
Section 8, shall each be true and complete on and as of the date of the making
of such Loan with the same force and effect as if made on and as of such date;
and (f) the Standard & Poor's Rating shall be at or above BBB- (or any successor
rating) and the Moody's Rating shall be at or above Baa3 (or any successor
rating). Each notice of borrowing hereunder shall constitute a certification by
the Company and, if applicable, such Approved Borrower to the effect set forth
in the preceding sentence (both as of the date of such notice and, unless the
Company otherwise notifies the Administrative Agent prior to the date of such
borrowing, as of the date of such borrowing).
Section 8. Representations and Warranties. The Company represents
and warrants to the Banks that:
Part A. Representations and Warranties of the Company.
8.01 Corporate Existence. Each of the Company and its Material
Subsidiaries: (a) is a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation (or, in the case of a
Subsidiary that is not a corporation, is a partnership or other entity duly
organized and validly existing under the laws of its jurisdiction of
organization); (b) has all requisite legal power, and has all material
governmental licenses, authorizations, consents and approvals, necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a material adverse effect on the
consolidated financial condition, operations, business or prospects taken as a
whole of the Company and its Consolidated Subsidiaries.
8.02 Financial Condition. The consolidated balance sheet of the
Company and its Consolidated Subsidiaries as at December 31, 1993 and the
related consolidated statements of earnings, cash flow and common shareholders'
equity of the Company and its Consolidated Subsidiaries for the fiscal year
ended on said date, with the opinion thereon of Arthur Andersen & Co., and the
unaudited consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at September 30, 1994 and the related consolidated statements of
earnings and cash flow of the Company and its Consolidated Subsidiaries for the
nine-month period ended on such date, heretofore furnished to each of the Banks,
are complete and correct and fairly present the consolidated financial condition
of the Company and its Consolidated Subsidiaries as at said dates and the
consolidated results of their operations for the fiscal year and nine-month
period ended on said dates (subject, in the case of such financial statements as
at September 30, 1994, to normal year-end audit adjustments), all in accordance
with generally accepted accounting principles and practices applied on a
consistent basis. Neither the Company nor any of its Subsidiaries had on said
dates any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
said balance sheets as at said dates. Since September 30, 1994, there has been
no material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Company and its Consolidated
Subsidiaries from that set forth in said financial statements as at said date.
8.03 Litigation. Except as disclosed to the Banks in writing prior
to the date of this Agreement, the legal or arbitral proceedings, and
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Company) threatened against the Company
and/or any of its Subsidiaries will not, in the opinion of the General Counsel
of the Company, result in imposition of liability or assessment against
(including seizure of) property in an aggregate amount as to all such
proceedings exceeding 10% of Tangible Net Worth.
8.04 No Breach. None of the execution and delivery of this Agreement
and the Notes, the consummation of the transactions herein contemplated and
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument.
8.05 Corporate Action of the Company. The Company has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Notes; the execution, delivery and performance by
the Company of this Agreement and the Notes have been duly authorized by all
necessary corporate action on its part; and this Agreement has been duly and
validly executed and delivered by the Company and constitutes, and each of the
Notes of the Company when executed and delivered for value by the Company, will
constitute, the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms.
8.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
of this Agreement or its Notes or for the validity or enforceability thereof.
8.07 Use of Loans. Neither the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock and no part of the proceeds of any Loan
hereunder will be used to buy or carry, or to extend credit to others to buy or
carry, any Margin Stock.
8.08 ERISA. The Company and the ERISA Affiliates have fulfilled
their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance in all material
respects with the presently applicable provisions of ERISA and the Code, and
have not incurred any liability to the PBGC or any Plan or Multiemployer Plan
(other than to make contributions in the ordinary course of business).
8.09 Taxes. United States Federal income tax returns of the Company
have been examined and closed through the fiscal year of the Company ended
December 31, 1971 and for the fiscal years ended December 31, 1980, December 31,
1981, December 31, 1982, December 31, 1983 and December 31, 1984. The Company
and its Subsidiaries have filed all United States Federal income tax returns and
all other material tax returns which are required to be filed by them and have
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Company or any of its Subsidiaries. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Company, adequate. If
the Company is a member of an affiliated group of corporations filing
consolidated returns for United States Federal income tax purposes, it is the
"common parent" of such group.
8.10 Investment Company Act. None of the Company or any of the
Approved Borrowers is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.11 Public Utility Holding Company Act. None of the Company or any
of the Approved Borrowers is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
8.12 Credit Agreements. Schedule 1 hereto is a complete and correct
list, as of the date of this Agreement, of each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Company or any of its Subsidiaries the aggregate principal or face amount of
which equals or exceeds (or may equal or exceed) $150,000,000 and the aggregate
principal or face amount outstanding or which may become outstanding under each
such arrangement is correctly described in said Schedule 1.
8.13 Hazardous Materials and Environmental Matters. (a) The Company
and each of its Subsidiaries have obtained all permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization could not in
the aggregate reduce by more than 25% the annual tonnage capacity of the paper
processing operations of the Company and its Consolidated Subsidiaries. The
Company and each of its Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply could
not in the aggregate reduce by more than 25% the annual tonnage capacity of the
paper processing operations of the Company and its Consolidated Subsidiaries.
(b) In the ordinary course of its business, the Company conducts an
ongoing review of the effect of Environmental Laws on the business, operations
and properties of the Company and its Subsidiaries, in the course of which it
identifies and evaluates associated liabilities and costs (including, without
limitation, any capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license, permit or
contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of or
change in the nature of operations conducted thereat, any costs or liabilities
in connection with off-site disposal of wastes or hazardous substances, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Company has
reasonably concluded that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, are unlikely to have a material
adverse effect on the financial condition, operations, business or prospects,
taken as a whole, of the Company.
8.14 Full Disclosure. The Company has heretofore furnished to each
of the Banks a true copy of (i) the Company's annual report to shareholders for
1993 setting forth consolidated audited financial statements for the year ended
December 31, 1993 and (ii) the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1994 as filed with the Securities and Exchange
Commission. Except as disclosed in writing to the Banks, the annual, quarterly
and other periodic reports most recently delivered to the Banks pursuant to this
Section 8.14 or Section 9.01(c) do not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein
not misleading.
Part B. Representations and Warranties of the Approved Borrowers.
Each Approved Borrower represents and warrants to the Banks that:
8.15 Corporate Existence of Approved Borrower. It (a) is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation; (b) has all requisite corporate power, and
has all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a material
adverse effect on the consolidated financial condition, operations, business or
prospects taken as a whole of the Company and its Consolidated Subsidiaries.
8.16 No Breach. None of the execution and delivery of its
Designation Letter and its Notes, the consummation of the transactions herein
contemplated and compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent under, the charter or
by-laws of such Approved Borrower, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which such Approved Borrower or any of
its Subsidiaries is a party or by which any of them is bound or to which any of
them is subject, or constitute a default under any such agreement or instrument.
8.17 Corporate Action. Such Approved Borrower has all necessary
corporate power and authority to execute, deliver and perform its obligations
under its Designation Letter and its Notes, to perform its obligations hereunder
and thereunder; the execution and delivery by such Approved Borrower of its
Designation Letter, its Notes and the performance by such Approved Borrower
hereof and thereof have been duly authorized by all necessary corporate action
on its part; and each of its Notes when executed and delivered for value and its
Designation Letter when executed and delivered by such Approved Borrower, will
constitute, the legal, valid and binding obligation of such Approved Borrower,
enforceable in accordance with its terms.
8.18 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by such Approved
Borrower of its Designation Letter or its Notes or for the validity or
enforceability thereof.
8.19 Taxes on Payments of Approved Borrowers. Except as disclosed to
the Banks in writing prior to the delivery of such Approved Borrower's
Designation Letter, there is no income, stamp or other tax of any country, or of
any taxing authority thereof or therein, imposed by or in the nature of
withholding or otherwise, which is imposed on any payment to be made by such
Approved Borrower pursuant hereto or on its Notes, or is imposed on or by virtue
of the execution, delivery or enforcement of its Designation Letter or its
Notes.
Section 9. Covenants of the Company. The Company agrees that, so
long as any of the Commitments are in effect and until payment in full of all
Loans hereunder, all interest thereon and all other amounts payable by any
Obligor hereunder:
9.01 Financial Statements. The Company shall deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the
end of each of the first three quarters of each fiscal year of the Company,
consolidated statements of earnings and cash flow of the Company and its
Consolidated Subsidiaries for such period and for the period from the beginning
of the respective fiscal year to the end of such period, and the related
consolidated balance sheet as at the end of such period, setting forth in each
case in comparative form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year, accompanied by a certificate
of a senior financial officer of the Company, which certificate shall state that
said financial statements fairly present the consolidated financial condition
and results of operations, as the case may be, of the Company and its
Consolidated Subsidiaries in accordance with generally accepted accounting
principles, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, consolidated statements of earnings,
cash flow and common shareholders' equity of the Company and its Consolidated
Subsidiaries for such year and the related consolidated balance sheet as at the
end of such year, setting forth in each case in comparative form the
corresponding consolidated figures for the preceding fiscal year, and
accompanied by an unqualified opinion thereon of Arthur Andersen & Co. or any
other independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of operations
of the Company and its Consolidated Subsidiaries as at the end of, and for, such
fiscal year, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports (other than registration
statements filed on Form S-8 and pricing supplements), if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have occurred or
exist, a statement signed by a senior financial officer of the Company setting
forth details respecting such event or condition and the action, if any, which
the Company or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to PBGC by the
Company or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in subsections (b)(1), (2),
(5) and (6), and subsection (c)(2) of Section 4043 of ERISA and the regulations
issued thereunder, with respect to a Plan;
(ii) the filing under Section 4041(c) of ERISA of a notice of
intent to terminate any Plan under a distress termination or the distress
termination of any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by PBGC with respect to
such Multiemployer Plan;
(iv) the receipt by the Company or any ERISA Affiliate of notice
from a Multiemployer Plan that the Company or such ERISA Affiliate has incurred
withdrawal liability under Section 4201 of ERISA in excess of $150,000,000 or
that such Multiemployer Plan is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA whereby a deficiency or additional assessment is
levied or threatened to be levied against the Company; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days;
(f) promptly after the Company knows or has reason to know that any
Default has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken and proposes to take with
respect thereto;
(g) as soon as available and in any event within 120 days after the
end of each fiscal year of each Approved Borrower, statements of earnings, cash
flow and common shareholders' equity (if any) of such Approved Borrower for such
year and the related balance sheet as at the end of such year, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year, accompanied by a certificate of a senior financial officer of the Company,
which certificate shall state that said financial statements fairly present the
financial condition and results of operations of such Approved Borrower in
accordance with generally accepted accounting principles, consistently applied,
as at the end of, and for, such fiscal year; and
(h) from time to time such other information regarding the business,
affairs or financial condition of the Company or any of its Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA) as any Bank or Agent may
reasonably request.
The Company will furnish to each Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken and proposes to take with respect thereto) and (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 9.07 and 9.08 hereof as of the end of the
respective quarterly fiscal period or fiscal year.
9.02 Litigation. The Company will promptly give to each Bank notice
of all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceedings, affecting the Company or any of its
Subsidiaries, except any proceeding which, if adversely determined, would not
have a material adverse effect on the consolidated financial condition,
operations, business or prospects taken as a whole of the Company and its
Consolidated Subsidiaries.
9.03 Corporate Existence, Etc. The Company will, and will cause each
of its Material Subsidiaries to: preserve and maintain its legal existence and
all of its material rights, privileges and franchises (provided that nothing in
this Section 9.03 shall prohibit any transaction expressly permitted under
Section 9.05 hereof); comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements (i) will in the opinion of the General
Counsel of the Company result in imposition of liability or assessment against
(including seizure of) property in an aggregate amount (as to all such failures
to comply) exceeding 10% of Tangible Net Worth or (ii) could in the aggregate
(as to all such failures to comply) reduce by more than 25% the annual tonnage
capacity of the paper processing operations of the Company and its Consolidated
Subsidiaries; pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its property
prior to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained; maintain all of its properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted; and upon
notice of at least 24 hours, permit representatives of any Bank or Agent, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by such Bank or Agent.
9.04 Insurance. The Company will maintain, and will cause each of
its Subsidiaries to maintain, insurance underwritten by financially sound and
reputable insurers, or self insurance (in accordance with normal industry
practice) in such amounts and against such risks as ordinarily is carried or
maintained by owners of like businesses and properties in similar circumstances.
9.05 Prohibition of Fundamental Changes. The Company will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution). The Company will not, and will not
permit any of its Subsidiaries to, convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or a substantial
part of its business or assets, whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests, but
excluding any inventory or other assets sold or disposed of in the ordinary
course of business). Notwithstanding the foregoing provisions of this Section
9.05:
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or surviving
corporation or (ii) any other such Subsidiary; provided that if any such
transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the
Wholly-Owned Subsidiary shall be the continuing or surviving corporation;
(b) any such Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Company or a Wholly-Owned Subsidiary of the Company; (c) the Company or any
Subsidiary of the Company may merge or consolidate with any other Person if (i)
in the case of a merger or consolidation of the Company, the Company is the
surviving corporation and, in any other case, the surviving corporation is a
Wholly-Owned Subsidiary of the Company and (ii) after giving effect thereto no
Default would exist hereunder; and
(d) in addition to the dispositions permitted pursuant to clauses (a)
through (c) of this Section 9.05, the Company or any Subsidiary of the Company
may sell or otherwise dispose of assets (including, without limitation, by
merger or consolidation) if, after giving effect to any such sale or
disposition, the book value of such assets, together with the aggregate book
value of the assets so sold or disposed of since September 30, 1994, does not
exceed 20% of Total Assets at September 30, 1994.
9.06 Limitation on Liens. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except:
(a) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good faith
and by appropriate proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Company or any of its Subsidiaries,
as the case may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are not
overdue for a period of more than 30 days or which are being contested in good
faith and by appropriate proceedings;
(c) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of the Company or any of its Subsidiaries;
(f) Liens on assets of corporations which become Subsidiaries of the
Company after the date of this Agreement, provided that such Liens are in
existence at the time the respective corporations become Subsidiaries of the
Company and were not created in anticipation thereof;
(g) Liens upon real and/or tangible personal property acquired after
the date hereof (by purchase, construction or otherwise) by the Company or any
of its Subsidiaries, each of which Liens either (A) existed on such property
before the time of its acquisition and was not created in anticipation thereof,
or (B) was created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund, the cost (including the cost of
construction) of the respective property; provided in the case of clause (B)
that such Lien attaches to such asset within 270 days after the acquisition or
completion of construction and commencement of full operations thereof;
provided, further that no such Lien shall extend to or cover any property of the
Company or such Subsidiary other than the respective property so acquired and
improvements thereon; and provided, further, that the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 95% of the fair
market value (as determined in good faith by a senior financial officer of
the Company) of the respective property at the time it was acquired (by
purchase, construction or otherwise);
(h) Liens on real and/or personal property of any Kwidzyn Entity and
Liens on Indebtedness or capital stock of Kwidzyn France held by the Company,
IPISA or Aussedat Rey, in each case securing Indebtedness or other obligations
of any Kwidzyn Entity;
(i) Liens on assets consisting of a capital project in a Non-OECD
Country and rights related thereto ("Project Assets") securing Indebtedness
incurred to finance the acquisition, construction or development of such Project
Assets; provided that (x) such Indebtedness is non-recourse to any other assets;
(y) the aggregate principal amount of Indebtedness secured by Liens permitted by
this paragraph (i) may at no time exceed $200,000,000 and (z) such Liens attach
to such Project Assets within two years after the initial acquisition or
completion of construction or development of such Project Assets;
(j) Liens upon real and/or personal property of the Company or any
Subsidiary of the Company in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political subdivision
of the United States or any State thereof, to secure partial, progress, or
advance or other payments pursuant to any contract or statute or to secure
Indebtedness incurred for the purpose of refinancing all or any part of the
purchase price or cost of constructing or improving such property;
(k) additional Liens upon real and/or personal property created after
the date hereof, provided that the aggregate outstanding Indebtedness secured
thereby and incurred on and after the date hereof shall not at any time exceed
10% of Tangible Assets; and
(l) any extension, renewal or replacement of the foregoing, provided,
however, that the Liens permitted hereunder shall not be spread to cover any
additional Indebtedness or property (other than a substitution of like
property);
provided that the sale, mortgage or other transfer of timber in connection with
an arrangement under which the Company or any of its Subsidiaries is obligated
to cut such timber (or any portion thereof) in order to provide the transferee
with a specified amount of money (however determined) shall not be deemed to
create Indebtedness secured by a Lien hereunder.
9.07 Total Debt to Total Capital Ratio. The Company will not at any
time permit the ratio of Total Debt to Total Capital to exceed 0.6 to 1.0.
9.08 Minimum Tangible Net Worth. The Company will not at any time
permit Tangible Net Worth to be less than $3,300,000,000.
9.09 Use of Proceeds. Each Borrower will use the proceeds of the
Loans made to it hereunder solely for its general corporate purposes (in
compliance with all applicable legal and regulatory requirements); provided that
neither the Administrative Agent nor any Bank shall have any responsibility as
to the use of any of such proceeds.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default") shall occur and be continuing:
(a) Any Borrower shall default in the payment when due of any
principal of any Loan; or any Borrower shall default in the payment when due of
any interest on any Loan or any other amount payable by it hereunder and such
default shall continue unremedied for two Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its Indebtedness
(other than (i) Indebtedness hereunder and (ii) Project Indebtedness)
aggregating $150,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
aggregating $150,000,000 or more shall occur if the effect of such event is (i)
to cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become due, or
to be prepaid in full (whether by redemption, purchase or otherwise), prior to
its stated maturity or (ii) to cause cancellation of commitments thereunder; or
(c) Any representation, warranty or certification made or deemed made
herein or in any Designation Letter (or in any modification or supplement hereto
or thereto) by any Obligor, or any certificate furnished to any Bank or the
Administrative Agent pursuant to the provisions hereof or of any Designation
Letter (or thereof), shall prove to have been false or misleading as of the time
made or furnished in any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 9.01(f), 9.05, 9.06, 9.07 or 9.08 hereof; or
any Obligor shall default in the performance of any of its other obligations in
this Agreement and such default shall continue unremedied for a period of ten
days after notice thereof to such Obligor (through notification to the Company)
by the Administrative Agent or any Bank (through the Administrative Agent); or
(e) The Company or any of its Material Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as such debts
become due; or
(f) The Company or any of its Material Subsidiaries shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Material Subsidiaries, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Company or such Subsidiary or of all or any substantial part of its assets, or
(iii) similar relief in respect of the Company or such Subsidiary under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of 60 or more days;
or an order for relief against the Company or such Subsidiary shall be entered
in an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $150,000,000 in the aggregate shall be rendered by a court or courts against
the Company and/or any of its Subsidiaries and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 30 days from the date of entry thereof and
the Company or the relevant Subsidiary shall not, within said period of 30 days,
or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) An event or condition specified in Section 9.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
the Company or any ERISA Affiliate shall be reasonably likely in the opinion of
the General Counsel of the Company to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) which is in
excess of 10% of Tangible Net Worth; or
(j) Any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended, it being agreed that
an employee of the Company or any Consolidated Subsidiary for whom shares are
held under an employee stock ownership, employee retirement, employee savings or
similar plan and whose shares are voted in accordance with the instructions of
such employee shall not be a member of a group of persons within the meaning of
said Section 13 or 14 solely because such employee's shares are held by a
trustee under said plan) shall acquire, directly or indirectly, beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said
Act, as amended) of 20% or more of the outstanding shares of stock of the
Company having by the terms thereof ordinary voting power to elect (whether
immediately or ultimately) a majority of the board of directors of the Company
(irrespective of whether or not at the time stock of any other class or classes
of stock of the Company shall have or might have voting power by reason of the
happening of any contingency); or
(k) During any period of 25 consecutive calendar months, a majority
of the Board of Directors of the Company shall no longer be composed of
individuals (i) who were members of said Board on the first day of such period
or (ii) whose election or nomination to said Board was approved by individuals
referred to in clause (i) above constituting at the time of such election or
nomination at least a majority of said Board;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10 with respect to any Obligor, (A) the
Administrative Agent may and, upon request of the Majority Banks, shall, by
notice to the Company, cancel the Commitments and they shall thereupon
terminate, and (B) the Administrative Agent may and, upon request of Banks
holding at least 66-2/3% of the aggregate unpaid principal amount of the Loans
shall, by notice to the Company, declare the principal amount then outstanding
of, and the accrued interest on, the Loans and all other amounts payable by the
Obligors hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 hereof) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor; and (2) in the case of the occurrence of an
Event of Default referred to in clause (f) or (g) of this Section 10 with
respect to any Obligor, the Commitments shall automatically be canceled and the
principal amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Obligors hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor.
Section 11. The Agents.
11.01 Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes each Agent to act as its agent hereunder
with such powers as are specifically delegated to such Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. Each Agent (which term as used in this sentence and in Section 11.05
and the first sentence of Section 11.06 hereof shall include reference to its
affiliates and its own and its affiliates' officers, directors, employees and
agents): (a) shall have no duties or responsibilities except those expressly
set forth in this Agreement, and shall not by reason of this Agreement be a
trustee for any Bank; (b) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other document referred to or provided for herein or for any failure
by any Obligor or any other Person to perform any of its obligations hereunder
or thereunder; (c) shall not be required to initiate or conduct any litigation
or collection proceedings hereunder; and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other document
or instrument referred to or provided for herein or in connection herewith,
except for its own gross negligence or willful misconduct. Each Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. Each Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent, together with the written consent of the Company (on its own behalf and
on behalf of the other Borrowers) to such assignment or transfer.
11.02 Reliance by the Agents. Each Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by such Agent. As to any matters not expressly provided
for by this Agreement, each Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Majority Banks, and such instructions of the Majority Banks and
any action taken or failure to act pursuant thereto shall be binding on all of
the Banks.
11.03 Defaults. Each Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default (other than the non-payment of principal
of or interest on Loans or of commitment fees) unless such Agent has received
notice from a Bank or the Company specifying such Default and stating that such
notice is a "Notice of Default". In the event that an Agent receives such a
notice of the occurrence of a Default, such Agent shall give prompt notice
thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment). Each Agent shall (subject to Section 11.07 hereof) take such
action with respect to such Default as shall be directed by the Majority Banks,
provided that, unless and until such Agent shall have received such directions,
such Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Banks.
11.04 Rights as a Bank. With respect to its Commitment and the Loans
made by it, each of Chase and Morgan (and any successor acting as an Agent) in
its capacity as a Bank hereunder shall have the same rights and powers hereunder
as any other Bank and may exercise the same as though it were not acting as an
Agent, and the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include each Agent in its individual capacity. Each of Chase and
Morgan (and any successor acting as an Agent) and its affiliates may (without
having to account therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Obligors (and any of their Subsidiaries or affiliates) as if it were not acting
as an Agent, and each of Chase and Morgan and its affiliates may accept fees and
other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Banks.
11.05 Indemnification. The Banks agree to indemnify each Agent (to
the extent not reimbursed under Section 12.03 hereof, but without limiting the
obligations of the Company under said Section 12.03) ratably in accordance with
their respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of this
Agreement or any other documents contemplated by or referred to herein or the
transactions contemplated hereby (including, without limitation, the costs and
expenses which the Company is obligated to pay under Section 12.03 hereof but
excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of any such
other documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
11.06 Non-Reliance on the Agents and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agents or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agents or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. Each Agent shall
not be required to keep itself informed as to the performance or observance by
any Obligor of this Agreement or any other document referred to or provided for
herein or to inspect the properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agents hereunder, each
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Company or any of its Subsidiaries (or any of their affiliates)
which may come into the possession of such Agent or any of its affiliates.
11.07 Failure to Act. Except for action expressly required of such
Agent hereunder, each Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall receive further assurances to its
satisfaction from the Banks of their indemnification obligations under Section
11.05 hereof against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
11.08 Resignation or Removal of Agents. Subject to the appointment
and acceptance of a successor Agent as provided below, each Agent may resign at
any time by giving notice thereof to the Banks and the Company, and each Agent
may be removed at any time with or without cause by the Majority Banks. Upon
any such resignation or removal, the Majority Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by the Majority Banks and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the Majority
Banks' removal of the retiring Administrative Agent, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a bank
which has an office in New York, New York with a combined capital and surplus of
at least $1,000,000,000. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as an Agent, the provisions of this Section 11 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as an Agent.
11.09. Agents' Fees. The Company shall pay to each Agent for its own
account fees in the amounts and at the times previously agreed upon between the
Company and such Agent.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of any Agent or Bank to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telecopy,
telegraph, cable or in writing (or, with respect to notices given pursuant to
Section 2.03 hereof, by telephone, confirmed in writing by facsimile by the
close of business on the day the notice is given) and telexed, telecopied,
telegraphed, cabled, mailed or delivered (or telephoned, as the case may be) to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party, at such other address as shall
be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid. Each
Approved Borrower hereby agrees that each notice or other communication provided
for herein may be furnished to the Company or by the Company on its behalf in
the manner specified above and each Approved Borrower further agrees that
failure of the Company to deliver to such Approved Borrower any notice furnished
in accordance with this Section 12.02 shall not affect the validity of such
notice.
12.03 Expenses, Etc. (a) The Company agrees to pay or reimburse each
of the Banks and the Agents for paying: (i) all reasonable out-of-pocket costs
and expenses of the Agents (including, without limitation, the reasonable fees
and expenses of Davis Polk & Wardwell, special counsel for the Agents), in
connection with (x) the negotiation, preparation, execution and delivery of this
Agreement and the Notes and the making of the Loans hereunder and (y) any
amendment, modification or waiver of any of the terms of this Agreement or any
of the Notes; (ii) all reasonable costs and expenses of the Banks and the Agents
(including reasonable counsels' fees) in connection with any Default and any
enforcement or collection proceedings resulting therefrom; and (iii) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the Notes or any other document referred to herein.
(b) The Company hereby agrees to indemnify each Agent and Bank and
their respective directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the Loans or any
actual or proposed use by any Borrower or any of its Subsidiaries of the
proceeds of any of the Loans, including, without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any such investigation
or litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
12.04 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be amended or modified only by an
instrument in writing signed by the Company and the other Borrowers, the Agents
and the Majority Banks, or by the Company (on its own behalf and on behalf of
the other Borrowers) and the Agents acting with the consent of the Majority
Banks, and any provision of this Agreement may be waived by the Majority Banks
or by the Agents acting with the consent of the Majority Banks; provided that no
amendment, modification or waiver shall, unless by an instrument signed by all
of the Banks or by the Agents acting with the consent of all of the Banks: (i)
increase or extend the term, or extend the time or waive any requirement for the
reduction or termination, of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan, (iii) reduce the amount of any
payment of principal thereof or the rate at which interest is payable thereon or
any fee is payable hereunder, (iv) alter the terms of this Section 12.04,
Section 2.10 or Section 12.06(a), (v) amend the definition of the term "Majority
Banks", (vi) waive any of the conditions precedent set forth in Section 7 hereof
or (vii) amend the provisions of Section 6 hereof to release the Guarantor from
its obligations thereunder.
12.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.06 Assignments and Participations.
(a) No Obligor may assign its rights or obligations hereunder or
under the Notes without the prior consent of all of the Banks and the Agents.
(b) No Bank may assign any of its Loans, its Note(s) or its
Commitment to any other Person (i) without the prior consent (which consent may
not be unreasonably withheld) of the Company and the Administrative Agent and
(ii) in an amount which is not at least $3,500,000 or a larger multiple of
$1,000,000 (or the remainder of a Bank's Commitment). Notwithstanding clause
(i) in the preceding sentence, without the consent of the Company or the
Administrative Agent, any Bank may assign to any affiliate that is a
Wholly-Owned Subsidiary of the same bank holding company of which such Bank is a
Subsidiary or to any Bank (subject to clause (y) below) all or a portion of its
Commitment and any Bank may assign to any other Person (subject to clauses (x)
and (y) below) a portion of its Commitment; provided that (x) after giving
effect to any such partial assignment to another Person that is not an affiliate
of such Bank or a Bank, such Bank shall have a Commitment of at least 90% of its
Commitment (adjusted for purposes of this sentence to eliminate the effect of
any prior assignment) hereunder and (y) such assigning Bank shall also
simultaneously assign to such assignee the same proportion of each of its
Syndicated Loans then outstanding. Upon written notice to the Company and the
Administrative Agent of an assignment permitted by the preceding sentence (which
notice shall identify the assignee, the amount of the assigning Bank's
Commitment and Syndicated Loans assigned in detail reasonably satisfactory to
the Administrative Agent) and upon the effectiveness of any assignment consented
to by the Company and the Administrative Agent, the assignee shall have, to the
extent of such assignment (unless otherwise provided in such assignment with the
consent of the Company and the Administrative Agent), the obligations, rights
and benefits of a Bank hereunder holding the Commitment and Syndicated Loans (or
portions thereof) assigned to it (in addition to the Commitment and Syndicated
Loans, if any, theretofore held by such assignee) and the assigning Bank shall,
to the extent of such assignment, be released from the Commitment (or portions
thereof) so assigned.
(c) A Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of the Commitment of such Bank or any Loan held
by it or Loans made or to be made by it, in which event each such participant
shall be entitled to the rights and benefits of the provisions of Section
12.03(b) hereof with respect to its participation in such Commitment or such
Loan as if (and the Company shall be directly obligated to such participant
under such provisions as if) such participant were a "Bank" for purposes of said
Section, but, except as otherwise provided in Section 4.05(c) hereof, shall not
have any other rights or benefits under this Agreement or any Note (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement (the "Participation Agreement") executed by
such Bank in favor of the participant). All amounts payable by the Company to
any Bank under Section 5 hereof shall be determined as if such Bank had not sold
or agreed to sell any participations in such Loan and as if such Bank were
funding all of such Loan in the same way that it is funding the portion of such
Loan in which no participations have been sold. In no event shall a Bank that
sells a participation be obligated to the participant under the Participation
Agreement to take or refrain from taking any action hereunder or under such
Bank's Note(s) except that such Bank may agree in the Participation Agreement
that it will not, without the consent of the participant, agree to (i) the
increase or extension of the term, or the extension of the time or waiver of any
requirement for the reduction or termination, of such Bank's Commitment, (ii)
the extension of any date fixed for the payment of principal of or interest on
the related Loan or Loans or any portion of any fees payable to the participant,
(iii) the reduction of any payment of principal thereof, or (iv) the reduction
of the rate at which either interest is payable thereon or (if the participant
is entitled to any part thereof) any fee is payable hereunder to a level below
the rate at which the participant is entitled to receive interest or such fee
(as the case may be) in respect of such participation.
(d) Anything in this Section 12.06 to the contrary notwithstanding,
any Bank may assign and pledge all or any portion of its Loans and its Note(s)
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank.
(e) Any Bank that assigns any of its Commitment, Loans or Note(s)
(except pursuant to 12.06(d)) shall, upon the effectiveness of any such
assignment, pay to the Administrative Agent a transfer fee of $2,000 in respect
of such assignment.
(f) A Bank may furnish any information concerning the Company or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.13 hereof.
12.07 Survival. The obligations of the Obligors under Sections 5.01,
5.05, 5.06, 5.07 and 12.03 hereof shall survive the repayment of the Loans and
the termination of the Commitments.
12.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 Governing Law; Submission to Jurisdiction; Service of Process.
This Agreement, each Designation Letter and the Notes shall be governed by, and
construed in accordance with, the law of the State of New York. Each Obligor
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York state court
sitting in New York City for the purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. Each
Obligor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Each
Approved Borrower hereby agrees that service of process in any such action or
proceeding brought in New York may be made upon such Approved Borrower by
service upon the Company at the "Address for Notices" specified below its name
on the signature pages hereof and each Approved Borrower hereby irrevocably
appoints the Company as its authorized agent ("Process Agent") to accept, on
behalf of its property such service of process in New York.
12.11 Judgment Currency. This is an international loan transaction
in which the specification of Dollars and payment in New York, New York, United
States of America ("U.S.A.") is of the essence and with respect to all Loans,
Dollars shall be the currency of account in all events. The payment obligations
of the Obligors with respect to any Loans under this Agreement or amounts
payable under the Notes shall not be discharged by an amount paid in a currency
other than Dollars or in a place other than New York, New York, U.S.A., whether
pursuant to a judgment or otherwise to the extent that the amount so paid on
conversion into Dollars and transfer to New York, New York, U.S.A., does not
yield the amount of Dollars due hereunder.
12.12 Waiver of Jury Trial. EACH OF THE OBLIGORS, AGENTS AND BANKS
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.13 Confidentiality. Each Bank and Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same is
delivered to such Bank or Agent; provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for any of the Banks or Agents,
(iii) to bank examiners, auditors or accountants, (iv) to any Agent or other
Bank, (v) in connection with any litigation to which any one or more of the
Banks is a party or (vi) to any assignee or participant (or prospective assignee
or participant) so long as such assignee or participant (or prospective assignee
or participant) first executes and delivers to the respective Bank a
Confidentiality Agreement substantially in the form of Exhibit G hereto; and
provided further, that in no event shall any Bank or the Administrative Agent be
obligated or required to return any materials furnished by the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
INTERNATIONAL PAPER COMPANY
By /s/ E. William Boehmler
Title: Vice President &
Treasurer
Address for Notices:
International Paper Company
Office of the Secretary
Two Manhattanville Road
Purchase, New York 10577
Telex No.: 239403
Telecopier No.: (914) 397-1909
Telephone No.: (914) 397-1500
Attention: Office of the Secretary
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By /s/ Hans H. Heinsen
Title: Managing Director
Address for Notices to Chase
as Administrative Agent:
Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081
Telex No.: 6720516 CMBNYAUW
Telecopier No.: (212) 552-7175
Telephone No.: (212) 552-2396
Attention: Hans Heinsen
THE DOCUMENTATION AGENT
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK,
as Documentation Agent
By /s/ Michael Y. Leder
Title: Vice President
Address for Notices to
Morgan as Documentation Agent:
Morgan Guaranty Trust Company of
New York,
Credit Support
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Telex No.: 177615 MGT UT
Telecopier No.: (302) 634-1094
Telephone No.: (302) 634-4225
Attention: Victoria Fedele
Commitment THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
$75,000,000
By /s/ Hans H. Heinsen
Title: Managing Director
Lending Office for all Loans:
Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081
Telex No.: 6720516 CMBNYAUW
Telecopier No.: (212) 552-7175
Telephone No.: (212) 552-2396
Attention: Hans Heinsen
Commitment MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
$75,000,000
By /s/ Michael Y. Leder
Title: Vice President
Lending Office for all Loans:
Morgan Guaranty Trust Company of
New York,
60 Wall Street--22nd Floor
New York, New York 10260
Address for Notices:
Morgan Guaranty Trust Company of
New York,
Credit Support
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Telex No.: 177615 MGT UT
Telecopier No.: (302) 634-1094
Telephone No.: (302) 634-4225
Attention: Victoria Fedele
Commitment ABN AMRO BANK N.V. NEW YORK BRANCH
$50,000,000
By /s/ David A. Mandell
Title: Vice President
By /s/ Nancy F. Watkins
Title: Group Vice President
Lending Office for all Loans:
ABN AMRO BANK N.V. NEW YORK BRANCH
500 Park Avenue
New York, New York 10022
Address for Notices:
ABN AMRO BANK N.V. NEW YORK BRANCH
500 Park Avenue
New York, New York 10022
Telex No.: 423721 AMROUR
Telecopier No.: (212) 832-7129
Telephone No.: (212) 446-4146
Attention: Nancy F. Watkins
Commitment THE BANK OF NEW YORK
$50,000,000
By /s/ Howard F. Bascom, Jr.
Title: Vice President
Lending Office for all Loans:
The Bank of New York
One Wall Street, 8th floor
New York, New York 10286
Address for Notices:
The Bank of New York
One Wall Street, 8th floor
New York, New York 10286
Telecopier No.: (212) 635-1480 or
1481
Telephone No.: (212) 635-1308
Attention: Howard F. Bascom
Commitment THE BANK OF NOVA SCOTIA
$50,000,000
By /s/ Terry K. Fryett
Title: Senior Relations Manager
Lending Office for all Loans:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Address for Notices:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Telecopier No.: (212) 225-5090
Telephone No.: (212) 225-5009
Attention: Kevin C. Clark
Commitment BANKERS TRUST COMPANY
$50,000,000
By /s/ Virginia M. Sermier
Title: Managing Director
Lending Office for all Loans:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Address for Notices:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telecopier No.: (312) 993-8119
Telephone No.: (212) 250-7351
Attention: Lianne Mech
Commitment BANQUE NATIONALE DE PARIS
- NEW YORK BRANCH
$50,000,000
By /s/ Richard L. Sted
Title: Sr. Vice President
By /s/ Thomas N. George
Title: Vice President
Lending Office for Base Rate Loans:
Banque Nationale de Paris
- New York Branch
499 Park Avenue
New York, New York 10022
Lending Office for Loans other than
Base Rate Loans:
Banque Nationale de Paris
- Georgetown (Grand Cayman) Branch
c/o Banque Nationale de Paris
- New York Branch
499 Park Avenue
New York, New York 10022
Address for Notices:
Banque Nationale de Paris
- New York Branch
499 Park Avenue
New York, New York 10022
Telecopier No.: (212) 415-9695
Telephone No.: (212) 415-9718
Attention: Tom George
Commitment CHEMICAL BANK
$50,000,000
By /s/ Robert K. Gaynor
Title: Vice President
Lending Office for all Loans:
Chemical Bank
270 Park Avenue, 10th floor
New York, New York 10017
Address for Notices:
Chemical Bank
270 Park Avenue, 10th floor
Banking and Corporate Finance
New York, New York 10017
Telecopier No.: (212) 270-1403
Telephone No.: (212) 270-9802
Attention: Lorraine Mohan
Commitment CREDIT LYONNAIS, NEW YORK BRANCH
$50,000,000
By /s/ W. Jay Buckley, III
Title: V.P. and Manager
CREDIT LYONNAIS, CAYMAN ISLAND
BRANCH
By /s/ W. Jay Buckley, III
Title: Authorized Signatory
Lending Office for Base Rate Loans:
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Lending office for Loans other than
Base Rate Loans:
Credit Lyonnais, Cayman Island
Branch
c/o Credit Lyonnais, New York
Branch
1301 Avenue of the Americas
New York, New York 10019
Address for Notices:
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Telex No.: CRED 62410 UW
Telecopier No.: (212) 261-7368
Telephone No.: (212) 261-7340
Attention: W. Jay Buckley
Commitment CREDIT SUISSE
$50,000,000
By /s/ Carole A. Lustig
Title: Member of Sr. Mgt.
By /s/ Michael C. Mast
Title: Member of Sr. Mgt.
Lending Office for Base Rate Loans:
Credit Suisse New York Branch
Tower 49, 12 East 49th Street
New York, New York 10017
Lending Office for Loans other than
Base Rate Loans:
Credit Suisse Cayman Island Branch
c/o Credit Suisse New York Branch
Tower 49, 12 East 49th Street
New York, New York 10017
Address for Notices:
Credit Suisse
Tower 49, 12 East 49th Street
New York, New York 10017
Telecopier No.: (212) 238-5439
Telephone No.: (212) 238-5408
Attention: Carole A. Lustig
Commitment DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
$50,000,000
By /s/ Surendra V. Shah
Title: Vice President
By /s/ David J. Cybulski
Title: Assistant V.P.
Lending Office for Base Rate Loans:
Deutsche Bank AG
New York Branch
31 West 52nd Street
New York, New York 10019
Lending Office for Loans other than
Base Rate Loans:
Deutsche Bank AG
Cayman Islands Branch
c/o Deutsche Bank AG
New York Branch
31 West 52nd Street
New York, New York 10019
Address for Notices:
Deutsche Bank AG
New York Branch
31 West 52nd Street
New York, New York 10019
Telex No.: WU 126109
Telecopier No.: (212) 474-8212
Telephone No.: (212) 474-7622
Attention: Surendra V. Shah
Commitment MELLON BANK, N.A.
$50,000,000
By /s/ Caroline R. Walsh
Title: Banking Officer
Lending Office for all Loans:
Mellon Bank, N.A.
3 Mellon Bank Center
Room 2302
Pittsburgh, Pennsylvania 15259
Address for Notices:
Mellon Bank, N.A.
3 Mellon Bank Center
Room 2302
Pittsburgh, Pennsylvania 15259
Telex No.: MELBNKPGH
Telecopier No.: (412) 234-5045
Telephone No.: (412) 234-4749
Attention: Rose Covel
Copy to: Caroline R. Walsh
Mellon Bank, N.A.
Mellon Financial Services
65 East 55th Street
New York, NY 10022
Commitment BANK OF AMERICA ILLINOIS
$35,000,000
By /s/ David Noda
Title: Authorized Officer
Lending Office for all Loans:
Bank of America Illinois
335 Madison Avenue
New York, NY 10019
Address for Notices:
Bank of America Illinois
335 Madison Avenue
New York, NY 10019
Telecopier No.: (212) 503-7771
Telephone No.: (212) 503-7349
Attention: Lucy Coyle
Commitment BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
$35,000,000
By /s/ Eric Hollanders
Title: Sr. V.P. Cr. Dept.
By /s/ Eileen Stekeur
Title: Assistant V.P.
Lending Office for all Loans:
Bank Brussels Lambert
630 Fifth Avenue
New York, New York 10111
Address for Notices:
Bank Brussels Lambert
630 Fifth Avenue
New York, New York 10111
Telex No.: 422934 BBC NYK
Telecopier No.: (212) 333-5786
Telephone No.: (212) 632-5316
Attention: John E. Kippax
Commitment THE BANK OF TOKYO TRUST COMPANY
$35,000,000
By /s/ Jean K. Reilly
Title: Vice President
Lending Office for all Loans:
The Bank of Tokyo Trust Company
1251 Avenue of the Americas
New York, New York 10116
Address for Notices:
The Bank of Tokyo Trust Company
1251 Avenue of the Americas
New York, New York
Telecopier No.: (212) 782-6445
Telephone No.: (212) 782-4313
Attention: Jean Reilly
Commitment CITIBANK, N.A.
$35,000,000
By /s/ Anita J. Brickell
Title: Vice President
Lending Office for all Loans:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Address for Notices:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Telex No: NYNIC
Telecopier No.: (212) 793-3053
Telephone No.: (212) 559-4651
Attention: Robert F. Parr
Commitment COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
$35,000,000 NEDERLAND", NEW YORK BRANCH
By /s/ Johannes F. Breukhoven
Title: Vice President
By /s/ Ian Reece
Title: V.P. & Manager
Lending Office for all Loans:
Rabobank Nederland
245 Park Avenue
New York, NY 10167
Address for Notices:
Rabobank Nederland
245 Park Avenue
New York, NY 10167
Attention: Corporate Services
Department
Telex No.: 424337 RABONY
Telecopier No.: (212) 818-0233
Telephone No.: (212) 916-7800
Commitment THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
$35,000,000
By /s/ Takeshi (Tak) Kawano
Title: Sr. V.P. & Sr. Mgr.
Lending Office for all Loans:
The Industrial Bank of Japan
Trust Company
245 Park Avenue-22nd floor
New York, New York 10167
Address for Notices:
The Industrial Bank of Japan
Trust Company
245 Park Avenue-22nd floor
New York, New York 10167
Telex No.: 233679 IBJTC UR or
425754 IBTC UI
Telecopier No.: (212) 692-9075
Telephone No.: (212) 309-6657
Attention: Mark Senyk
Commitment NATIONAL WESTMINSTER BANK PLC
$35,000,000
By /s/ Maria Amaral-LeBlanc
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By /s/ Maria Amaral-LeBlanc
Title: Vice President
Lending Office for Base Rate Loans:
National Westminster Bank PLC
New York Branch
175 Water Street-29th floor
New York, New York 10038
Lending Office for Loans other than
Base Rate Loans:
National Westminster Bank PLC
Nassau (Bahamas) Branch
c/o National Westminster Bank PLC
New York Branch
175 Water Street
New York, New York 10038
Address for Notices:
National Westminster Bank PLC
175 Water Street
New York, New York 10038
Telex No.: 233222/NWBUR
Telecopier No.: (212) 602-4500
Telephone No.: (212) 602-4229
Attention: Maria Amaral-LeBlanc
Commitment SOCIETE GENERALE
$35,000,000
By /s/ Paul Dalle Molle
Title: Vice President
Lending Office for all Loans:
Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Address for Notices:
Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Telecopier No.: (212) 278-7430
Telephone No.: (212) 278-6875
Attention: Paul J. Dalle Molle
Commitment THE TORONTO-DOMINION BANK
$35,000,000
By /s/ Jorge A. Garcia
Title: Mgr. Cr. Admin.
Lending Office for all Loans:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Address for Notices:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Telex No.: TDOM U833
Telecopier No.: (212) 262-1929
Telephone No.: (212) 468-0705
Attention: R. Neil Stewart
Commitment WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK/CAYMAN
$35,000,000 ISLANDS BRANCHES
By /s/ Salvatore Battinelli
Title: Vice President
By /s/ Karen Hoplock
Title: Vice President
Lending Office for Base Rate and
CD Loans:
Westdeutsche Landesbank
Girozentrale, New York Branch
1211 Avenue of the Americas
New York, NY 10036
Lending Office for Eurodollar
Loans:
Westdeutsche Landesbank
Girozentrale, Cayman Islands
Branch
c/o New York Branch
1211 Avenue of the Americas
New York, NY 10036
Address for Notices:
Westdeutsche Landesbank
Girozenrale
1211 Avenue of the Americas
New York, NY 10036
Telex No.: 666668/WLBIUW
Telecopier No.: (212) 852-6300
Telephone No.: (212) 852-6000
Attention: Loan Administration
SCHEDULE 1
Material Agreements
INTERNATIONAL PAPER COMPANY
Issue Principal Trustee
5-3/4% Euro Notes due 2002 $199,250,000 Bankers Trust Company
9.70% Notes due 2000 $150,000,000 The Bank of New York
9-5/8% Notes due 1995 $150,000,000 The Bank of New York
6-1/8% Notes due 2003 $200,000,000 The Bank of New York
7-5/8% Notes due 2023 $200,000,000 The Bank of New York
7-5/8% Notes due 2007 $200,000,000 The Bank of New York
6-7/8% Notes due 2023 $200,000,000 The Bank of New York
7.5% Notes due 2004 $150,000,000 The Chase Manhattan Bank
7-7/8% Notes due 2006 $150,000,000 The Chase Manhattan Bank
8-1/8% Notes due 2024 $150,000,000 The Chase Manhattan Bank
7.625% Notes due 2004 $150,000,000 The Chase Manhattan Bank
Other Principal Lender
Bank Borrowing $180,000,000 Deutsche Bank AG
Bank Borrowing $166,448,000 Deutsche Bank AG
EXHIBIT A
PROMISSORY NOTE
____________, 19__
New York, New York
FOR VALUE RECEIVED, [Name of Borrower], a __________ corporation (the
"Borrower"), hereby promises to pay to _________________ (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
(National Association) at New York, New York, the aggregate unpaid principal
amount of each Loan made by the Bank to the Borrower under the Credit Agreement,
in lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such Loan,
at such office, in like money and funds, for the period commencing on the date
of such Loan until such Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The date, amount, type, interest rate and maturity date of each Loan
made by the Bank to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Note, endorsed by the Bank on the schedule attached hereto or
any continuation thereof.
This Note is one of the Notes referred to in the Credit Agreement (as
modified and supplemented and in effect from time to time, the "Credit
Agreement") dated as of January 24, 1995, among International Paper Company, the
banks named therein (including the Bank), The Chase Manhattan Bank (National
Association), as Administrative Agent and Morgan Guaranty Trust Company of New
York, as Documentation Agent, and evidences Loans made by the Bank thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Bank to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
[INSERT NAME OF BORROWER]
By ______________________
Title:
* [For value received, International Paper Company hereby unconditionally
guarantees to the holder of this Note the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest on this Note, hereby expressly waiving diligence, presentment,
demand for payment, protest and all notices whatsoever.
----------
* Use bracketed language if the Borrower named herein is an Approved Borrower.
INTERNATIONAL PAPER COMPANY
By ________________________
Title: ]
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Credit
Agreement to the Borrower named herein, on the dates, in the principal amounts,
of the types, bearing interest at the rates and maturing on the dates set forth
below, subject to the payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal Notation
Loan Loan Loan Rate Loan Prepaid Amount Made by
EXHIBIT B-1
[Form of Designation Letter]
[Date]
To Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
Attention:
Ladies and Gentlemen:
We make reference to the Credit Agreement (the "Credit Agreement")
dated as of January 24, 1995 among International Paper Company (the "Company"),
the banks named therein (the "Banks"), The Chase Manhattan Bank (National
Association), as administrative agent for the Banks (in such capacity, the
"Administrative Agent") and Morgan Guaranty Trust Company of New York, as
documentation agent (in such capacity, the "Documentation Agent"). Terms
defined in the Credit Agreement are used herein as defined therein.
Subject to the approval of the Banks (to be evidenced by your signing
at the place below indicated and returning to the Company the enclosed copy of
this letter) the Company hereby designates __________________ (the "Approved
Borrower"), a Wholly- Owned Consolidated Subsidiary of the Company, a
corporation duly incorporated under the laws of [State/Country], as a Borrower
in accordance with Section 2.10 of the Credit Agreement until such designation
is terminated in accordance with said Section 2.10.
The Approved Borrower hereby accepts the above- designation and hereby
expressly and unconditionally accepts the obligations of a Borrower under the
Credit Agreement, adheres to the Credit Agreement and agrees and confirms that,
upon your execution and return to the Company of the enclosed copy of this
letter, it shall be a Borrower for purposes of the Credit Agreement and agrees
to be bound by and to perform and comply with the terms and provisions of the
Credit Agreement applicable to it as if it had originally executed the Credit
Agreement. The Approved Borrower hereby authorizes and empowers the Company to
act as its representative and attorney-in-fact for the purposes of signing
documents and giving and receiving notices (including notices of borrowing under
Section 2 of the Credit Agreement) and other communications in connection with
the Credit Agreement and the transactions contemplated thereby and further
agrees that each Agent and Bank may conclusively rely on the foregoing
authorization.
The Approved Borrower hereby submits with this Designation Letter, the
statements of earnings, cash flow and common shareholders' equity (if any) of
the Approved Borrower for each of the most recently completed fiscal quarter and
the most recently completed fiscal year of the Approved Borrower and the related
balance sheets as at the end of such quarter and such year, respectively; and
the Company and the Approved Borrower each hereby certifies that said financial
statements fairly present the financial condition and results of operations of
such Approved Borrower in accordance with generally accepted accounting
principles, consistently applied, as at the end of, and for, such quarter and
such year, respectively.
The Company hereby represents and warrants to each Agent and Bank
that, before and after giving effect to this Designation Letter, (i) the
representations and warranties set forth in Part A of Section 8 of the Credit
Agreement are true and correct on the date hereof as if made on and as of the
date hereof and (ii) no Default has occurred and is continuing.
The Approved Borrower hereby represents and warrants to each Agent and
Bank that, after giving effect to this Designation Letter, the representations
and warranties set forth in Part B of Section 8 of the Credit Agreement are true
and correct on the date hereof.
The Approved Borrower hereby agrees that this Designation Letter, the
Credit Agreement and the Notes shall be governed by, and construed in accordance
with, the law of the State of New York. The Approved Borrower hereby submits to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for the purposes of all legal proceedings arising out of or relating
to this Designation Letter, the Credit Agreement or the transactions
contemplated thereby. The Approved Borrower irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. The Approved Borrower further agrees that service of
process in any such action or proceeding brought in New York may be made upon it
by service upon the Company at the "Address for Notices" specified below its
name on the signature pages to the Credit Agreement and the Approved Borrower
hereby irrevocably appoints the Company as its authorized agent ("Process
Agent") to accept, on behalf of it and its property such service of process in
New York.
THE APPROVED BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS DESIGNATION LETTER, THE CREDIT AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY.
INTERNATIONAL PAPER COMPANY
By__________________________
Title:
[APPROVED BORROWER]
By________________________
Title:
[insert address]
Consent and Agree:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
as Documentation Agent
for and on behalf of the Banks
By_____________________________
Title:
Date:__________________________
EXHIBIT B-2
[Form of Termination Letter]
[Date]
To Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
Attention:
Ladies and Gentlemen:
We make reference to the Credit Agreement (the "Credit Agreement")
dated as of January 24, 1995 among International Paper Company (the "Company"),
the banks named therein (the "Banks"), The Chase Manhattan Bank (National
Association), as administrative agent for the Banks (in such capacity, the
"Administrative Agent") and Morgan Guaranty Trust Company of New York, as
documentation agent (in such capacity, the "Documentation Agent"). Terms
defined in the Credit Agreement are used herein as defined therein.
The Company hereby terminates the status as an Approved Borrower of
_______________, a corporation incorporated under the laws of [State/County],
in accordance with Section 2.10 of the Credit Agreement, effective as of the
date of receipt of this notice by the Administrative Agent. The undersigned
hereby represent and warrant that all principal and interest on all Notes of the
above-referenced Approved Borrower and all other amounts payable by such
Approved Borrower pursuant to the Credit Agreement have been paid in full on or
prior to the date hereof. Notwithstanding the foregoing, this Termination
Letter shall not affect any obligation which by the terms of the Credit
Agreement survives termination thereof.
INTERNATIONAL PAPER COMPANY
By_________________________
Title:
EXHIBIT C-1
[Form of Opinion of Associate General Counsel
to the Company]
__________________, 19__
To the Banks party to the Credit Agreement referred to
below, The Chase Manhattan Bank (National Association)
as Administrative Agent and Morgan Guaranty Trust
Company of New York, as Documentation Agent
Gentlemen:
I am an associate general counsel of International Paper Company (the
"Company") and I am providing this opinion in connection with the Credit
Agreement (the "Credit Agreement") dated as of January 24, 1995, among the
Company, the banks named therein (the "Banks"), The Chase Manhattan Bank
(National Association), as administrative agent (the "Administrative Agent") and
Morgan Guaranty Trust Company of New York, as documentation Agent (the
"Documentation Agent"), providing for loans to be made by the Banks to the
Company in an aggregate principal amount not exceeding $1,000,000,000 at any one
time outstanding. Terms defined in the Credit Agreement are used herein as
defined therein.
In rendering the opinion expressed below, I have examined the
originals or conformed copies of such corporate records, agreements and
instruments of the Company and its Subsidiaries, certificates of public
officials and of officers of the Company and its Subsidiaries, and such other
documents and records, and such matters of law, as I have deemed appropriate as
a basis for the opinions hereinafter expressed.
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New York and has the
necessary corporate power to make and perform the Credit Agreement and its
Notes, to borrow under, and to guarantee borrowings by Approved Borrowers under,
the Credit Agreement. Each Material Subsidiary of the Company is a corporation
duly incorporated or a partnership or other entity duly organized, validly
existing and in good standing under the laws of the respective State indicated
opposite its name on Annex 1 hereto. The Company and the Material Subsidiaries
of the Company are duly qualified to transact business in all jurisdictions
where failure so to qualify would have a material adverse effect on the
consolidated financial condition, operations, business or prospects taken as a
whole of the Company and its Consolidated Subsidiaries.
2. The making and performance by the Company of the Credit Agreement
and its Notes and the borrowings and guarantee thereunder have been duly
authorized by all necessary legal action, and do not and will not violate any
provision of law or regulation or any provision of its charter or by-laws or any
other constitutive documents or result in the breach of, or constitute a default
or require any consent under, any indenture or other agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or its properties may be bound.
3. The Credit Agreement constitutes, and the Notes of the Company
when executed and delivered for value will constitute, legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and except
that no opinion is expressed as to Section 4.05(c) of the Credit Agreement. In
addition, I express no opinion as to (i) whether a Federal or state court
outside of the State of New York would give effect to the choice of New York law
provided for in the Credit Agreement and the Notes, (ii) the second sentence of
Section 12.10 of the Credit Agreement, insofar as such sentence relates to the
subject matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to the Credit
Agreement or the Notes, (iii) the waiver of inconvenient forum set forth in
Section 12.10 of the Credit Agreement with respect to proceedings in the United
States District Court for the Southern District of New York or (iv) Section
12.11 of the Credit Agreement.
4. Except as disclosed to the Banks in writing prior to the date
hereof, the legal or arbitral proceedings, and proceedings by or before any
governmental or regulatory authority or agency, pending or (to my knowledge)
threatened against or affecting the Company and/or any of its Subsidiaries, or
any properties or rights of the Company and/or any of its Subsidiaries will not
result in imposition of liability or assessment against (including seizure of)
property in an aggregate amount as to all such proceedings exceeding 10% of
Tangible Net Worth.
5. No authorizations, consents, approvals, licenses, filings or
registrations with, any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by the
Company of the Credit Agreement or its Notes.
6. The Company is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
7. The Company is not a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
I am a member of the bar of the State of New York and do not herein
express any opinion as to any matters governed by any laws other than the laws
of the State of New York and the Federal laws of the United States of America.
Very truly yours,
EXHIBIT C-2
[Form of Opinion of Counsel to any Approved Borrower]
__________________, 19__
To the Banks party to the Credit Agreement referred to
below, The Chase Manhattan Bank (National Association)
as Administrative Agent and Morgan Guaranty Trust
Company of New York as Documentation Agent
Gentlemen:
[I/We] have acted as counsel* to [name of Approved Borrower] (the
"Approved Borrower") in connection with the Credit Agreement (the "Credit
Agreement") dated as of January 24, 1995, among International Paper Company (the
"Company"), the banks named therein (the "Banks"), The Chase Manhattan Bank
(National Association), as administrative agent (the "Administrative Agent") and
Morgan Guaranty Trust Company of New York as documentation agent (the
"Documentation Agent"), providing for loans to be made by the Banks to the
Company in an aggregate principal amount not exceeding $1,000,000,000 at any one
time outstanding. Terms defined in the Credit Agreement are used herein as
defined therein.
In rendering the opinion expressed below, [I/we] have examined the
originals or conformed copies of such corporate records, agreements and
instruments of the Approved Borrower, certificates of public officials and of
officers of the Approved Borrower, and such other documents and records, and
such matters of law, as [I/we] have deemed appropriate as a basis for the
opinions hereinafter expressed.
-------------------
*If the Approved Borrower is a domestic Subsidiary, this opinion may
be given by the Associate General Counsel of the Company, who may rely on an
opinion of local counsel to the Approved Borrower in the jurisdiction of
incorporation of the Approved Borrower. If the Approved Borrower is a foreign
Subsidiary, this opinion must be given by counsel, satisfactory to the
Administrative Agent, that is admitted to practice in the jurisdiction of
incorporation of the Approved Borrower.
**[In rendering the opinion expressed below, [I/we] have, with your
permission, assumed that the Credit Agreement, the Designation Letter of the
Approved Borrower and the Notes are, under the laws of the State of New York (by
which they are stated to be governed), legal, valid and binding agreements,
enforceable in accordance with their respective terms.]
Based upon the foregoing, [I/we] [am/are] of the opinion that:
1. The Approved Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of [State/Country] and has the
necessary corporate power to make and perform its obligations under its
Designation Letter, the Credit Agreement and its Notes and to borrow under the
Credit Agreement.
2. The making and performance by the Approved Borrower of its
Designation Letter (and the assumption therein of obligations under the Credit
Agreement) and its Notes and the borrowings by the Approved Borrower under the
Credit Agreement have been duly authorized by all necessary legal action, and do
not and will not violate any provision of law or regulation or any provision of
the charter or by-laws or any other constitutive documents of the Approved
Borrower or result in the breach of, or constitute a default or require any
consent under, any indenture or other agreement or instrument to which the
Approved Borrower or any of its Subsidiaries is a party or by which the Approved
Borrower or any of its Subsidiaries or its properties may be bound.
3. The Designation Letter of the Approved Borrower and, pursuant to
the assumption under such Designation Letter, the Credit Agreement, each
constitutes, and the Notes of the Approved Borrower when executed and delivered
for value will constitute, legal, valid and binding obligations of the Approved
Borrower enforceable in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of
---------------------------
**Do not insert bracketed language if counsel is admitted to practice
in the State of New York.
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law), and except that no opinion is expressed as to Section
4.05(c) of the Credit Agreement. [I/We] express no opinion as to (i) the second
sentence of Section 12.10 of the Credit Agreement and the second sentence of the
penultimate paragraph of the Designation Letter of the Approved Borrower,
insofar as such sentences relate to the subject matter jurisdiction of the
United States District Court for the Southern District of New York to adjudicate
any controversy related to the Credit Agreement, such Designation Letter or the
Notes or (ii) the waiver of inconvenient forum set forth in Section 12.10 of the
Credit Agreement and the penultimate paragraph of such Designation Letter with
respect to proceedings in the United States District Court for the Southern
District of New York.
4. No authorizations, consents, approvals or licenses of, or filings
or registrations with, any governmental or regulatory authority or agency in
[[State] or the United States of America/Country] are required in connection
with the execution, delivery or performance by the Approved Borrower of its
Designation Letter (or of the Credit Agreement obligations assumed therein) or
its Notes.
5. In any action or proceeding in any court in [insert
State/Country] arising out of or relating to the Credit Agreement, the
Designation Letter of the Approved Borrower or the Notes of the Approved
Borrower, such court would recognize and give effect to the provisions of
Section 12.10 of the Credit Agreement wherein the parties thereto agree that the
Credit Agreement, each Designation Letter and the Notes shall be governed by,
and construed in accordance with, the laws of the State of New York, United
States of America.
6. The appointment of the Company as Process Agent by the Approved
Borrower under Section 12.10 of the Credit Agreement and the Designation Letter
is a valid appointment and the empowerment of the Company to act as the Approved
Borrower's representative and attorney-in-fact for the purposes of signing
documents and giving and receiving notices (including notices of borrowing under
Section 2 of the Credit Agreement) in the Approved Borrower's Designation Letter
is a valid and binding empowerment.
7. It is not necessary under the laws of [insert State/Country] (i)
in order to enable the Administrative Agent or any Bank to enforce its rights
under the Credit Agreement or the Notes of the Approved Borrower, or (ii) by
reason of the execution, delivery or performance of the Designation of the
Approved Borrower, the Credit Agreement or the Notes of the Approved Borrower,
that the Administrative Agent or any Bank should be licensed, qualified or
entitled to carry on business in [insert State/Country].
8. Neither the Administrative Agent nor any Bank is or will be
deemed to be resident, domiciled, carrying on business or subject to taxation in
[insert State/Country] by reason only of the execution, delivery, performance or
enforcement of the Credit Agreement, the Designation Letter of the Approved
Borrower or the Notes of the Approved Borrower.
9. If any judgment of a court in or of the State of New York were
rendered against the Approved Borrower in connection with any action arising out
of or relating to the Credit Agreement, the Designation Letter of the Approved
Borrower or the Notes of the Approved Borrower, such judgment would be
recognized and could be sued upon in the courts of [insert State/Country], and
such courts would grant a judgment which would be enforceable against the
Approved Borrower in [insert State/Country] without any retrial or reexamination
of the merits of the original action[, provided that the requirements of [insert
relevant statutory provisions] are met.
***[10. Except as described in writing to the Banks prior to the date
of delivery of the Approved Borrower's Designation Letter, there is no income,
stamp or other tax of any country, or of any taxing authority thereof or
therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by the Approved Borrower pursuant to the
Credit Agreement or on its Notes, or is imposed on or by virtue of the
execution, delivery or enforcement of its Designation Letter or its Notes. The
Approved Borrower is permitted to make all payments pursuant to the Credit
Agreement or its Notes free and clear of all taxes, and no such payment in the
hands of
------------------------------
***Insert Paragraphs 10, 11, 12 and 13 if the Approved Borrower is not
a U.S. Person.
any Bank under, and as defined in, each of the Credit Agreement and its Notes,
will be subject to any tax.
11. Neither the Approved Borrower nor any of its property has any
immunity (sovereign or otherwise) from jurisdiction of any [insert Country]
court or set-off or any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) under the laws of [insert Country].
12. To ensure the legality, validity, enforceability or admissability
in evidence in [insert Country] of the Credit Agreement, the Designation Letter
of the Approved Borrower or the Notes of the Approved Borrower, it is not
necessary that the Credit Agreement, such Designation Letter or such Notes or
any other document be filed or recorded with any court or other authority in
[insert Country] or that any stamp or similar tax be paid on or in respect of
the Credit Agreement, such Designation Letter or such Notes, or any other
document [other than such filings and recordations that have already been made
and such stamp or similar taxes that have already been paid].
13. Each of the Credit Agreement, the Designation Letter of the
Approved Borrower and the Notes of the Approved Borrower is in proper legal form
under the laws of [insert Country] for the enforcement thereof against the
Approved Borrower.]
****[10. The Approved Borrower is not an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
11. The Approved Borrower is not a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.]
[I/We] [am/are] a member of the bar of the [State/Country] and do not
herein express any opinion as to any matters governed by any laws other than the
laws of
-------------------------------
****Insert these alternative Paragraphs 10 and 11 if the Approved
Borrower is a U.S. Person.
[[State] and the Federal laws of the United States of America/Country].
Very truly yours,
EXHIBIT D
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of January 24, 1995 among International Paper
Company, a New York corporation (the "Borrower"), the banks listed on the
signature pages thereof (the "Banks"), The Chase Manhattan Bank (National
Association), as Administrative Agent (the "Administrative Agent") and Morgan
Guaranty Trust Company of New York, as Documentation Agent (the "Documentation
Agent", and together with the Administrative Agent, the "Agents"), and have
acted as special counsel for the Agents for the purpose of rendering this
opinion pursuant to Section 7.01(d) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
3. We express no opinion as to the effect of the law of any
jurisdiction (other than the State of New York) wherein any Bank (including any
of its Applicable Lending Offices) may be located which limits rates of interest
which may be charged or collected by such Bank. In addition, we express no
opinion as to (i) Section 4.05(c) of the Credit Agreement, (ii) the second
sentence of Section 12.10 of the Credit Agreement, insofar as such sentence
relates to the subject matter jurisdiction of the United States District Court
for the Southern District of New York to adjudicate any controversy related to
the Credit Agreement or the Notes, (iii) the waiver of inconvenient forum set
forth in Section 12.10 of the Credit Agreement with respect to proceedings in
the United States District Court for the Southern District of New York or (iv)
Section 12.11 of the Credit Agreement.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of New
York.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT E
[Form of Money Market Quote Request]
[Date]
To: The Chase Manhattan Bank (National Association), as
Administrative Agent
From: International Paper Company
Re: Money Market Quote Request
Pursuant to Section 2.03 of the Credit Agreement (the "Credit
Agreement") dated as of January 24, 1995, among International Paper Company (the
"Company"), the banks named therein (the "Banks") and The Chase Manhattan Bank
(National Association), as administrative agent for the Banks (in such capacity,
the "Administrative Agent") and Morgan Guaranty Trust Company of New York as
documentation agent (in such capacity, the "Documentation Agent"), we hereby
give notice that we request Money Market Quotes for the following proposed Money
Market Borrowing(s) by the below-referenced Borrower:
Borrowing Interest
Borrower Date Amount[1] Type[2] Period[3]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
INTERNATIONAL PAPER COMPANY
By ________________________
Title:
-------------------------------
[1]Each amount must be $15,000,000 or a larger multiple of $1,000,000.
[2]Insert either "Margin" (in the case of LIBOR Market Loans) or
"Rate" (in the case of Set Rate Loans).
[3]One, two, three or six months, in the case of a LIBOR Market Loan
or, in the case of a Set Rate Loan, a period of not less than 15 days but not
more than 180 days after the making of such Set Rate Loan and ending on a
Business Day.
EXHIBIT F
[Form of Money Market Quote]
To: The Chase Manhattan Bank (National Association), as
Administrative Agent
Attention:
Re: Money Market Quote to International Paper Company in
respect of the below referenced Borrower
This Money Market Quote is given in accordance with Section
2.03(c) of the Credit Agreement (the "Credit Agreement") dated as of January 24,
1995, among International Paper Company (the "Company"), the banks named therein
(the "Banks"), The Chase Manhattan Bank (National Association), as
administrative agent for the Banks (in such capacity, the "Administrative
Agent") and Morgan Guaranty Trust Company of New York, ad documentation agent
(in such capacity, the "Documentation Agent"). Terms defined in the Credit
Agreement are used herein as defined therein.
In response to the Company's invitation dated ___________, 19__,
we hereby make the following Money Market Quote(s) on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. We hereby offer to make Money Market Loan(s) to the below-
referenced Borrower in the following principal amount[s], for the following
Interest Period(s) and at the following rate(s):
Borrowing Interest
Borrower Date Amount[1] Type[2] Period[3] Rate[4]
----------------------------
[1]The principal amount bid for each Interest Period may not exceed
the aggregate principal amount requested. Bids must be made in multiples of
$1,000,000.
[2]Indicate "Margin" (in the case of LIBOR Market Loans) or "Rate" (in
the case of Set Rate Loans).
[3]One, two, three or six months, in the case of a LIBOR Market Loan
or, in the case of a Set Rate Loan, a period of not less than 15 days but not
more than 180 days after the making of such Set Rate Loan and ending on a
Business Day, as specified in the related Money Market Quote Request.
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement,
irrevocably obligate[s] us to make the Money Market Loan(s) for which any
offer(s) (is/are) accepted, in whole or in part (subject to the third sentence
of Section 2.03(e) of the Credit Agreement).
Very truly yours,
[Name of Bank]
By___________________
Authorized Officer
Date: ____________, ____
----------------------------------
[4]For a LIBOR Market Loan, specify margin over or under the London
interbank offered rate determined for the applicable Interest Period. Specify
percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or
"MINUS". For a Set Rate Loan, specify rate of interest per annum (rounded to
the nearest 1/10,000 of 1%).
EXHIBIT G
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Credit Agreement dated as of January 24,
1995, among International Paper Company (the
"Company"), the banks named therein (the "Banks"),
The Chase Manhattan Bank (National Association),
as administrative agent for the Banks (in such
capacity, the "Administrative Agent") and Morgan
Guaranty Trust Company of New York, as documentation
agent (in such capacity, the "Documentation Agents").
Dear ______________:
As a Bank party to the above-referenced Credit Agreement (the "Credit
Agreement"), we have agreed with International Paper Company (the "Company")
pursuant to Section 12.13 of the Credit Agreement to use reasonable precautions
to keep confidential, except as otherwise provided therein, all non-public
information identified by the Company as being confidential at the time the same
is delivered to us pursuant to the Credit Agreement.
As provided in said Section 12.13, we are permitted to provide you, as a
prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)][assignee Bank], with certain of such non-public information subject
to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [participation][assignment] mentioned above and (B)
you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential; provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any of the Banks or Agents, (iii) to bank examiners,
auditors or accountants, (iv) to any Agent or other Bank, or (v) in connection
with any litigation to which you or any one or more of the Banks are a party;
and provided further that in no event shall you be obligated to return any
materials furnished to you pursuant to this Confidentiality Agreement.
Would you please indicate your agreement to the foregoing by signing at the
place provided below the enclosed copy of this Confidentiality Agreement.
Very truly yours,
[Insert Name of Bank]
By_____________________
The foregoing is agreed to
as of the date of this letter.
[Insert name of prospective
participant or assignee]
By _______________________]
Exhibit (11)
INTERNATIONAL PAPER COMPANY
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In millions, except per share amounts)
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1994 1993 1992
---- ---- ----
Net earnings $ 357 $289 $ 86
Debenture interest savings, net
of taxes, assuming conversion
of convertible subordinated
debentures 7 * *
----- ---- ----
Primary and fully diluted net earnings $364 $ 289 $ 86
===== ===== =====
Earnings per common share $2.86 $2.34 $0.71
===== ===== =====
Primary earnings per share $2.85 $2.34 $0.71
===== ===== =====
Fully diluted earnings per share $2.84 $2.34 $0.71
===== ===== =====
PRIMARY SHARES
Average shares outstanding 124.9 123.2 121.4
Shares assumed to be repurchased
using long-term incentive plan
deferred compensation at average
market price (0.3) (0.4) (0.3)
Shares assumed to be issued upon
exercise of stock options, net
of treasury buyback at average
market price 0.4 0.4 0.5
Shares assumed to be issued upon
conversion of convertible
subordinated debentures 2.9 * *
===== ===== =====
Primary shares 127.9 123.2 121.6
===== ===== =====
FULLY DILUTED SHARES
Average shares outstanding 124.9 123.2 121.4
Shares assumed to be repurchased
using long-term incentive plan
deferred compensation at period-
end market price (if higher than
average market price) (0.3) (0.3) (0.3)
Shares assumed to be issued upon
exercise of stock options, net
of treasury buyback at period-
end market price (if higher than
average market price) 0.5 0.5 0.5
Shares assumed to be issued upon
conversion of convertible
subordinated debentures 2.9 * *
----- ----- -----
Fully diluted shares 128.0 123.4 121.6
===== ===== =====
Note: The Company reports earnings per common share as the effect of dilutive
securities is less than 3%.
<TABLE>
<CAPTION>
(Exhibit 12)
INTERNATIONAL PAPER COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollar amounts in millions)
(unaudited)
For the Years Ended December 31,
TITLE 1989 1990 1991 1992 1993 1994
----------------------------------------------- ---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
A) Earnings before income taxes, extraordinary
item and accounting changes $ 1,404.7 $ 945.9 $ 637.9 $ 206.1 $ 500.0 $ 664.0
B) Add: Fixed charges excluding
capitalized interest 250.4 336.2 380.3 325.3 365.3 412.3
C) Add: Amortization of previously
capitalized interest 8.4 8.6 9.9 9.9 12.2 12.8
D) Less: Equity in undistributed
earnings of affiliates (6.7) (9.4) (10.8) (19.1) (25.9) (49.1)
--------- --------- --------- --------- --------- ---------
E) EARNINGS BEFORE INCOME TAXES,
EXTRAORDINARY ITEM, ACCOUNTING
CHANGES AND FIXED CHARGES $ 1,656.8 $ 1,281.3 $ 1,017.3 $ 522.2 $ 851.6 $ 1,040.0
========= ========= ========= ========= ========= =========
FIXED CHARGES
F) Interest and amortization of
debt expense $ 228.7 $ 309.5 $ 351.1 $ 297.1 $ 334.5 $ 371.0
G) Interest factor attributable
to rentals 21.7 26.7 29.2 28.2 30.8 41.3
H) Capitalized interest 10.9 26.3 36.4 42.0 12.2 18.0
--------- --------- --------- --------- --------- ---------
I) TOTAL FIXED CHARGES $ 261.3 $ 362.5 $ 416.7 $ 367.3 $ 377.5 $ 430.3
========= ========= ========= ========= ========= =========
J) RATIO OF EARNINGS TO FIXED CHARGES 6.34 3.53 2.44 1.42 2.26 2.42
========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
Exhibit 13
Profile
International Paper is a worldwide producer of paper, packaging and forest
products, all complemented by related specialty products and an extensive
distribution system. We operate facilities throughout the Americas, Europe and
Asia on behalf of customers in 130 nations, including some of the fastest
growing markets in the world.
Contents
1 Financial Highlights
2 Letter to Shareholders
4 Our Global Business Mix
5 We Answer to the World
6 World Class
10 Clear Foresight
14 Peak Performance
18 Added Value
22 Forward Thinking
27 Financial Review
61 Directors and Senior Management
63 Management Through Teamwork
Shareholder Information
(Inside Back Cover)
<PAGE>
Financial Highlights
Dollar amounts and shares in millions,
except per share amounts 1994 1993
-------- --------
Financial Summary
Net Sales ........................................ $ 14,966 $ 13,685
Operating Profit ................................. 1,033 832
Earnings Before Income Taxes and Cumulative
Effect of Accounting Change .................... 664 500
Earnings Before Cumulative Effect of
Accounting Change .............................. 432(1) 289(2)
Net Earnings ..................................... 357 289(2)
Total Assets ..................................... 17,836 16,631
Common Shareholders' Equity ...................... 6,514 6,225
Return on Equity ................................. 5.6%(3) 4.7%(3)
-------- --------
Per Share of Common Stock
Earnings Before Cumulative Effect of
Accounting Change .............................. $ 3.46(1) $ 2.34(2)
Earnings ......................................... 2.86 2.34(2)
Cash Dividends ................................... 1.68 1.68
Common Shareholders' Equity ...................... 51.74 50.25
-------- --------
Shareholder Profile
Shareholders of Record at December 31 ............ 29,756 31,750
Shares Outstanding at December 31 ................ 125.9 123.9
Average Shares Outstanding ....................... 124.9 123.2
-------- --------
1 $422 million ($3.38 per share) before $17 million ($10 million after taxes or
$.08 per share) of additional earnings for the current-year effect of the
change in accounting for start-up costs.
2 $314 million ($2.54 per share) before $25 million ($.20 per share) of
additional income tax expense to revalue deferred tax balances to reflect the
increase in the U.S. statutory federal income tax rate.
3 Return on equity was 6.7% in 1994 before the change in accounting for start-up
costs and 5.1% in 1993 before the additional income tax expense.
--------------------------------------------------------------------------------
[Net Sales Chart--Appendix A No. 1]
[Net Earnings Chart--Appendix A No. 2]
[Earnings per Share Chart--Appendix A No. 3]
[Return on Equity Chart--Appendix A No. 4]
--------------------------------------------------------------------------------
1
<PAGE>
Letter to Shareholders
Dear Valued Shareholders:
1994 was a year of higher sales and earnings for International Paper, the
result of significant improvements in most of our businesses. We have been
preparing for several years for the upturn in the paper industry that began in
late 1993, and we believe that we have entered a sustained period of favorable
markets worldwide.
Net sales in 1994 reached $15 billion, 9 percent above 1993 levels.
Earnings amounted to $422 million or $3.38 per share before a change in
accounting for start-up costs, an increase of 33 percent above the previous
year. The change reduced 1994 earnings by $65 million or $.52 per share for
reported earnings of $357 million or $2.86 per share.
Our 1994 results were driven by economic growth throughout the world,
especially in the United States and Europe. The upturn in our paper business
began late in 1993 with improvement in global pulp markets. Demand picked up in
the spring of 1994 for many of our paper and packaging grades, and we found it
necessary to put linerboard on allocation around midyear, followed by other
grades. As a result, we were able to realize higher prices for virtually all
products by year end. This pricing momentum continued into the early months of
1995.
Favorable economic conditions worldwide as well as higher demand and operating
rates were not the only reasons for our improved performance, however. Over the
past several years, we put initiatives in place to grow revenues, reduce costs,
and add value in our core paper and specialty products businesses.
Investing to Grow Revenues and Reduce Costs
Our efforts to make International Paper the low-cost producer of our major
product lines are proving successful. We continue to invest in our future by
upgrading and building new facilities around the world. In 1995, start-up of
state-of-the-art machinery at our Riverdale mill in Alabama and our Mansfield,
La., mill will place us among the industry's most efficient producers of
uncoated papers and recycled linerboard. A world-class pulp mill at Saillat is
enabling us to further integrate our Aussedat Rey manufacturing operations in
France. The capital improvement program at our Kwidzyn, Poland, operation is in
its final phase, with start-up of the mill's fourth paper machine scheduled for
1996. As new low-cost capacity is added to our system, we have shut down older
high-cost capacity, some of which has been converted to other uses. We will
continue to look for similar opportunities to improve our cost structure.
Our capital investment initiatives represent only one of our productivity
improvement measures. In addition, ambitious quality assurance programs are
enhancing our ability to meet or exceed the high standards our customers expect
from us. Organizational changes will eliminate layers of management and create
closer links between our customers and the people who serve them. The full
implementation of high-performance work systems will foster the commitment of
every employee to improved productivity and customer service and will better
prepare them to respond to opportunities more rapidly and effectively.
Expanding Our International Businesses
Participation in worldwide production and sales is imperative to be truly
competitive in most of our product lines. It is an important part of our
strategy to achieve a sales growth rate at least twice that of the U.S. market,
and we can accomplish that only by becoming a significant factor in the faster
growing markets outside North America.
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 1]
John A. Georges
Chairman and Chief Executive Officer
--------------------------------------------------------------------------------
2
<PAGE>
We continue to explore opportunities to leverage our technology and product
knowledge around the world. In addition to our sizable and growing presence in
Europe, where we now produce 1.5 million tons of pulp and paper annually in
France, Germany and Poland, we increased our ownership of Carter Holt Harvey in
New Zealand and acquired two small Mexican companies for our North American
distribution business. We are building liquid packaging facilities in Brazil and
China, as well as an aseptic packaging plant in France, and we recently
announced that we will construct a door facings plant in Ireland and a spunbond
nonwoven fabrics facility in Mexico.
Protecting the Environment
The environmental impact of papermaking and forestry operations is an important
issue facing our industry, and International Paper has assumed a leadership role
in addressing these concerns. In 1994, we were among the first to endorse new
industry-wide forestry management standards. We made excellent progress toward
our goal of converting our U.S. bleached mills to elemental chlorine-free
bleaching technology. And new investments in our Riverdale and Mansfield mills,
combined with recent conversions at Oswego and Lock Haven, will make us a
leading manufacturer of recycled paper and packaging.
Looking Forward
We expect the business environment in our industry to improve further, assuming
worldwide economic expansion continues for the next several years. Announced
industry capacity additions are modest and we should continue to enjoy high
operating rates for our major product lines. Given these conditions, our
earnings should increase dramatically from current levels.
Our strategies going forward are the same as those that underlie our current
success: expand higher value products in our core paper businesses; grow our
specialty products and distribution businesses; develop technologies to create
innovative new products, improve our manufacturing processes and reduce costs;
and continue to enter fast-growing markets worldwide.
Our objective continues to be the achievement of a 15 percent return on equity
over a full economic cycle, and we believe that our current expansion and
cost-improvement programs will enable us to reach that target. Our employees are
critical to our success, and we are making excellent progress in obtaining their
active participation and support of our goals. Their efforts are guided by the
best management team in the industry, including senior managers who take a
hands-on and entrepreneurial approach to their operations.
I want to recognize the invaluable contributions of our board of directors,
and particularly thank Fred Dent, Bill Ellinghaus, Bill Kuhns and Sam Pierce,
all of whom retired during 1994. I also want to welcome our newest members, Bob
Eaton, Chief Executive Officer of Chrysler Corporation, and Dick Shoemate,
Chief Executive Officer of CPC International, Inc.
Finally, I want to express my sincere appreciation to you, our shareholders,
for your continued confidence and support.
/s/ John A. Georges
John A. Georges
Chairman and Chief Executive Officer
February 28, 1995
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 2]
Our emphasis on dealing with environmental
issues is reflected in the television and print
advertisements we introduced during 1994.
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3
<PAGE>
Our Global Business Mix
Printing Papers
International Paper ranks among the world's largest producers of high-quality
printing and writing papers. Through our Hammermill, Springhill, Strathmore and
Beckett franchises, we serve growing markets for uncoated papers, fine papers
and more than 100 grades of recycled papers. We are a leader in the manufacture
of coated papers used in magazines and catalogs as well as heavyweight papers
used for folders, tags and tickets. Our Aussedat Rey, Zanders and Kwidzyn
operations are major producers of paper and pulp in Europe, and well-known
brands include Aussedat Rey's Reymat, Zanders' Ikono and Chromolux lines, and
Kwidzyn's Pollux. We are also a leading producer of paper, fluff and dissolving
pulp for international markets.
Packaging
International Paper is one of the world's largest producers of
containerboard and corrugated boxes as well as the number one provider of
agricultural packaging in Europe. Our premium Everest bleached board is used
worldwide for folding cartons, liquid packaging and food service products. Our
aseptic packaging systems help keep perishable liquids fresh without
refrigeration. And our kraft division offers the widest array of kraft paper and
packaging in the industry.
Distribution
International Paper distributes paper, industrial products, graphic arts
supplies and other goods internationally. In North America, ResourceNet
International comprises over 280 distribution facilities. Overseas, Aussedat Rey
and Scaldia cover the growing European marketplace. By continually broadening
our product line and geographic coverage, we strive to enhance the value we
provide to our suppliers and customers.
Specialty Products
Specialty Products complements our core paper, packaging and
forestry operations. Imaging products include plates, films and papers for the
photography and graphic arts markets. Specialty panels produces CraftMaster door
facings, siding, decorative products including Fountainhead solid surfacing and
Nevamar high-pressure laminates, foam products and furniture components.
Specialty industrial papers are used for diverse applications such as
pressure-sensitive labels. Veratec, a nonwovens producer, is a leading
manufacturer of spunbond fabrics for consumer disposable products. Arizona
Chemical reprocesses papermaking by-products for specialty applications. And
our petroleum operation develops oil and gas reserves.
Forest Products
International Paper manages 6.1 million acres of U.S. forestlands, one of the
largest fiber bases in our industry. Sawlogs and pulpwood harvested from our
forests represent about one-third of our U.S. fiber needs. We are a leading U.S.
producer of southern pine lumber as well as a broad range of panel and other
wood products, including oriented strand board. We adhere to environmentally
sound, scientifically based forest management principles to ensure that our
forests and the life they support will be sustained and renewed for many
generations to come.
4
<PAGE>
We answer to the world.
International Paper is an industry leader, offering products that respond to
our customers' changing needs. Our international presence gives us exposure to
fast-growing markets. Our financial strength enables us to invest in our most
promising businesses. We're taking steps to enhance our global competitiveness.
And we take seriously our role as corporate citizens. Whatever the world
requires of us, we are ready.
5
<PAGE>
World Class
Established and emerging global markets represent International Paper's greatest
opportunities for growth. With sales in more than 130 countries, we are
expanding our ability to reach a diverse and growing customer base.
--------------------------------------------------------------------------------
With facilities in 28 nations and sales in 130 countries, International Paper's
paper, packaging, forestry, distribution and specialty businesses span the
globe.
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6
<PAGE>
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[Photograph--Appendix B No. 3]
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7
<PAGE>
International operations and export sales generated revenues of $4.5 billion in
1994, 30 percent of International Paper's total sales. This is the result of our
presence in markets where economic growth and demand for our products are
expanding more rapidly than in the United States.
Established Markets
International Paper has a substantial on-the-ground presence in Europe. Our
three printing papers operations--Aussedat Rey in France, Zanders in Germany and
Kwidzyn in Poland--have a combined annual pulp and paper capacity of more than
1.5 million tons. Aussedat Rey, for example, is one of the Continent's largest
manufacturers of office papers, a position strengthened by a new world-class
pulp mill in Saillat, France, and ongoing development of a continent-wide
distribution network.
Our international container division, already the number one provider of
agricultural packaging in Europe, is expanding its plants in Italy and Spain.
In our specialty products businesses, Masonite is increasing its overseas
capacity with plans for a greenfield plant in Ireland. And Ilford, our
U.K.-based imaging products company, continues to hold a major share in Europe
for professional black-and-white films and papers.
Emerging Markets
Kwidzyn, our modern paper, pulp and packaging mill in Poland, positions
International Paper for further growth in
--------------------------------------------------------------------------------
Our mill in Kwidzyn, Poland, gives us a strong presence in the developing
markets of Eastern Europe.
[Photograph--Appendix B No. 4]
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8
<PAGE>
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[Photograph--Appendix B No. 5]
The Far East is one of the world's fastest growing liquid packaging markets, and
International Paper is there with plants in Japan, Korea, Taiwan and, soon, the
People's Republic of China.
--------------------------------------------------------------------------------
the emerging markets of Eastern Europe and the developed countries of Western
Europe. Kwidzyn continues to set new production records, manufacturing 30
percent more in 1994 than the previous year.
In Asia, International Paper has formed a joint venture to build and operate a
liquid packaging plant near Shanghai, our fourth facility in Asia and first in
the People's Republic of China. Our success as a major supplier of pulp,
paperboard and logs to China is helping us expand our presence in this emerging
market of more than one billion consumers.
International Paper has long enjoyed participation in Latin American markets
through a liquid packaging plant in Venezuela and 36 percent ownership of
Productora de Papeles S.A., which operates two paper mills in Colombia. A new
liquid packaging operation in Brazil and higher U.S. exports of our fresh and
aseptic packaging will help us expand our participation in Latin American
markets. Our North American distribution system, ResourceNet International,
acquired two independent distribution companies in Mexico in 1994, increasing
the potential for sales there. In addition, our Veratec nonwovens specialty
business is bringing advanced spunbond technology to Mexico, where we will serve
markets for disposable diapers and other products in Mexico as well as Colombia,
Chile and Venezuela. Demand for spunbond fabrics is expected to grow rapidly in
the region.
9
<PAGE>
Clear Foresight
Our ability to invest in new businesses, technologies and markets sharpens our
competitive edge in every economic climate. Our enduring financial strength
allows us to develop and acquire capabilities that support our growing
businesses.
--------------------------------------------------------------------------------
Expansion of our aseptic packaging capabilities in Raleigh, N.C., and a new
facility near Lyons, France, will increase our presence in a growing
international market.
--------------------------------------------------------------------------------
10
<PAGE>
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 6]
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11
<PAGE>
We expect to devote $1.3 billion to capital projects in 1995, following $1.1
billion in 1994. Our strong financial position has given International Paper the
ability to invest in our future even during periods of economic weakness.
Projects completed in 1994 and 1995 will add almost one million tons of paper
and packaging capacity throughout our mill system. These improvements will
expand revenues and keep us a low-cost producer of high-quality paper,
packaging, forest and specialty products. For example, a new 400,000-ton-per-
year recycled containerboard machine in Mansfield, La., expected to start up in
late 1995, will give our customers the widest selection of grades in the
industry. Production there will focus on higher value products such as mottled
white, white-top and lightweight grades.
Our uncoated papers business is growing at a time when little capacity is
being added by our competitors. New facilities at our Riverdale mill in Alabama
will increase our ability to provide recycled reprographic papers. Additions at
Riverdale include a 360,000-ton-per-year uncoated papers machine, a deinking
plant, two sheeters and a gas turbine, representing an investment of more than
$300 million.
We are expanding our capacity to serve the global aseptic packaging market.
Improvements at our Raleigh, N.C., plant support our expansion into Latin
America, where aseptic packaging plays a key role in delivering nutrition to
regions with limited refrigeration. Similarly, a new plant near Lyons, France,
will support growth of our Evergreen and other aseptic filling systems in Europe
and the Middle East.
In response to our customers' need for additional panel products, we are
building a new oriented strand board mill in Jefferson, Texas. When completed in
late 1995, the 350-million-square-foot mill will more than double International
Paper's OSB capacity and will have a cost structure that compares favorably with
any mill in the industry.
We are also investing in the growth of our specialty businesses. Nicolet added
new capacity in 1994 to meet rising demand. Veratec established a second
spunbond line in Toronto, Canada, to increase capacity and reduce costs.
Masonite is increasing its CraftMaster door facings capacity. And Arizona
Chemical is expanding its production of ink and adhesive resins.
--------------------------------------------------------------------------------
The new world-class paper machine at our Riverdale mill strengthens our position
as a low-cost producer of uncoated papers, a market we expect will grow 3 to 4
percent annually.
--------------------------------------------------------------------------------
12
<PAGE>
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[Photograph--Appendix B No. 7]
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13
<PAGE>
Peak Performance
We continually look for ways to improve efficiency, reduce costs and
enhance earnings. Highly productive employees and operations are key to
ensuring International Paper's growth.
--------------------------------------------------------------------------------
Our proprietary deinking process recovers significantly more fiber than other
techniques. The advanced technology is used at the Corinth, N.Y., mill and at
our new Riverdale deinking plant.
--------------------------------------------------------------------------------
14
<PAGE>
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 8]
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15
<PAGE>
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[Photograph--Appendix B No. 9]
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16
<PAGE>
--------------------------------------------------------------------------------
High-performance work teams such as this one at our Nicolet mill draw on
employees' insight and experience to improve productivity.
--------------------------------------------------------------------------------
A concerted effort to change the way we operate our businesses is under way that
should save International Paper several hundred million dollars annually,
beginning in 1996. Just as important, these productivity improvements will help
our company remain a highly competitive force in every business and market we
pursue.
We are encouraging a greater focus on our customers and heightened awareness
of the challenges and opportunities our company faces. By reducing layers of
management and delegating authority more broadly, we are promoting active
employee participation in the success of our mills, plants and offices.
High-performance work systems are a team-oriented approach to increasing
employee involvement in day-to-day operations and encouraging greater
accountability for the final product. And we are taking steps to reduce downtime
and improve the performance of our plant and machinery. A 1994 pilot program of
these initiatives proved that we can save as much as $10 million per year
through greater productivity and lower maintenance costs in one facility alone.
New technologies and processes for our plants are expected to help us reduce
costs further. For example, the forthcoming addition of a new paper machine at
Riverdale enabled us to shut down 115,000 tons per year of less efficient,
higher cost capacity in 1994. When the Riverdale machine starts up in mid-1995,
our U.S. uncoated papers manufacturing costs are expected to decline by $100
million per year.
Our European paper operations are enjoying similar improvements in their cost
structures. Aussedat Rey has reduced its manufacturing costs through improved
efficiency and the expansion of its pulp capacity. And Kwidzyn has achieved
significant gains in output and quality through improved process technology, the
modernization of its paper machines and pulp mill, and installation of the
world's largest paper sheeter.
17
<PAGE>
Added Value
We are adding value to our core paper, packaging and forest products, and
complementing them with global distribution capabilities and fast-growing
specialty businesses. The result is a diverse array of products that sets
International Paper apart.
--------------------------------------------------------------------------------
Our packaging business adds value through production of high-quality
containerboard and corrugated boxes designed for strength and visual appeal.
--------------------------------------------------------------------------------
18
<PAGE>
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 10]
--------------------------------------------------------------------------------
19
<PAGE>
International Paper is well known as an innovative producer of high-quality
paper, packaging and forest products. In addition, our company is a leader in
the worldwide distribution of paper, industrial products and graphic arts
supplies. And we have entered a number of specialty businesses that enhance our
earnings. In 1994, our specialty products businesses accounted for 17 percent of
International Paper's revenues, testament to their importance to our overall
business mix.
Core Products
Our continued focus on customer service, value-added products and high-quality
grades such as colored, laser and recycled papers is helping us differentiate
ourselves in the U.S. uncoated printing and writing papers market. Hammermill,
Springhill, Strathmore and Beckett specialties, for example, now account for 20
percent of our U.S. uncoated papers sales. These brands are recognized around
the world for their consistent quality and give International Paper strong
global franchises.
The strategy for our packaging businesses is to enhance profitability by
focusing on higher value grades that offer our customers better printing
capabilities, lighter weights and superior strength. PineLiner and ColorBrite
high-performance containerboard provide superior stacking strength and help
users attain the merchandising visibility their products need in today's
competitive retail environment. Special Reserve recycled board, introduced in
1994 and manufactured at our newly converted Oswego, N.Y., mill, is a
lightweight material with the strength and durability of the highest quality
kraft board.
In our consumer packaging business, Everest bleached board provides
exceptional smoothness, strength and consistency for premium packaging.
International Paper has long been a leader in liquid packaging through
innovations such as SpoutPak cartons and barrier technology to extend shelf
life.
Specialty Products
Sales of specialty products have grown from $600 million in 1987 to $2.6 billion
in 1994, and we expect to achieve
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 11]
--------------------------------------------------------------------------------
20
<PAGE>
--------------------------------------------------------------------------------
Triton beverage packaging system, an innovative paperboard carrier for bottles
and cans, delivers marketing and distribution performance that is superior to
traditional plastic rings.
--------------------------------------------------------------------------------
record sales and earnings again in 1995. We continue to expand the breadth of
these product lines as well as their geographic scope. Specialty businesses
leverage the strengths and resources of our core capabilities by sharing many of
the same materials, processes or customers.
For example, Masonite uses the same basic materials as our papermaking
operations. Sales of Masonite's CraftMaster molded interior door facings grew
significantly in 1994 as builders looked for attractive and economical
alternatives to solid wood doors. We expect extensions of the CraftMaster
product line, such as prestained door facings, to further increase revenues in
1995. Other products by Masonite include OmniWood, a unique oriented strand
board siding product, and Colorlok siding, the premium prefinished product of
the industry.
Our specialty industrial papers business has moved quickly to attain a
leadership position in the production of release backing papers for pressure-
sensitive labels, a particularly fast-growing market. Additional specialty
products include Nevamar, a stylish paper-based high-pressure laminate with a
patented abrasion-resistant finish, and Fountain-head, a superior solid-surface
countertop material.
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 12]
OmniWood, a unique oriented strand board siding with a wood overlay, provides
the performance of solid wood at a lower cost.
--------------------------------------------------------------------------------
21
<PAGE>
Forward Thinking
We take seriously our responsibilities as world citizens. From preserving the
environment to protecting the health of our employees and the communities
in which we operate, International Paper is committed to environmental
leadership.
--------------------------------------------------------------------------------
Our nurseries produce 190 million SuperTree seedlings annually, which we plant
in our forests and provide to other landowners as part of our commitment to
renew our natural resources.
--------------------------------------------------------------------------------
22
<PAGE>
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 13]
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23
<PAGE>
International Paper has long made responsible environmental, health and safety
performance part of our overall business strategy. We use our forests, water,
energy and other resources responsibly, striving for 100 percent compliance with
environmental laws and regulations. When practical, we take actions that go
beyond compliance to reduce pollution, increase recycling, protect our forests
and improve the quality of life in our communities.
Environment
In addition to our goal of 100 percent compliance with environmental laws and
regulations, we set voluntary goals in areas of environmental concern as
described in our 1993-1994 Environment, Health and Safety Progress Report. (To
obtain a copy, see the inside back cover of this report.) For example, between
1988 and 1993, our company voluntarily reduced emissions of the most potentially
toxic chemicals, as categorized by the Environmental Protection Agency, by more
than 76 percent. Our goal is to achieve an 85 percent reduction by the year
2000. We are also on track toward achieving our goal of completely eliminating
the use of elemental chlorine at our 11 U.S. bleached mills by the end of 1996.
We have also set ambitious goals for other voluntary environmental
initiatives, including the continued reduction of solid waste going to
landfills, hazardous waste, the use of ozone-depleting chemicals and
--------------------------------------------------------------------------------
Our Texarkana, Texas, mill, one of four International Paper mills converted to
elemental chlorine-free technology in 1994, uses chlorine dioxide in the pulp
bleaching process.
[Photograph--Appendix B No. 14]
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24
<PAGE>
--------------------------------------------------------------------------------
[Photograph--Appendix B No. 15]
In 1994, we launched a powerful advertising campaign featuring children of
International Paper employees. This image is from a television ad that conveys
our care for the environment and our commitment to recycling.
--------------------------------------------------------------------------------
the production of odor-causing chemicals. Our environmental efforts extend to
our international operations as well, where we have established baselines by
which we will measure our progress toward reducing toxic emissions and hazardous
waste. Finally, we help ensure compliance with environmental laws and
regulations through in-depth audit programs and periodic certification of
compliance by facility managers. In this regard, we exceeded our 1994 goal to
reduce reportable environmental incidents by 15 percent and are seeking a
further 25 percent reduction in 1995.
For more discussion of environmental issues, including the proposed EPA
Cluster Rule, see page 41 of this report.
Forests
As one of the largest private landowners in the United States, International
Paper has long recognized its special responsibility to our forests. Our aim has
always been to manage the land under our stewardship in a way that balances
economic and environmental concerns. For example, we are proud of our successful
programs that promote soil conservation and protect plant and animal habitats on
the land we own while allowing activities critical to forest productivity and
harvesting.
In 1994, we were among the first to endorse the Sustainable Forestry
Principles and Implementation Guidelines, forest management standards
25
<PAGE>
adopted by the American Forest and Paper Association. As one of the most
protective land managers in the country, International Paper already has
internal standards in place that are consistent with the Principles. We commend
the commitment AFPA members are making to publicly report their forestry
performance and International Paper will do so in our annual Environment, Health
and Safety Progress Report. In addition, we support the AFPA's efforts to share
its members' expertise with smaller, nonindustrial landowners and loggers.
Reducing, Reusing and Recycling
The development of new processes, products and technologies that reduce the
amount of solid waste going to landfills is key to International Paper's
commitment to environmental responsibility. We offer more than 100
recycled-content printing and writing paper grades as well as packaging products
that require less fiber yet perform as well as heavier grades.
By 1996, we expect to use about 3,000 tons of wastepaper per day in our U.S.
mills, making International Paper a leading consumer of waste fiber. For
example, our Unity and Incentive 100 paper brands are the first in the United
States to be made entirely from recycled newspapers and magazines. We converted
our Oswego mill from a high-cost paper producer to an efficient producer of
lightweight recycled board in 1994. The new deinking plant at our Riverdale
mill, started in early 1995, consumes 500 tons of sorted office waste daily. And
the new recycling plant in Mansfield will enable us to use recycled fiber on all
three machines there.
Health and Safety
We are also committed to protecting the health and safety of our employees. In
1994, the frequency of injuries in our U.S. facilities declined for the sixth
consecutive year, down 16 percent for a total decline of 64 percent since 1988.
Our lost workday incident rate fell by 24 percent year-to-year and 68 percent
for the six-year period. Our goal for 1995 is to reduce both measures by an
additional 15 percent. These accomplishments have not gone unrecognized: we have
earned 17 facility awards through the U.S. Occupational Health and Safety
Administration's prestigious Voluntary Protection Program. This ranks us first
in the forest products industry and second among all U.S. companies in the
number of facilities recognized.
26
<PAGE>
FINANCIAL REVIEW
Management's Discussion and Analysis
28 Corporate Overview
30 Printing Papers
32 Packaging
34 Distribution
36 Specialty Products
38 Forest Products
40 Liquidity and Capital Resources
43 Financial Information by Geographic Area
44 Financial Information by Industry Segment
45 Report of Management on Financial Statements
45 Report of Independent Public Accountants
46 Consolidated Statement of Earnings
47 Consolidated Balance Sheet
48 Consolidated Statement of Cash Flows
49 Consolidated Statement of Common Shareholders' Equity
50 Notes to Consolidated Financial Statements
58 Eleven-Year Financial Summary
60 Interim Financial Results
27
<PAGE>
Corporate Overview
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Resourceful
SuperTree seedlings, developed to replant harvested areas in our forests, enable
the Company to produce more wood fiber on each managed acre.
[Illustration of SuperTree pine seedling.]
Technology
Our research organization uses state-of-the-art technology to optimize the
quality and performance of our products.
[Photograph--Appendix B No. 16]
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Results of Operations
International Paper achieved net sales of $15.0 billion during 1994, 9 percent
ahead of 1993 sales of $13.7 billion and 10 percent above 1992 sales of $13.6
billion.
Sales from operations outside the United States rose to $3.3 billion in
1994, up from $2.9 billion in 1993 and approaching the $3.4 billion achieved in
1992. U.S. export sales were $1.2 billion in 1994 compared with $1.1 billion in
1993 and $1.2 billion in 1992.
Net earnings were $357 million or $2.86 per share in 1994 ($422 million or
$3.38 per share before an accounting change) versus $289 million or $2.34 per
share in 1993 ($314 million or $2.54 per share before the revaluation of
deferred taxes) and $86 million or $.71 per share in 1992 ($405 million or $3.34
per share before the effects of an accounting change, an extraordinary item, and
charges for a profitability improvement program and for environmental costs).
Profits began to increase in the second half of 1994 as the pace of the
recovery in the U.S. economy accelerated and the European economy began to
recover.
The Packaging and Printing Papers segments led the Company's improving
performance. Our industrial packaging business
28
<PAGE>
benefited from strong demand and higher prices for containerboard and corrugated
boxes. In Printing Papers, price increases, propelled by a stronger pulp market,
led to a resurgence in earnings in the latter part of the year. Results from
Specialty Products were mixed, but overall earnings improved slightly over 1993.
Forest Products earnings fell short of last year's record, while Distribution
posted increases in both sales and earnings.
Accounting Changes
Effective January 1, 1994, International Paper changed its
method of accounting for start-up costs to expense them as incurred. Our policy
had been to capitalize start-up costs on major projects and amortize them over a
five-year period. The accounting change resulted in a one-time after-tax charge
of $75 million or $.60 per share. However, it also increased earnings by $10
million or $.08 per share for a net reduction in 1994 earnings of
$65 million or $.52 per share.
--------------------------------------------------------------------------------
[Net Sales chart--Appendix A No. 5]
--------------------------------------------------------------------------------
As of January 1, 1992, we adopted SFAS No. 109, "Accounting for
Income Taxes," which requires the liability method of determining
deferred income taxes. Net earnings in 1992 were reduced by $50 million
or $.41 per share for the cumulative effect of this change.
Restructuring and Other Charges
In 1992, International Paper recorded pre-tax charges of $370 million for a
productivity improvement reserve and $28 million for environmental remediation
and cleanup. These charges totaled $398 million ($263 million after taxes or
$2.17 per share).
The productivity improvement charge was primarily for asset write-downs and
related severance costs to shift production from older, less efficient
facilities to newer or modernized plants. The charge also included costs to
consolidate operations and write-downs of some facilities with marginal returns.
Asset write-downs were estimated at $250 million with accruals for one-time cash
costs of $120 million (mainly for employee severance, legal, warranty and
leases). Our projections called for annual savings approaching $75 million by
the end of 1994, primarily the result of lower personnel costs and depreciation
as well as the elimination of operating losses. As of year-end 1994, the Company
substantially completed the actions for which the reserve had been established
and realized the expected savings.
--------------------------------------------------------------------------------
15
billion in sales
1994 marked the beginning of a worldwide economic recovery that promises to
drive sales and earnings higher in 1995 and beyond.
[Photograph--Appendix B No. 17]
Worldwide
As international trade barriers fall, International Paper is ideally positioned
to enter new global markets for our products.
Standing Tall
Like the radiata pine raised by our New Zealand-based Carter Holt Harvey
affiliate, International Paper is growing rapidly in a highly competitive
environment.
[Illustration of a radiata pine tree.]
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29
<PAGE>
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Premium
Zanders' Ikono and Chromolux lines of premium coated papers are used in
top-of-the-line brochures and annual reports...like this one.
[Photograph--Appendix B No. 18]
Selection
The wide choice of colors, textures and weights of our Hammermill, Springhill,
Strathmore and Beckett brands helps consumers match the medium to the message.
[Photograph--Appendix B No. 19]
Magazines
You read it here first: many widely circulated magazines and catalogs are
printed on Adirondack, Saratoga and Miraweb II recycled coated papers.
[Photograph--Appendix B No. 20]
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Printing Papers
Printing Papers produced net sales of $4.4 billion in 1994, up from $3.9 billion
in 1993 and $4.0 billion in 1992. 1994 operating profits totaled $20 million
compared with losses of $122 million in 1993 and $70 million (a profit of $19
million before unusual items) in 1992.
After several years of eroding prices and sluggish demand, improving economic
conditions in the United States and Europe sparked a recovery in all printing
papers businesses and the segment returned to profitability during the third
quarter of 1994. Prices continue to improve, mills are running full and cost
reduction efforts are under way, positioning International Paper to achieve
sharply higher earnings in 1995.
Uncoated Papers represented about 49 percent of segment sales. A stronger U.S.
economy led to higher demand when industry capacity was relatively tight. After
reaching their lows at the end of the second quarter, uncoated paper prices
began to increase rapidly. By the fourth quarter, our U.S. uncoated papers
business turned profitable, following two years of losses.
Our European operations improved dramatically, returning to profitability in
1994. Improving
30
<PAGE>
economies in Western Europe supported stronger demand and higher prices for
Aussedat Rey's products. At Kwidzyn, productivity, quality and operating gains
also aided results.
We expect strong U.S.demand and high operating rates to lead to higher prices
in 1995. Our forecast calls for demand growth to exceed GDP growth, with very
modest industry capacity additions. The start-up of our new machine at
Riverdale, together with our 1994 shutdown of high-cost capacity, continuing
cost reductions and an enhanced product mix, should produce substantial
profitability gains in 1995 and beyond. The European economic recovery is
expected to continue. Operating results should improve as expanding demand
supports additional price increases and as cost reduction efforts are realized.
At Kwidzyn, capital improvements will provide greater operating efficiency and
higher product quality.
--------------------------------------------------------------------------------
[Net Sales and Operating Profit charts--Appendix A No. 6]
--------------------------------------------------------------------------------
Coated Papers represented about 28 percent of segment sales. In the United
States, price increases were implemented in the second half of the year and
order levels strengthened, substantially reducing operating losses. European
sales and results were also up from 1993 levels. However, the market for
Zanders' higher margin premium grades did not fully recover in 1994. Looking
forward, robust market growth is expected to keep operating rates high and
prices strong in the United States and Europe.
Bristols accounted for 8 percent of segment sales. Operating profits
increased 24 percent in 1994 after a two-year decline. Prices rose as markets
strengthened and product mix improved. Our outlook for 1995 is for continued
growth. New products and markets will help ensure that we maintain our
leadership position.
Pulp represented about 15 percent of segment sales. Operating results turned
sharply upward in 1994 after a loss in 1993. Late in 1993, pulp markets began
showing sustained improvement for the first time since 1989. Prices climbed more
than $300 per ton in 1994 as growing demand absorbed industry capacity. Supplies
remained tight through year end, and continued strong demand allowed further
price increases in the first quarter of 1995. We expect worldwide demand to
remain strong in 1995.
--------------------------------------------------------------------------------
114
Recycled Grades
International Paper is responding to an environmentally aware marketplace by
increasing the recycled grades that we offer.
[Photograph--Appendix B No. 21]
Specialty
[Illustration of acetate fiber spool]
Fibers such as Celebrate! acetate used in upscale apparel worn by Olympic gold
medalist Kristi Yamaguchi contain specialty pulp from International Paper.
--------------------------------------------------------------------------------
31
<PAGE>
# One
Bleached Board Producer
Quality products amd customer service support our position as a global leader in
bleached board for folding cartons, liquid packaging and food service products.
[Photograph--Appendix B No. 22]
Long-lasting
Aseptic packaging keeps juice, milk and other perishable liquids fresh for our
customers ... and helps preserve our growth in fast-growing markets.
[Illustration and Photograph--Appendix B No. 23]
32
<PAGE>
Packaging
Our Packaging segment generated net sales of $3.4 billion in 1994 compared with
$3.1 billion in 1993 and $3.2 billion in 1992. Operating profits rebounded to
$293 million in 1994 from $188 million in 1993 and were slightly lower than $308
million ($330 million before unusual items) in 1992. After reaching a low point
in the first quarter of 1994, segment earnings improved in the wake of higher
prices and volumes for industrial packaging.
Industrial Packaging represented about 52 percent of segment sales. Results
improved from 1993 as containerboard prices rose by more than $100 per ton
during the year. Higher prices were supported by accelerating demand, causing
the U.S. industry to operate at near-full capacity. Export demand for
containerboard was also strong.
In response to rising demand, the Oswego, N.Y., mill was converted in 1994
from high-cost uncoated papers to recycled containerboard. Construction of a new
400,000-ton-per-year containerboard machine at the Mansfield, La., mill also
began during 1994.
In 1995, U.S. containerboard capacity expansions will be limited and operating
rates should remain high. Containerboard prices continue to rise in early 1995
and box prices are increasing commensurately. While worldwide containerboard
supplies are expected to be tight in 1995, both our domestic and international
box businesses are expected to have an excellent year.
--------------------------------------------------------------------------------
[Net Sales and Operating Profit charts--Appendix A No. 7]
--------------------------------------------------------------------------------
We believe that earnings will improve signicantly in 1995 as we benefit from
our long-standing strength in the agricultural, poultry and industrial markets,
our ability to provide high-performance and visual-appeal grades, and our
expansion into the recycled markets.
Consumer Packaging accounted for about 36 percent of segment sales. Operating
profits were up slightly following a 30 percent decline in 1993. Market
conditions began to improve by mid-1994. Pricing rose during the second half but
did not fully recover to 1993 levels. Higher shipments and greater efficiency
offset the lower prices.
Capitalizing on our strengths in liquid packaging, we expect to expand in
offshore markets for both fresh and aseptic packaging in 1995, including
completion of an aseptic packaging facility near Lyons, France, as well as entry
into China and Brazil. New products, such as our Triton beverage packaging
system, will also contribute to the segment's growth. Strong market conditions
are expected to prevail in 1995 even as capacity is added to the U.S. market.
Kraft Packaging contributed about 12 percent of segment sales. Operating
profits increased 30 percent over 1993 as shipments and prices rose. We expect
further earnings improvement in 1995.
--------------------------------------------------------------------------------
Supremazia
We can say "leadership" in several languages--our international container
division is a top producer of corrugated boxes in Europe.
[Photograph--Appendix B No. 24]
Eye-catching
Everest bleached board enhances the merchandising appeal of our customers'
products, offering an exceptionally smooth surface for high quality printing.
[Photograph--Appendix B No. 25]
Refreshing
This SpoutPak carton keeps nature's bounty fresh-tasting, thanks to our
packaging technology, and makes it easy to pour, thanks to our cap.
------------------------------------------------------------------------------
33
<PAGE>
------------------------------------------------------------------------------
280
Locations
Broad geographic coverage and coordinated operations enable us to serve
customers in every state of the union.
International
[Illustration of European Continent]
In addition to ResourceNet International in North America, Aussedat Rey in
France and Scaldia in the Netherlands deliver reliable service in Europe.
Moving
Expanding to new markets south of the border, ResourceNet International welcomed
Mexican paper distributors Ogi Papel and Papelera Kif to our growing family in
1994.
[Illustration of Mexican flag.]
--------------------------------------------------------------------------------
Distribution
Distribution produced net sales of $3.5 billion in 1994, up from $3.1 billion in
1993 and $3.0 billion in 1992. Operating profits were $74 million in 1994
compared with $58 million in 1993 and $52 million ($58 million before unusual
items) in 1992. While business conditions were sluggish during the first half of
1994, they improved dramatically later in the year. Sales and earnings grew
because of improving economic conditions, acquisitions, effective marketing and
gains in operating efficiency.
Sales and earnings of ResourceNet International, our North American
distribution business, rose in 1994. Earnings improved by 11 percent compared
with a 5 percent gain in 1993. Operating, selling and administrative expenses
improved as a percent of sales due to cost control and productivity efforts.
Overall, return on sales improved slightly in 1994 despite costs associated with
the integration of acquired companies.
--------------------------------------------------------------------------------
[Net Sales and Operating Profit charts--Appendix A No. 8]
--------------------------------------------------------------------------------
ResourceNet International is in transition from a group of successful regional
distributors to a premier national merchant. This change is designed to serve
customers more effectively and includes facility consolidations, implementation
of common information systems and a significant investment in employee training.
For example, in 1994 a large new facility was opened in New England,
consolidating several smaller, less efficient operations. Consolidation of
smaller facilities also took place in the Southeast and Midwest. In 1995,
additional facility coordination and redesign efforts are scheduled.
During 1994, ResourceNet International entered the Mexican market with two
small acquisitions. We also acquired California-based Kirk Paper Corporation in
December
34
<PAGE>
1994. These acquisitions broaden our product offerings and marketing
opportunities across California, and enhance our westernmost distribution
capability from Canada to Mexico. Also in December, we announced our intent to
acquire Michigan-based Carpenter Paper Company and Seaman Patrick Paper Company.
Our European distribution business, based in France and the Netherlands,
generated 12 percent higher sales in 1994 than in 1993. Operating results
improved to a nearly break-even level following losses in 1993 and 1992. Sales
and earnings gains reflect improving economic conditions.
Demand and prices for our products and services began to improve in North
America and Europe during the third quarter of 1994, and we expect improvement
to continue in 1995. We are continuing to reduce costs, increase productivity
and responsiveness to customers, and improve working capital.
--------------------------------------------------------------------------------
Towering
We distribute printing papers, industrial packaging, maintenance supplies,
graphic arts supplies and other products used every day by businesses and
consumers.
[Photograph--Appendix B No. 26]
Service
ResourceNet International puts experienced, quality-driven professionals on our
team.
[Photograph--Appendix B No. 27]
Responsive
Just-in-time scheduling and the ability to deliver goods anywhere in the United
States drive our reputation for superior customer service.
[Photograph--Appendix B No. 28]
--------------------------------------------------------------------------------
35
<PAGE>
--------------------------------------------------------------------------------
17%
Total Sales
Growing specialty products businesses build on the resources of our paper,
packaging and forest operations by sharing many of the same materials, processes
and customers.
[Photograph--Appendix B No. 29]
In Vogue
Our Polyrey subsidiary in France is a style leader in decorative surfaces such
as these high-pressure laminates.
--------------------------------------------------------------------------------
Specialty Products
Net sales of Specialty Products totaled $2.6 billion in 1994, up from $2.5
billion in 1993 and 1992. Operating profits improved to $268 million from $263
million in 1993 and $83 million ($238 million before unusual items) in 1992.
Improvement was led by Specialty Panels, Chemicals and Specialty Industrial
Papers. Earnings from Nonwovens, Petroleum and Imaging Products were lower in
1994 than in 1993.
Specialty Panels accounted for 29 percent of segment sales. Operating profit
improved 30 percent in 1994 following a 22 percent increase in 1993. As in
1993, the major contributor was CraftMaster molded interior door facings. Siding
sales increased 8 percent over the previous year with the greatest growth coming
from our specialty lines, OmniWood and Colorlok. The outlook for 1995 is for
continued growth in sales and earnings.
--------------------------------------------------------------------------------
[Net Sales and Operating Profit charts--Appendix A No. 9]
--------------------------------------------------------------------------------
Imaging Products sales represented about 28 percent of segment sales. Sales
increased in 1994 while earnings declined slightly after falling 64 percent in
1993. Earnings declines since 1992 are due to industry overcapacity and
technological changes in the photographic and graphic arts businesses. Our
offset plate and pressroom chemical activities are growing and continue to gain
market share. We expect 1995 results to improve as we reduce costs, introduce
new products and increase market share.
Specialty Industrial Papers, which produces release backing papers for
pressure-sensitive labels and other specialty papers, contributed about 18
percent of segment sales. After a 42 percent increase in 1993, 1994 earnings
improved by 8 percent on the strength of record shipments. Prices improved
toward the end of 1994, led by growth in the pressure-sensitive market. Our
outlook is for further improvement in 1995 as markets remain strong and prices
rise. Productivity enhancements will lower costs and a rebuilt machine at our
Kaukauna, Wis., facility will double our capacity to make release backing papers
for pressure-sensitive labels.
Nonwovens sales represented about 10 percent of segment sales. Operating
results declined significantly in 1994 as the con-
36
<PAGE>
sumer disposables market continued to move from drylaid to spunbond products.
Sales volumes and earnings should begin to rebound in 1995 with the addition of
a spunbond line at our Toronto, Canada, facility and the start-up of a
proprietary fabric-enhancing process.
Chemicals accounted for 10 percent of segment sales. Earnings were 47 percent
above 1993. Commodity prices increased from cyclical lows. Demand was also
strong in specialty markets where we were able to raise prices and grow volume.
In 1995, we expect to continue to shift more of our sales to specialty products
and raise prices to maintain margins.
Petroleum accounted for about 5 percent of segment sales but a larger portion
of its earnings. However, earnings were down about 30 percent from 1993 and 1992
as prices and production declined. We expect 1995 production levels and results
to be comparable with 1994.
Overall, we expect higher sales and earnings for the Specialty Products
segment in 1995.
--------------------------------------------------------------------------------
Taking Off
Our specialty industrial papers business is reaching new heights as our
customers continue to find new uses for pressure-sensitive labels.
[Photograph--Appendix B No. 30]
Brilliant
[Illustration of container of yellow ink]
Arizona Chemical significantly expanded its specialty product mix, including
resins used in brightly colored printing inks.
Advanced
[Photograph--Appendix B No. 31]
New products in our CraftMaster door facings line, such as this prestained
natural oak style, will open the door to higher sales in 1995.
[Photograph--Appendix B No. 32]
Veratec, a leading supplier of spunbond fabrics used in disposable diapers, is
using new technologies to improve comfort and hygiene for some of the world's
youngest consumers.
--------------------------------------------------------------------------------
37
<PAGE>
--------------------------------------------------------------------------------
Stewardship
Southern pine represents our largest renewable source of fiber. On average, we
grow 25 percent more fiber than we harvest.
[Illustration of Southern pine trees.]
Preservation
We are proud to receive the National Wild Turkey Federation's first Land
Stewardship Award, recognizing our wildlife preservation programs.
[Illustration of a wild turkey.]
--------------------------------------------------------------------------------
Forest Products
Forest Products net sales were $1.7 billion in 1994, even with 1993 and up from
$1.4 billion in 1992. Operating profits totaled $378 million in 1994, down from
a record $445 million in 1993, but up substantially from $197 million ($261
million before unusual items) in 1992.
Forestland revenues and profits declined in 1994 in the wake of a planned
reduction in harvest volumes. A 10 percent decrease in the 1994 harvest was
partially offset by a 4 percent increase in average prices. Sales of
nonstrategic forestlands also declined.
In the South, revenues were about the same as in 1993 as higher prices for
pine sawlogs and pulpwood offset a lower harvest. High customer inventories and
favorable harvest conditions led to a softening of prices through midyear.
However, prices rebounded sharply in the fourth quarter when weather conditions
constrained harvest activity. Stumpage sales in the West were 18 percent lower
in 1994 than in 1993. Average prices on the West Coast were slightly above 1993
levels.
38
<PAGE>
Export sales were soft throughout the year. In the Northeast, revenues
were 18 percent above 1993 despite a lower harvest. Spruce-fir sawlog prices
rose steadily throughout the year to record highs at year end. Pulpwood prices
also increased as competition for fiber was brisk.
We project harvest volume to decrease an additional 10 percent in 1995 and to
remain near this level for the next several years. While early-1995 sawlog and
pulpwood prices are well above 1994 average prices in the South and Northeast,
and are at comparable levels in the West, lower harvests will likely have a
dampening effect on sales and earnings in 1995.
Wood Products operating results reached record levels in 1994 as sales
increased 9 percent over 1993 levels. Operating profits were up 12 percent,
benefiting from strong pricing and demand. Housing starts were robust through
midyear, but finished the year slightly below 1993 levels.
--------------------------------------------------------------------------------
[Net Sales and Operating Profit charts--Appendix A No. 10]
--------------------------------------------------------------------------------
Lumber prices were volatile during 1994, up significantly early in the year
but somewhat softer in the spring and late fall. The volatility resulted from
uncertainties in the construction industry as interest rates rose throughout the
year. Prices at year end were 11 percent below the record level reached in 1993.
Wood costs increased throughout the year.
Panel prices were less volatile and softened slightly during the spring before
strengthening at year end, finishing the year near record levels. Increased
productivity from recent capital improvements more than offset the increase in
wood costs.
Pricing levels for 1995 are uncertain and profit margins will face pressure
from higher wood costs as competition for fiber increases. However, programs are
under way to improve productivity and reduce costs.
--------------------------------------------------------------------------------
6,100,000
Acres
Our extensive forestlands, primarily in the southern United States, support the
economic vitality of our communities and the well-being of native plant and
animal life.
Conservation
In partnerhsip with the U.S. Fish and Wildlife Service, we are completing a
Habitat Conservation Plan in 1995 to protect the gopher tortoise, a threatened
species.
[Illustration of a gopher tortoise.]
Building
International Paper is one of the largest U.S. producers of southern pine lumber
and a leading provider of panels and other wood products.
[Photograph--Appendix B No. 33]
--------------------------------------------------------------------------------
39
<PAGE>
Liquidity and Capital resouces
Cash Flow From Operations
Higher earnings helped International Paper generate substantial cash flow in
1994. Cash provided by operations in 1994 of $1.3 billion exceeded $1.0 billion
in 1993 and 1992.
Depreciation and amortization expense, excluding depletion, was $885 million
($923 million before the change in accounting for start-up costs) in 1994,
$898 million in 1993 and $850 million in 1992.
Investment Activities
Capital spending of $1.1 billion in 1994 exceeded $954 million spent in 1993,
but was less than $1.4 billion spent in 1992. Spending in 1994 reflected the
start of several major projects and, as in recent years,also focused on further
reductions of production costs, plant upgrades and incremental capacity
expansions, quality and productivity improvements, and environmental
initiatives.
We expect capital spending for 1995 to exceed $1.3 billion. A discussion of
our capital spending program appears on page 12.
--------------------------------------------------------------------------------
Capital Expenditures by Industry Segment
In millions for the years ended December 31 1994 1993 1992
------ ------ ------
Printing Papers $ 447 $ 429 $ 740
Packaging 205 181 201
Distribution 16 13 14
Specialty Products 270 155 245
Forest Products 135 145 104
------ ------ ------
1,073 923 1,304
Corporate 41 31 64
------ ------ ------
Capital Expenditures $1,114 $ 954 $1,368
====== ====== ======
--------------------------------------------------------------------------------
In 1994, International Paper spent $299 million to acquire an additional 8
percent interest in Carter Holt Harvey Limited, bringing total ownership to 24
percent. In late December, the Company acquired additional stock of Zanders
Feinpapiere AG. Also in December, a merger was completed with Kirk Paper
Corporation, a California-based paper distribution company.
In 1993, the Company made several small acquisitions in its distribution and
specialty products businesses.
In 1992, the Company acquired Kwidzyn from the Polish government and an equity
interest in Scitex Corporation Ltd.
Financing Activities
In 1994, the Company issued long-term debt totaling $600 million: in May, $150
million due in 2004; in June, $150 million due in 2024; and in August, $300
million of which $150 million is due in each of 2004 and 2006. In 1993, the
Company issued $600 million of long-term debt: in March, $200 million due in
2023; in October, $200 million due in 2023; and in November, $200 million due in
2003.
The proceeds of all 1994 and 1993 debentures were used primarily to reduce
short-term borrowing and secure favorable long-term interest rates.
In 1992, taking advantage of low interest rates, the Company increased
short-term borrowing by $657 million, retiring $255 million of high-rate
long-term debt. Also, 9.2 million shares of common stock were sold in a public
offering yielding $650 million, and $200 million of 7.625 percent notes due in
2007 were issued. These proceeds were used principally to retire higher rate
debt. See Note 10 on page 54 for a discussion of financial instruments.
Common stock dividends per share were $.42 per quarter ($1.68 on an annual
basis) in 1994, 1993 and 1992. Payments were $210 million in 1994, $208 million
in 1993 and $206 million in 1992.
Capital Resource Outlook for 1995
Cash flow from operations is expected to exceed capital
40
<PAGE>
expenditures, working capital and dividend requirements.
The Company maintained a strong balance sheet, with a debt to capital ratio of
41 percent in 1994, up from 39 percent in 1993 and 38 percent in 1992. These
ratios support an investment-grade debt rating, allowing ready access to
financial markets. As a result, we are able to take advantage of external
investment and financing opportunities.
--------------------------------------------------------------------------------
[Cash Flow From Operations chart--Appendix A No. 11]
--------------------------------------------------------------------------------
Other Financial Statement Items
Net interest expense increased to $349 million in 1994, up from $310 million in
1993 and $247 million in 1992. The 1994 increase resulted primarily from the
shift to longer term debt and higher short-term rates.
Net interest in 1992 benefited from tax-related interest income as well as
higher capitalized interest related to major capital projects.
The effective tax rate for 1994 was 35 percent of pre-tax income compared with
42 percent in 1993 (37 percent before the revaluation of deferred tax balances)
and 31 percent in 1992. The adoption of SFAS No. 109 and the tax benefit at
statutory rates of the productivity improvement charge in 1992 contributed to
the lower rate. The increase in the 1993 rate arose from the increase in the
U.S. statutory federal income tax rate of 1 percent, which also increased
deferred taxes by $25 million. We expect the effective tax rate for 1995 to
increase slightly as a result of changes in the geographic mix of our
earnings.
During 1994 and 1993, the Company recognized tax benefits of $33 million and
$55 million, respectively, related to losses at certain non-U.S. locations. We
believe that it is likely that these tax benefits will be realized.
--------------------------------------------------------------------------------
[Total Debt to Capital Ratio chart--Appendix A No. 12]
--------------------------------------------------------------------------------
Environmental Issues
Environmental capital expenditures totaled $95 million in 1994, $100 million in
1993 and $126 million in 1992. Capital spending to increase recycling capacity
totaled $280 million, $102 million and $35 million in 1994, 1993 and 1992,
respectively. During 1994, International Paper successfully converted four of
its 11 U.S. bleached mills to elemental chlorine-free technology.
In 1993, the EPA released its "Cluster Rule" proposal to coordinate and
integrate by 1998 the requirements for air emissions and water discharge for the
pulp and paper industry. Also in 1993, the EPA issued the "Great Lakes
Initiative," proposed regulations covering minimum water quality and
implementation procedures. The content of the Cluster Rule and GLI and their
impact on the industry was widely debated during 1994. The financial impact of
these regulations will depend on various factors, including changes in the
proposed regulations, new developments in technology, and timing of the
implementation period. Last year, the Company estimated future capital spending
to comply with the Cluster Rule and GLI to be between $700 million and $1.5
billion, depending upon the methods allowed by the final regulations to meet
requirements. While there are ongoing discussions with the EPA and Congress
concerning these rules, there have been no announced changes to the proposals
and thus these estimates remain valid at this time. As a result of these
discussions, there is some basis to expect that the EPA will make moderating
adjustments to these rules and, if so, the range of estimated capital
41
<PAGE>
spending would be adjusted downward. Last year, we estimated that annual
operating costs, excluding depreciation and the cost of capital, would increase
between $60 million and $120 million when these rules are fully implemented in
1998 or 1999. This estimate will also be adjusted to the extent the EPA makes
moderating changes.
The Company paid fines and penalties related to environmental issues of
$960,000, $400,000 and $1.6 million for the years 1994, 1993 and 1992,
respectively. Reviews are in progress by federal and state environmental
agencies at certain facilities to determine if the Company is in
compliance with environmental laws and regulations. Any fines arising
from these reviews should not have a material effect on the Company's
future financial condition or results of operations.
In 1992, agreement was reached with the State of New York to conclude an
investigation of the Company's Anitec facility in Binghamton, N.Y. Estimated
costs of remediation were accrued in 1992.
Beginning in late 1990, several lawsuits were filed against paper producers
alleging property damage, business loss or risk of personal injury resulting
from the presence of dioxin in mill discharges. International Paper was named in
a number of these lawsuits. One case involving the Company's Texarkana, Texas,
facility was settled in late 1993 without any admission or finding of liability.
All but one of the remaining cases are in federal or state court in southern
Mississippi and involve the Company's Moss Point, Miss., mill. During 1994, the
Company tried to bring several cases to trial but uniformly the plaintiffs have
dismissed the actions prior to commencement of proceedings. The Company expects
to bring at least one lawsuit to trial during 1995. Due to aggressive
solicitations by plaintiffs' attorneys, cumulative damage claims totaled more
than $9.4 billion by the end of 1994, some $8 billion of which is in punitive
damages. Management believes these suits are without merit and expects to
prevail upon final resolution.
International Paper is also a party to a number of other environmental
remediation actions under various federal and state laws, including the
Comprehensive Environmental Response, Compensation and Liability Act. Related
costs are recorded in the financial statements when probable and reasonably
estimable. These costs have increased in recent years and stabilized in 1994.
Completion of these actions is not expected to have a material adverse effect on
the Company's future financial condition or results of operations.
Further details with respect to these cases can be found in the
Company's quarterly reports on Form 10-Q and annual report on Form 10-K
filed with the Securities and Exchange Commission. Copies can be
obtained as indicated on the inside back cover of this report.
Effects of Inflation
General inflation has had minimal impact on International Paper's operating
results in the last three years. Sales prices and volumes are more strongly
influenced by supply and demand factors in specific markets and by exchange rate
fluctuations than by inflationary factors.
42
<PAGE>
Financial Information by Geographic Area
--------------------------------------------------------------------------------
Net Sales
In millions 1994 1993 1992
------- ------- -------
United States 1 $11,965 $11,085 $10,524
Europe 2,958 2,586 3,030
Other 354 340 347
Less: Intergeographic Sales (311) (326) (303)
------- ------- -------
Net Sales $14,966 $13,685 $13,598
======= ======= =======
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Assets
In millions 1994 1993 1992
------- ------- -------
United States $11,237 $10,999 $10,680
Europe 3,818 3,512 3,832
Other 1,241 820 812
Corporate 1,540 1,300 1,192
------- ------- -------
Assets $17,836 $16,631 $16,516
======= ======= =======
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
European Sales by Business Segment
In millions 1994 1993 1992
------- ------- -------
Printing Papers $1,231 $1,016 $1,172
Packaging 559 513 675
Distribution 318 284 335
Specialty Products 771 710 791
Forest Products 79 63 57
------- ------- -------
European Sales $2,958 $2,586 $3,030
======= ======= =======
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Operating Profit
In millions 1994 1993 1992
------- ------- -------
United States $915 $833 $511
Europe 2,3 97 (23) 41
Other 21 22 18
------- ------- -------
Operating Profit $1,033 $832 $570 4
======= ======= =======
--------------------------------------------------------------------------------
1 Export sales to unaffiliated customers (in millions) were $1,200 in 1994,
$1,100 in 1993 and $1,200 in 1992.
2 Includes amounts, net of goodwill amortization, for Aussedat Rey, Ilford,
Zanders, the Horsell graphic arts businesses, the Rhone Valley Packaging
business, Scaldia Papier BV and Kwidzyn from the dates of acquisition.
3 While net sales includes 100% of Zanders' sales, operating profit is
adjusted for minority interests.
4 Includes restructuring and other charges totaling $336 million.
European sales staged a strong recovery in 1994, increasing 14% to $3.0 billion
after decreasing 15% in 1993 and increasing 7% in 1992. Profitability of the
European units of our Packaging and Specialty Products segments improved
compared with 1993 and operations within the Printing Papers segment returned to
profitability during 1994. As a result, European operations as a whole reported
profits of $97 million in 1994 compared with a loss of $23 million in 1993 and a
$41 million profit in 1992.
Improved economic conditions in 1994 resulted in increased prices and
shipments, particularly in the last quarter. Prices for pulp and
uncoated papers led the upturn. The capital improvements at Aussedat
Rey's Saillat mill in France and the Kwidzyn mill in Poland contributed
to increased earnings as a result of reduced costs and increased pulp
production.
In Europe, prices reached their cyclical lows in 1994 and began recovering in
the second half. We expect higher profits in 1995 as the economy continues to
recover and the price increases implemented in the latter part of 1994 are
realized in 1995.
International Paper owns a 12% interest in Scitex Corporation Ltd., a world
leader in digital visual information communication for the graphic design,
printing, publishing and video markets. Scitex, with annual 1994 revenues of
$704 million, is headquartered in Israel, with most of its sales to European,
North American and Japanese customers. For the year ended December 31, 1994,
Scitex reported net income of $72 million before a nonrecurring charge of $8
million. The 1994 results before the special charge declined 23% after a similar
decline in 1993.
In March 1994, the Company increased its investment in Carter Holt Harvey
Limited, a New Zealand-based forest and paper products company with substantial
assets in Chile, from 16% to 24%. CHH has annual sales of approximately $1.5
billion. For the fiscal year ended March 31, 1994, CHH reported net earnings of
about $180 million for a 34% increase over the period ended March 31, 1993. The
growth in profit for the period is attributable to higher sawlog export prices
and solid gains in productivity and operational efficiencies. For the six months
ended September 30, 1994, CHH had earnings of about $120 million, which
represented a 23% increase in profits over the prior-year six-month period.
Results were driven by higher average pulp and paper prices, stronger wood
products demand and operating cost reductions.
43
<PAGE>
Financial Information by Industry Segment
--------------------------------------------------------------------------------
Net Sales
In millions 1994 1993 1992
------- ------- -------
Printing Papers $ 4,400 $ 3,905 $ 4,040
Packaging 3,375 3,095 3,245
Distribution 3,470 3,140 2,980
Specialty Products 2,590 2,460 2,460
Forest Products 1,715 1,700 1,410
Less: Intersegment Sales (584) (615) (537)
------- ------- -------
Net Sales $14,966 $13,685 $13,598
======= ======= =======
--------------------------------------------------------------------------------
Operating Profit
In millions 1994 1993 1992
------- ------- -------
Printing Papers $ 20 $ (122) $ (70)
Packaging 293 188 308
Distribution 74 58 52
Specialty Products 268 263 83
Forest Products 378 445 197
------- ------- -------
Operating Profit 1,033 832 570
Interest Expense, net (349) (310) (247)
Corporate Items, net (20) (22) (117)
------- ------- -------
Earnings Before Income Taxes,
Extraordinary Item and
Cumulative Effect of
Accounting Changes $664 $500 $206
======= ======= =======
--------------------------------------------------------------------------------
Assets
In millions 1994 1993 1992
------- ------- -------
Printing Papers $ 6,706 $ 6,466 $ 6,566
Packaging 3,098 3,011 3,090
Distribution 1,210 1,085 1,062
Specialty Products 2,782 2,607 2,585
Forest Products 1,533 1,603 1,522
Investment in:
Carter Holt Harvey 735 331 285
Scitex 232 228 214
Corporate 1 1,540 1,300 1,192
------- ------- -------
Assets $17,836 $16,631 $16,516
======= ======= =======
--------------------------------------------------------------------------------
Depreciation, Depletion and Amortization
In millions 1994 1993 1992
------- ------- -------
Printing Papers $ 443 $ 414 $ 392
Packaging 192 213 211
Distribution 29 28 30
Specialty Products 161 180 152
Forest Products 96 93 84
Corporate 5 10 14
------- ------- -------
Depreciation, Depletion
and Amortization 926 938 883
Less: Depletion 2 (41) (40) (33)
------- ------- -------
Depreciation and
Amortization $885 $898 $850
======= ======= =======
--------------------------------------------------------------------------------
1 Corporate assets are principally cash and temporary investments, investments,
deferred taxes and other assets that are not identifiable with industry
segments.
2 Included in Forest Products.
Industry Segment Contributions
Earnings before income taxes, extraordinary item and cumulative effect of
accounting changes were $664 million in 1994, $500 million in 1993 and $206
million ($604 million before the $370 million productivity improvement charge
and $28 million of environmental charges) in 1992. The table to the right
portrays the impact of the unusual items on operating profit for each of the
industry segments for 1992:
--------------------------------------------------------------------------------
1992 Operating Profit
-----------------------------------------
Before Unusual After
Unusual Items Items Unusual Items
------------- ------- -------------
In millions
Printing Papers $ 19 $ 89 $ (70)
Packaging 330 22 308
Distribution 58 6 52
Specialty Products 238 155 83
Forest Products 261 64 197
----- ----- -----
Operating Profit 906 336 570
Interest Expense, net (247) (247)
Corporate Items, net (55) 62 (117)
----- ----- -----
Earnings Before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Changes $ 604 $ 398 $ 206
===== ===== =====
--------------------------------------------------------------------------------
44
<PAGE>
REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS
The management of International Paper Company is responsible for the fair
presentation of the information contained in the financial statements in this
annual report. The statements are prepared in accordance with generally accepted
accounting principles and reflect management's best judgment as to the Company's
financial position, results of operations and cash flows.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are properly recorded and
summarized so that reliable financial records and reports can be prepared and
assets safeguarded.
An important part of the internal controls system is the Company's Policy on
Ethical Business Conduct, which requires employees to maintain the highest
ethical and legal standards in their conduct of Company business. The internal
controls system further includes careful selection and training of supervisory
and management personnel, appropriate delegation of authority and division of
responsibility, dissemination of accounting and business policies throughout
the Company, and an extensive program of internal audits with management
follow-up. During 1993, the Company instituted a toll-free telephone "compliance
line" whereby any employee may report suspected violations of law or Company
policy.
The independent public accountants provide an objective, independent review of
management's discharge of its responsibility for the fairness of the Company's
financial statements. They review the Company's internal accounting controls and
conduct tests of procedures and accounting records to enable them to form the
opinion set forth in their report.
The Board of Directors monitors management's administration of the Company's
financial and accounting policies and practices, and the preparation of these
financial statements. The Audit Committee, which consists of five nonemployee
directors, meets regularly with representatives of management, the independent
public accountants and the internal Auditor to review their activities. At the
annual meeting, the Audit Committee presents a summary of its findings to the
shareholders and recommends that the shareholders approve the appointment of the
independent public accountants to conduct the annual audit.
The independent public accountants and the internal Auditor both have free
access to the Audit Committee and meet regularly with the Audit Committee, with
and without management representatives in attendance.
Robert C. Butler
Senior Vice President and Chief Financial Officer
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of International Paper Company:
We have audited the accompanying consolidated balance sheets of International
Paper Company (a New York corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of earnings, common
shareholders' equity and cash flows for each of the three years ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Paper Company and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years ended December 31,
1994 in conformity with generally accepted accounting principles.
As explained in Notes 3 and 6 to the financial statements, effective January
1, 1994, the Company changed its method of accounting for start-up costs, and
effective January 1, 1992, changed its method of accounting for income taxes.
New York, N.Y.
February 9, 1995
45
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
In millions, except per share amounts, for
the years ended December 31 1994 1993 1992
------- ------- -------
Net Sales $14,966 $13,685 $13,598
------- ------- -------
Costs and Expenses
Cost of products sold 11,143 10,191 10,137
Depreciation and amortization 885 898 850
Distribution expenses 692 634 629
Selling and administrative expenses 1,082 999 981
Taxes other than payroll and income taxes 151 153 150
Restructuring charges 370
Other 28
------- ------- -------
Total Costs and Expenses 13,953 12,875 13,145
------- ------- -------
Earnings Before Interest, Income Taxes,
Extraordinary Item and Cumulative Effect
of Accounting Changes 1,013 810 453
Interest expense, net 349 310 247
------- ------- -------
Earnings Before Income Taxes,
Extraordinary Item and Cumulative
Effect of Accounting Changes 664 500 206
Provision for income taxes 232 211 64
------- ------- -------
Earnings Before Extraordinary Item and
Cumulative Effect of Accounting Changes 432 289 142
Extraordinary item-loss on extinguishment
of debt (less tax benefit of $3)-Note 9 (6)
Cumulative effect of change in
accounting for:
Start-up costs (less tax benefit of $50)
-Note 3 (75)
Income taxes-Note 6 (50)
------- ------- -------
Net Earnings $ 357 $ 289 $ 86
======= ======= =======
Earnings per Common Share
Earnings before extraordinary item
and cumulative effect of accounting
changes $ 3.46 $ 2.34 $ 1.17
Extraordinary item-loss on extinguishment
of debt-Note 9 (.05)
Cumulative effect of change in
accounting for:
Start-up costs-Note 3 (.60)
Income taxes-Note 6 (.41)
------- ------- -------
Earnings per Common Share $ 2.86 $ 2.34 $ .71
======= ======= =======
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
CONSOLIDATED BALANCE SHEET
In millions at December 31 1994 1993
------- -------
Assets
Current Assets
Cash and temporary investments, at cost,
which approximates market $ 270 $ 242
Accounts and notes receivable, less
allowances of $97 in 1994 and $104 in
1993 2,241 1,856
Inventories 2,075 2,024
Other current assets 244 279
------- -------
Total Current Assets 4,830 4,401
------- -------
Plants, Properties and Equipment, Net 9,139 8,872
Forestlands 802 786
Investments 1,032 631
Goodwill 763 754
Deferred Charges and Other Assets 1,270 1,187
------- -------
Total Assets $17,836 $16,631
======= =======
Liabilities and Common Shareholders' Equity
Current Liabilities
Notes payable and current maturities of
long-term debt $ 2,083 $ 2,089
Accounts payable 1,204 1,089
Accrued liabilities 747 751
------- -------
Total Current Liabilities 4,034 3,929
------- -------
Long-Term Debt 4,464 3,601
Deferred Income Taxes 1,612 1,614
Minority Interest and Other Liabilities 1,212 1,262
Commitments and Contingent Liabilities-Note 7
Common Shareholders' Equity
Common stock, $1 par value; issued 1994--
128.2 shares, 1993--127.3 shares 128 127
Paid-in capital 1,786 1,704
Retained earnings 4,711 4,553
------- -------
6,625 6,384
Less: Common stock held in treasury,
at cost; 1994--2.3 shares, 1993--3.4 shares 111 159
------- -------
Total Common Shareholders' Equity 6,514 6,225
------- -------
Total Liabilities and Common Shareholders' Equity $17,836 $16,631
======= =======
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
In millions for the years ended December 31 1994 1993 1992
------- ------- -------
Operating Activities
Net earnings $ 357 $ 289 $ 86
Cumulative effect of accounting changes 75 50
Noncash items
Depreciation and amortization 885 898 850
Deferred income taxes 42 54 (99)
Restructuring and other charges 398
Other, net (2) (22) (95)
Changes in current assets and liabilities
Accounts and notes receivable (339) 78 2
Inventories 8 (93) (127)
Accounts payable and accrued liabilities 252 (220) (71)
Other (3) (3) 15
------- ------- -------
Cash Provided by Operations 1,275 981 1,009
------- ------- -------
Investment Activities
Invested in capital
projects (1,114) (954) (1,368)
Acquisitions
Plants, properties and equipment (17) (163)
Goodwill (9) (13)
Other assets and liabilities, net (58) (9) 23
Investments in affiliated companies (299) (9) (247)
Other (71) (124) (104)
------- ------- -------
Cash Used for Investment Activities (1,542) (1,122) (1,872)
------- ------- -------
Financing Activities
Issuance of common stock 67 60 703
Sale of limited partnership interests 165
Issuance of debt 1,059 727 869
Reduction of debt (275) (467) (475)
Change in bank overdrafts (115) (52) 69
Dividends paid (210) (208) (206)
Other (235) (62) (102)
------- ------- -------
Cash Provided by Financing Activities 291 163 858
------- ------- -------
Effect of Exchange Rate Changes on Cash 4 (5) (8)
------- ------- -------
Change in Cash and Temporary Investments 28 17 (13)
Cash and Temporary Investments
Beginning of the year 242 225 238
------- ------- -------
End of the year $ 270 $ 242 $ 225
======= ======= =======
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common
Stock Issued Treasury Stock Total
--------------- -------------- Common
Paid-In Retained Shareholders'
In millions, except share amounts in thousands Shares Amount Capital 1 Earnings Shares Amount Equity
------- ------ --------- -------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 117,578 $118 $1,264 $4,592 5,124 $235 $5,739
Issuance of stock in a public offering 9,200 9 641 650
Issuance of stock for various plans 215 27 (793) (33) 60
Cash dividends--Common stock ($1.68 per share) (206) (206)
Foreign currency translation
(less tax benefit of $58) (140) (140)
Net earnings 86 86
------- ------ --------- -------- ------ ------ -------------
Balance, December 31, 1992 126,993 127 1,792 4,472 4,331 202 6,189
Issuance of stock for acquisition 2 (117) (5) 7
Issuance of stock for various plans 294 38 (815) (38) 76
Cash dividends--Common stock ($1.68 per share) (208) (208)
Foreign currency translation (less tax benefit of $14) (128) (128)
Net earnings 289 289
------- ------ --------- -------- ------ ------ -------------
Balance, December 31, 1993 127,287 127 1,704 4,553 3,399 159 6,225
Issuance of stock for merger 819 1 15 11 27
Issuance of stock for various plans 138 30 (1,050) (48) 78
Cash dividends--Common stock ($1.68 per share) (210) (210)
Foreign currency translation (less tax benefit of $70) 37 37
Net earnings 357 357
------- ------ --------- -------- ------ ------ -------------
Balance, December 31, 1994 128,244 $128 $1,786 $4,711 2,349 $111 $6,514
======= ====== ========= ======== ====== ====== =============
</TABLE>
1 The cumulative foreign currency translation adjustment was $(243) million,
$(280) million and $(152) million at December 31, 1994, 1993 and 1992,
respectively.
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of International
Paper Company and its subsidiaries (the Company). Minority interest represents
minority shareholders' proportionate share of the equity in several of the
Company's consolidated subsidiaries, primarily IP Timberlands, Ltd. (IPT),
Zanders Feinpapiere AG, Georgetown Equipment Leasing Associates, L.P. and Trout
Creek Equipment Leasing, L.P. All significant intercompany balances and
transactions are eliminated. Investments in affiliated companies owned 20% to
50%, and the Company's investment in Scitex Corporation Ltd. where the Company
has the ability to exercise significant influence, are accounted for by the
equity method. The Company's share of affiliates' earnings is included in the
consolidated statement of earnings.
Temporary Investments
Temporary investments with an original maturity of three months or less are
treated as cash equivalents and are stated at cost.
Inventories
Inventory values include all costs directly associated with manufacturing
products: materials, labor and manufacturing overhead. These values are
presented at cost or market if it is lower. Costs of raw materials and finished
pulp and paper products are generally determined on the last-in, first-out
method. Other inventories are primarily stated using the first-in, first-out or
average cost method.
Plants, Properties and Equipment
Plants, properties and equipment are stated at cost, less accumulated
depreciation. For financial reporting purposes, the Company uses the
units-of-production method for depreciating its major pulp and paper mills and
certain wood products facilities and the straight-line method for other plants
and equipment. Annual straight-line depreciation rates are buildings, 2 1/2% to
8 1/2%, and machinery and equipment, 5% to 33%. For tax purposes, depreciation
is computed utilizing accelerated methods.
Interest costs for the construction of certain long-term assets are capitalized
and amortized over the related assets' estimated useful lives. The Company
capitalized net interest costs of $18 million in 1994, $12 million in 1993 and
$42 million in 1992. Interest payments made during 1994, 1993 and 1992 were $369
million, $372 million and $363 million, respectively.
Forestlands
The Company, which currently owns 84% and 100% of IPT's Class A and Class B
Units, respectively, controlled approximately 6.1 million acres of forestlands
in the United States at December 31, 1994. Forestlands are stated at cost, less
accumulated depletion representing the cost of timber harvested. Forestlands
include owned property as well as certain timber harvesting rights with terms of
one or more years. Costs attributable to timber are charged against income as
trees are cut. The depletion rate charged is determined annually based on the
relationship of remaining costs to estimated recoverable volume.
Translation of Financial Statements
Balance sheets of the Company's international operations are translated into
U.S. dollars at year-end exchange rates, while statements of earnings are
translated at average rates. Adjustments resulting from financial statement
translations are included as cumulative translation adjustments in paid-in
capital. Gains and losses resulting from foreign currency transactions are
included in earnings.
Amortization of Intangible Assets
Goodwill, the cost in excess of assigned value of businesses acquired, is
amortized over 40 years. Accumulated amortization was $148 million and $101
million at December 31, 1994 and 1993, respectively.
Revenue Recognition
The Company generally recognizes revenues when goods are shipped.
Earnings per Common Share
Earnings per common share were computed on the basis of the following average
number of shares outstanding (in millions): 1994--124.9, 1993--123.2 and
1992--121.4. The effect of all dilutive securities is immaterial.
Reclassifications
Certain reclassifications have been made to prior-year amounts to conform with
the current-year presentation.
Note 2. Industry Segment Information
Financial information by industry segment and geographic area for 1994, 1993 and
1992 is presented on pages 40, 43 and 44.
50
<PAGE>
Note 3. Start-up Costs
Effective January 1, 1994, the Company changed its method of accounting for
start-up costs on major projects to expense these costs as incurred. Prior to
1994, the Company capitalized these costs and amortized them over a five-year
period. This change was made to increase the focus on controlling costs
associated with facility start-ups.
The Company restated 1994 first-quarter results to record a pre-tax charge of
$125 million ($75 million after taxes or $.60 per share) as the cumulative
effect of this accounting change. This change also decreased 1994 total costs
and expenses by $17 million ($10 million after taxes or $.08 per share). On a
pro forma basis, this change would have increased 1992 total costs and expenses
by $33 million ($20 million after taxes or $.17 per share) and would have had no
impact on 1993.
Note 4. Mergers and Acquisitions
In March 1994, the Company acquired from Brierley Investments Limited an
additional 8% interest in Carter Holt Harvey Limited, a major New Zealand forest
and paper products company with substantial assets in Chile. The purchase
increased the Company's ownership of Carter Holt to 24%. The investment in
Carter Holt is accounted for using the equity method. In December, the Company
acquired additional stock of Zanders Feinpapiere AG. Also in December, a merger
was completed with Kirk Paper Corporation, a California-based paper distribution
company. The December 31, 1994 consolidated balance sheet reflects a preliminary
allocation of the purchase price for these acquisitions, to be finalized in
1995.
In 1993, the Company made several small acquisitions in its distribution and
specialty products businesses.
During 1992, the Company acquired an equity interest in Scitex Corporation Ltd.,
an Israel-based world leader in digital visual information communication for the
graphic design, printing, publishing and video industries. Also in 1992, Zaklady
Celulozowa-Papierniecze S.A. w Kwidzynie (Kwidzyn) was acquired from the
Government of the Republic of Poland. Kwidzyn is Poland's largest white papers
manufacturer and only integrated bleached pulp and paper company.
With the exception of Kirk Paper Corporation, which was accounted for as a
pooling-of-interests, all of the 1994, 1993 and 1992 acquisitions were accounted
for using the purchase method. The operating results of these mergers and
acquisitions have been included in the consolidated statement of earnings from
the dates of acquisition. The effects of these mergers and acquisitions, both
individually and in the aggregate, were not significant to the Company's
consolidated financial statements.
During 1993, the Company contributed assets with a fair market value of
approximately $900 million to two newly formed limited partnerships, Georgetown
Equipment Leasing Associates, L.P. and Trout Creek Equipment Leasing, L.P. These
partnerships are separate and distinct legal entities from the Company and have
separate assets, liabilities, business functions and operations. However, for
accounting purposes, the Company continues to consolidate these assets, and the
minority shareholders' interest is reflected as minority interest in the
accompanying financial statements. The purpose of the partnerships is to invest
in and manage a portfolio of assets including pulp and paper equipment used at
the Georgetown, S.C., and Ticonderoga, N.Y., mills. This equipment is leased to
the Company under long-term leases. Partnership assets also include floating
rate notes and cash. During 1993, outside investors purchased a portion of the
Company's limited-partner interests for $132 million and also contributed an
additional $33 million to one of these partnerships.
At December 31, 1994, the Company held aggregate general and limited-partner
interests totaling 83.5% in Georgetown Equipment Leasing Associates, L.P. and
81.2% in Trout Creek Equipment Leasing, L.P. The Company also held $273 million
and $197 million of borrowings at December 31, 1994 and 1993, respectively, from
these partnerships. These funds are being used for general corporate purposes.
Note 5. Unusual Items
In November 1992, the Company recorded pre-tax charges of $370 million to
establish a productivity improvement reserve and $28 million for environmental
remediation and cleanup. The productivity improvement reserve included charges
for plant shutdowns ($126 million), consolidations and other write-offs ($138
million) and severance and employee relocation ($64 million). Other costs
included in the productivity charge concerned legal, warranty and miscellaneous
items amounting to $42 million.
51
<PAGE>
Note 6. Income Taxes
The Company uses the liability method required by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109),
whereby deferred income taxes are recorded based upon differences between the
financial statement and tax bases of assets and liabilities. Deferred tax assets
and liabilities must be revalued to reflect new tax rates in the periods rate
changes are enacted. Accordingly, the 1993 provision for income taxes included a
charge of $25 million ($.20 per share) for deferred tax expense resulting from
the enactment of the Omnibus Budget Reconciliation Act of 1993, which raised the
federal income tax rate by 1% effective January 1, 1993.
The Company adopted the provisions of SFAS No. 109 in the fourth quarter of
1992. First-quarter operations were restated to record an after-tax charge of
$50 million ($.41 per share) as the cumulative effect of the accounting change
as of January 1, 1992. The components of earnings before income taxes,
extraordinary item and cumulative effect of accounting changes, and the
provision for income taxes by taxing jurisdiction were:
--------------------------------------------------------------------------------
In millions 1994 1993 1992
----- ----- -----
Earnings (losses)
U.S. $ 595 $ 577 $ 134
Non-U.S. 69 (77) 72
----- ----- -----
Earnings before income taxes,
extraordinary item and cumulative
effect of accounting changes $ 664 $ 500 $ 206
===== ===== =====
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
In millions 1994 1993 1992
----- ----- -----
Current tax provision
U.S. federal $ 148 $ 114 $ 120
U.S. state and local 10 12 14
Non-U.S. 32 31 29
----- ----- -----
190 157 163
----- ----- -----
Deferred tax provision
U.S. federal 23 64 (79)
U.S. state and local 24 20 (17)
Non-U.S. (5) (55) (3)
U.S. federal rate change 25
----- ----- -----
42 54 (99)
----- ----- -----
Provision for income taxes $ 232 $ 211 $ 64
===== ===== =====
--------------------------------------------------------------------------------
The Company made income tax payments of $75 million, $156 million and $130
million in 1994, 1993 and 1992, respectively.
A reconciliation of income tax expense using the statutory U.S. income tax rate
compared with the Company's actual income tax expense follows:
--------------------------------------------------------------------------------
In millions 1994 1993 1992
----- ----- -----
Earnings before income taxes,
extraoridinary item and cumulative
effect of accounting changes $ 664 $ 500 $ 206
Statutory U.S. income tax rate 35% 35% 34%
----- ----- -----
Tax expense using statutory
U.S. income tax rate 232 175 70
State and local taxes 22 21 (2)
Goodwill amortization 8 7 18
Foreign sales corporation benefit (12) (6) (6)
U.S. federal rate change 25
Tax credits (6) (9) (6)
Other, net (12) (2) (10)
----- ----- -----
Provision for income taxes $ 232 $ 211 $ 64
----- ----- -----
Effective income tax rate 35% 42% 31%
===== ===== =====
--------------------------------------------------------------------------------
The net deferred income tax liability as of December 31, 1994 and 1993 includes
the following components:
--------------------------------------------------------------------------------
In millions 1994 1993
------- -------
Current deferred tax asset $ 138 $ 176
Noncurrent deferred tax liability 1 (1,462) (1,499)
------- -------
Total $(1,324) $(1,323)
======= =======
--------------------------------------------------------------------------------
1 Net of $150 million and $115 million at December 31, 1994 and 1993,
respectively, of noncurrent deferred tax assets.
The tax effects of significant temporary differences representing deferred tax
assets and liabilities at December 31, 1994 and 1993 were as follows:
--------------------------------------------------------------------------------
In millions 1994 1993
------- -------
Plants, properties and equipment $(1,634) $(1,644)
Prepaid pension costs (233) (204)
Postretirement benefit accruals 167 150
Alternative minimum tax credit
carryforwards 145 92
Non-U.S. net operating losses 148 115
Other 83 168
------- -------
Total $(1,324) $(1,323)
======= =======
--------------------------------------------------------------------------------
The Company's alternative minimum tax credit carryforwards can be carried
forward indefinitely. The Company had net operating loss carryforwards
applicable to non-U.S. subsidiaries of which $176 million expire in years 1997
through 2004 and $240 million can be carried forward indefinitely.
52
<PAGE>
Deferred taxes are not provided for temporary differences of approximately $297
million and $385 million as of December 31, 1994 and 1993, respectively,
representing earnings of non-U.S. subsidiaries that are intended to be
permanently reinvested. If these earnings were remitted, the Company believes
that U.S. foreign tax credits would eliminate any significant impact on future
income tax provisions.
Note 7. Commitments and Contingent Liabilities
The Company leases certain property, machinery and equipment under cancelable
and noncancelable lease agreements. At December 31, 1994, total future minimum
rental commitments under noncancelable leases were $348 million, due as
follows: 1995-$81 million, 1996-$68 million, 1997-$57 million, 1998-$46
million, 1999-$41 million, and thereafter-$55 million. Rent expense was
$124 million, $92 million and $86 million for 1994, 1993 and 1992, respectively.
The Company is involved in various inquiries, administrative proceedings and
litigation relating to contracts, sales of property, environmental protection,
tax, antitrust and other matters, some of which allege substantial monetary
damages. While any proceeding or litigation has the element of uncertainty, the
Company believes that the outcome of any lawsuit or claim that is pending or
threatened, or all of them combined, will not have a material adverse effect on
its consolidated financial position or results of operations.
Note 8. Supplementary Balance Sheet Information
Inventories by major category were:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Raw materials $ 365 $ 380
Finished pulp, paper and packaging
products 1,067 1,017
Finished imaging products 152 164
Finished lumber and panel products 77 79
Operating supplies 335 324
Other 79 60
------- -------
Inventories $ 2,075 $ 2,024
======= =======
--------------------------------------------------------------------------------
Approximately 70% of the Company's total raw materials and finished products
inventories were valued using the last-in, first-out method. If the first-in,
first-out method had been used, it would have increased total inventory balances
by approximately $194 million, $160 million and $168 million at December 31,
1994, 1993 and 1992, respectively.
Plants, properties and equipment by major classification were:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Pulp, paper and packaging facilities
Mills $11,672 $10,996
Packaging plants 1,180 1,138
Wood products facilities 1,296 1,178
Other plants, properties and equipment 2,042 1,865
------- -------
Gross cost 16,190 15,177
Less: Accumulated depreciation 7,051 6,305
------- -------
Plants, properties and equipment, net $ 9,139 $ 8,872
======= =======
--------------------------------------------------------------------------------
Note 9. Debt and Lines of Credit
A summary of long-term debt follows:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
9.4% to 9.7% notes--due 1995-2002 $ 400 $ 400
8 1/8% notes--due 2024 149
7 1/2% to 7 7/8% notes--due 2004-2007 648 199
7 5/8% notes--due 2023 199 199
6 7/8% notes--due 2023 197 197
6 1/8% notes--due 2003 199 199
5 3/4% convertible subordinated
debentures--due 2002 1 199 199
5 1/8% debentures--due 2012 81 78
Medium-term notes--due 1995-2009 2 594 549
Environmental and industrial
development bonds--due 1995-2017 3,4 848 747
Commercial paper and bank notes 5 677 516
Other 6 585 496
------- -------
Total 7 4,776 3,779
Less: Current maturities 312 178
------- -------
Long-term debt $ 4,464 $ 3,601
======= =======
--------------------------------------------------------------------------------
1 The 5 3/4% convertible subordinated debentures are convertible into Company
common stock at a conversion price of $68.50 per share. These debentures are
redeemable at par.
2 The weighted average interest rate on these notes was 8.5% in 1994 and 8.7% in
1993.
3 The weighted average interest rate on these bonds was 5.7% in 1994 and 5.3% in
1993.
4 Includes $323 million and $279 million of bonds at December 31, 1994 and 1993,
respectively, which may be tendered at various dates and/or under certain
circumstances.
5 The weighted average interest rate was 5.7% in 1994 and 3.5% in 1993.
6 Includes $96 million in 1994 and $95 million in 1993 of French franc
borrowings with a weighted average interest rate of 4.7% in 1994 and 5.6% in
1993, and $227 million in 1994 and $214 million in 1993 of German mark
borrowings with a weighted average interest rate of 6.7% in 1994 and 6.6% in
1993.
7 The fair market value was approximately $4.7 billion and $4.0 billion at
December 31, 1994 and 1993, respectively.
53
<PAGE>
At December 31, 1994 and 1993, the Company classified $1.0 billion and $795
million, respectively, of tenderable bonds, commercial paper and bank notes as
long-term debt. The Company has the intent and ability to renew or convert these
obligations through 1995 and into future periods.
Total maturities of long-term debt over the next five years are: 1995-$312
million, 1996-$228 million, 1997-$190 million, 1998-$171 million and 1999-$120
million.
At December 31, 1994, the Company had unused bank lines of credit of
approximately $1.2 billion. The lines generally provide for interest at market
rates plus a margin based on the Company's current bond rating. The principal
line provides for $1.0 billion of credit through January 2000, cancelable only
if the Company's bond rating drops below investment grade. A facility fee of
.10% of the line is payable annually.
At December 31, 1994, notes payable classified as current liabilities included
$1.7 billion of non-U.S. dollar-denominated debt with a weighted average
interest rate of 5.9%.
In 1992, an extraordinary loss of $6 million after taxes ($.05 per share) was
recorded for the extinguishment of high-interest-rate debt.
Note 10. Financial Instruments
The Company has a policy of financing a portion of its investments in overseas
operations with borrowings denominated in the same currency as the investment or
by entering into foreign exchange contracts in tandem with U.S. borrowings. The
purpose of this activity is to provide a hedge against fluctuations in exchange
rates.
Non-U.S. dollar-denominated debt totaling $2.2 billion was outstanding at
December 31, 1994. Also outstanding were foreign exchange contracts totaling
$319 million, all having maturities of less than 360 days, as follows: Belgian
francs, $126 million; Spanish pesetas, $58 million; British pounds, $52 million;
and contracts totaling $83 million in four other currencies. The average amount
of outstanding contracts during 1994 and 1993 was $2.1 billion. Gains and losses
from these contracts (including an immaterial gain related to contracts
outstanding at December 31, 1994), which are fully offset by gains and losses
from the revaluation of the net assets being hedged, are determined monthly
based on published currency exchange rates and are recorded as translation
adjustments in common shareholders' equity.
The Company also utilizes foreign exchange contracts to hedge certain
transactions denominated in foreign currencies, primarily export sales
and equipment purchased from non-U.S. vendors. These contracts serve to
protect the Company from currency fluctuations between the transaction
date and settlement. Gains and losses on these contracts, along with
offsetting gains and losses resulting from the revaluations of the
underlying transactions, are recognized in earnings based on published
currency exchange rates. At December 31, 1994, foreign exchange
contracts totaling $189 million in 18 different currencies, all having
maturities of less than six months, were outstanding. The average amount
of outstanding contracts during 1994 and 1993 was $170 million and $87
million, respectively. Net gains and losses related to contracts
outstanding at December 31, 1994 and 1993, and amounts of outstanding
contracts in any single currency were not significant.
The Company used interest rate swap agreements to manage the composition of its
fixed and floating rate debt portfolio in 1994 and 1993. The agreements involve
the exchange of fixed or floating rate interest payments without changing the
underlying principal amounts related to $600 million and $400 million of
long-term debt having maturities ranging from 10 to 30 years issued in 1994 and
1993, respectively. The interest payments made or received pursuant to the swap
agreements are included in interest expense. The impact on earnings and the
Company's net liability under these agreements were not significant.
The Company does not hold or issue financial instruments for trading purposes.
The counterparties to the Company's interest rate swap agreements and foreign
exchange contracts consist of a number of major international financial
institutions. The Company continually monitors its positions with and the credit
quality of these financial institutions and does not expect nonperformance by
the counterparties.
54
<PAGE>
Note 11. Capital Stock
The authorized capital stock of the Company at December 31, 1994 and 1993
consisted of 400,000,000 shares of common stock, $1 par value; 400,000 shares of
cumulative $4 nonredeemable preferred stock, without par value (stated value of
$100 per share); and 8,750,000 shares of serial preferred stock, $1 par value.
The serial preferred stock is issuable in one or more series by the Board of
Directors without further shareholder action.
In January 1992, 9.2 million shares of common stock were sold in a public
offering. Proceeds of $650 million were used to repay long-term and short-term
borrowings.
The Company has stock rights under a Shareholder Rights Plan whereby each share
of common stock has one right. Each right entitles shareholders to purchase one
common stock share at an exercise price of $155. The rights will become
exercisable 10 days after anyone acquires or tenders for 20% or more of the
Company's common stock. If, thereafter, anyone acquires 30% or more of the
common stock, or a 20% or more owner combines with the Company in a reverse
merger in which the Company survives and its common stock is not changed, each
right will entitle its holder to purchase Company common stock with a value of
twice the $155 exercise price. If, following an acquisition of 20% or more of
the common stock, the Company is acquired in a merger or sells 50% of its assets
or earnings power, each right will entitle its holder to purchase stock of the
acquiring company with a value of twice the $155 exercise price.
Note 12. Retirement Plans
The Company maintains pension plans that provide retirement benefits to
substantially all employees. Employees generally are eligible to participate in
the plans upon commencement of employment.
The plans provide defined benefits based on years of credited service and either
final average earnings (salaried employees), hourly job rates or specified
benefit rates (hourly and union employees).
U.S. Defined Benefit Plans
The Company makes contributions that are sufficient to fully fund its
actuarially determined costs, generally equal to the minimum amounts required by
ERISA. Net periodic pension income for the Company's qualified and nonqualified
defined benefit plans comprised the following:
--------------------------------------------------------------------------------
In millions 1994 1993 1992
------- ------- -------
Service cost-benefits earned
during the period $ (54) $ (43) $ (43)
Interest cost on projected benefit
obligation (151) (143) (136)
Actual return on plan assets 7 291 135
Net amortization and deferrals 275 (18) 125
------- ------- -------
Net periodic pension income $ 77 $ 87 $ 81
======= ======= =======
--------------------------------------------------------------------------------
The actuarial assumptions used in determining net periodic pension costs for the
years presented were:
--------------------------------------------------------------------------------
1994 1993 1992
------- ------- -------
Discount rate 7.25% 8.0% 8.0%
Expected long-term return on
plan assets 10.0% 10.0% 10.0%
Weighted average rate of increase
in compensation levels 4.0% 5.0% 5.0%
--------------------------------------------------------------------------------
The discount rates and the rates of increase in future compensation levels used
to determine the projected benefit obligations at December 31, 1994 were 8.75%
and 4.75%, respectively, and at December 31, 1993 were 7.25% and 4.0%,
respectively.
The following table presents the funded status of the Company's U.S. pension
plans and the amounts reflected in the accompanying consolidated balance
sheet:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Actuarial present value of benefit
obligations
Vested benefits $ 1,649 $ 1,835
------- -------
Accumulated benefit obligation $ 1,777 $ 1,986
------- -------
Projected benefit obligation $ 1,909 $ 2,145
Plan assets at fair value 2,557 2,671
------- -------
Plan assets in excess of projected
benefit obligation 648 526
Unrecognized net (gain) loss (6) 58
Balance of unrecorded transition
asset (109) (136)
Other 53 59
------- -------
Prepaid pension cost $ 586 $ 507
======= =======
--------------------------------------------------------------------------------
Plan assets are held primarily in master trust accounts and comprised the
following:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Cash reserve $ 134 $ 163
Fixed income securities 843 744
Diversified equities 943 1,174
International Paper common stock 392 351
Real estate 117 130
Other 128 109
------- -------
Total plan assets $ 2,557 $ 2,671
======= =======
--------------------------------------------------------------------------------
55
<PAGE>
Non-U.S. Defined Benefit Plans
Generally, the Company's non-U.S. pension plans are funded using the projected
benefit as a target, except in certain countries where funding of benefit plans
is not required.
The following table presents the funded status of the Company's non-U.S. pension
plans and the amounts reflected in the accompanying consolidated balance sheet.
Plan assets are comprised principally of common stocks and fixed income
securities.
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Actuarial present value of benefit
obligations
Vested benefits $ 276 $ 251
------- -------
Accumulated benefit obligation $ 292 $ 266
------- -------
Projected benefit obligation 1 $ 347 $ 307
Plan assets at fair value 338 304
------- -------
Projected benefit obligation
in excess of plan assets (9) (3)
Unrecognized net (gain) (16) (19)
Balance of unrecorded transition
asset (40) (41)
Other 3 3
------- -------
Pension liability 2 $ (62) $ (60)
======= =======
--------------------------------------------------------------------------------
1 The weighted average discount rate and the weighted average rate of increase
in compensation levels used to measure the projected benefit obligation were
7.01% (6.82% in 1993) and 4.61% (4.41% in 1993), respectively.
2 Pension liability is the result of unfunded plans in Germany and France as is
the general practice in those countries.
Other Plans
The Company sponsors several defined contribution plans to provide substantially
all U.S. salaried and certain hourly employees of the Company an opportunity to
accumulate personal funds for their retirement. Contributions may be made on a
before-tax basis to substantially all of these plans.
As determined by the provisions of each plan, the Company matches the
employees' basic voluntary contributions. Company matching contributions to
the plans were approximately $36 million, $38 million and $30 million for the
plan years ending in 1994, 1993 and 1992, respectively. The net assets of
these plans approximated $1.4 billion as of the 1994 plan year ends.
Note 13. Postretirement Benefits
The Company provides certain retiree health care and life insurance benefits
covering substantially all U.S. salaried and certain hourly employees. Employees
are generally eligible for benefits upon retirement and completion of a
specified number of years of creditable service. A plan amendment in 1992 limits
the maximum annual Company contribution for health care benefits for retirees
after January 1, 1992 based on age at retirement and years of service after age
50. The Company does not pre-fund these benefits and has the right to modify or
terminate certain of these plans in the future.
The components of postretirement benefit expense in 1994, 1993 and 1992 were as
follows:
--------------------------------------------------------------------------------
In millions 1994 1993 1992
------- ------- -------
Service cost-benefits earned
during the period $ 8 $ 8 $ 7
Interest cost on accumulated
postretirement benefit obligation 23 25 23
Net amortization of plan amendments (16) (15) (18)
------- ------- -------
Net postretirement benefit cost $ 15 $ 18 $ 12
======= ======= =======
--------------------------------------------------------------------------------
The accumulated postretirement benefit obligation, included in minority
interest and other liabilities in the accompanying consolidated balance sheet,
comprised the following components:
--------------------------------------------------------------------------------
In millions at December 31 1994 1993
------- -------
Retirees $ 223 $ 235
Fully eligible active plan
participants 15 16
Other active plan participants 63 83
------- -------
Total accumulated postretirement
benefit obligation 301 334
Unrecognized net loss (26) (58)
Unrecognized effect of plan
amendments 96 104
------- -------
Accrued postretirement benefit
obligation $ 371 $ 380
======= =======
--------------------------------------------------------------------------------
Future benefit costs were estimated assuming medical costs would increase at a
15% annual rate starting in 1991, decreasing to a 6% annual growth rate ratably
over the next 13 years and then remaining at a 6% annual growth rate thereafter.
A 1% increase in this annual trend rate would have increased the accumulated
postretirement benefit obligation at December 31, 1994 by $20 million, with an
immaterial effect on 1994 postretirement benefit expense. The weighted average
discount rate used to estimate the accumulated postretirement benefit obligation
at December 31, 1994 was 8.75%, up from 7.25% at December 31, 1993.
In 1992, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." The
impact of this change was not significant.
56
<PAGE>
Note 14. Incentive Plans
The Company has a Long-Term Incentive Compensation Plan that includes a
Restricted Performance Share Plan, a Stock Option Plan and an Executive
Continuity Award Plan, administered by a committee of nonemployee members of the
Board of Directors who are not eligible for awards. The plan allows stock
appreciation rights to be awarded either separately or in combination with other
awards, although none were awarded in 1994, 1993 or 1992.
Under the Restricted Performance Share Plan, contingent awards of Company common
stock are granted by the committee. Awards are earned if the Company's financial
performance over a five-year period meets or exceeds that of other forest
products companies using standards determined by the committee. In 1993 and
1992, 152,000 shares and 163,000 shares, respectively, were earned. The awards
for 1994 have not yet been determined.
The Stock Option Plan provides for the granting of incentive stock options and
nonqualified stock options to key employees. The committee determines the option
price, the number of shares for which an option is granted and the term (which
cannot exceed 10 years). The option price is the market price of the stock at
the date of grant. Upon exercise of an option, a replacement option may be
granted with the exercise price equal to the current market price and with a
term extending to the expiration date of the original option.
The following summarizes stock option transactions under stock option plans
for the three years ended December 31, 1994:
--------------------------------------------------------------------------------
Shares Option Price
--------- --------------
Balance at 1/1/92 1 2,694,074 $13.930-76.750
Granted 1,091,369 60.750-78.000
Exercised (561,634) 13.930-70.625
--------- --------------
Balance at 12/31/92 1 3,223,809 13.930-78.000
Granted 941,900 59.375-69.250
Exercised (425,196) 13.930-64.000
--------- --------------
Balance at 12/31/93 1 3,740,513 13.930-78.000
Granted 1,353,270 64.625-79.625
Exercised (895,349) 13.930-74.000
--------- --------------
Balance at 12/31/94 1 4,198,434 $13.930-79.625
========= ==============
--------------------------------------------------------------------------------
1 All options are exercisable under the plan upon grant; however, the underlying
shares cannot be sold or are otherwise restricted for various periods.
The Executive Continuity Award Plan provides for the granting of tandem awards
of restricted stock and/or nonqualified stock options to key executives. Grants
are restricted and awards conditioned on attainment of specified age and years
of service requirements. Exercise of the options results in the cancellation of
the related restricted shares.
In 1994, 1993 and 1992, restricted shares of 32,000, 32,000 and 20,000,
respectively, were awarded under this plan. In 1992, grants for 20,000 shares
were forfeited. At December 31, 1994, 1,060,000 options at exercise prices
ranging from $48.250 to $73.875 were outstanding under the Executive Continuity
Award Plan. The options expire at various dates through 2008.
At December 31, 1994 and 1993, a total of 7.1 million shares and 3.7 million
shares, respectively, were available for grant under incentive plans.
Provisions for awards under the Long-Term Incentive Compensation Plan and all
other incentive plans amounted to $37 million, $31 million and $29 million in
1994, 1993 and 1992, respectively. The provisions include charges for recently
acquired companies, and adjustments of prior-year awards due to changes in the
market price of Company stock and final determination of Restricted Performance
Share Plan awards.
57
<PAGE>
ELEVEN-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Dollar amounts in millions, except
per share amounts and stock prices 1994 1993 1992 1991 1990 1989
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Results of Operations
Net sales $14,966 $13,685 $13,598 $ 12,703 $ 12,960 $ 11,378
Costs and expenses, excluding interest 13,953 12,875 13,145 3 11,750 4 11,737 5 9,768
Earnings before income taxes,
extraordinary item and cumulative
effect of accounting changes 664 1 500 206 3 638 4 946 5 1,405
Extraordinary item (6)
Cumulative effect of accounting
changes (75) (50) (215)
Net earnings 357 1 289 2 86 3 184 4 569 5 864
Earnings applicable to common shares 357 1 289 2 86 3 184 4 569 5 845
------- ------- ------- -------- -------- --------
Financial Position
Working capital $ 796 $ 472 $ (165)6 $ 404 $ 784 $ 366
Plants, properties and equipment, net 9,139 8,872 8,884 7,848 7,287 6,238
Forestlands 802 786 759 743 751 764
Total assets 17,836 16,631 16,516 14,941 13,669 11,582
Long-term debt 4,464 3,601 3,096 3,351 3,096 2,324
Common shareholders' equity 6,514 6,225 6,189 5,739 5,632 5,147
------- ------- ------- -------- -------- --------
Per Share of Common Stock 7
Earnings before extraordinary
item and cumulative effect of
accounting changes $ 3.46 1 $ 2.34 2 $ 1.17 3 $ 3.61 4 $ 5.21 5 $ 7.72
Extraordinary item (.05)
Cumulative effect of accounting
changes (.60) (.41) (1.95)
Earnings 2.86 1 2.34 2 .71 3 1.66 4 5.21 5 7.72
Cash dividends 1.68 1.68 1.68 1.68 1.68 1.53
Common shareholders' equity 51.74 50.25 50.46 51.03 51.34 47.35
------- ------- ------- -------- -------- --------
Common Stock Prices 7
High 80 1/2 69 7/8 78 1/2 78 1/4 59 3/4 58 3/4
Low 60 5/8 56 5/8 58 1/2 50 1/2 42 3/4 45 1/8
Year-end 75 3/8 67 3/4 66 5/8 70 3/4 53 1/2 56 1/2
------- ------- ------- -------- -------- --------
Financial Ratios
Current ratio 1.2 1.1 .96 6 1.1 1.2 1.1
Total debt to capital ratio 41.2 38.5 38.0 39.1 36.1 33.9
Return on equity 5.6 1,8 4.7 2,8 1.4 3,8 3.2 4 10.5 5 17.8
Return on capital employed 3.9 1,8 3.8 2,8 1.2 3,8 3.5 4 8.0 5 13.4
------- ------- ------- -------- -------- --------
Capital Expenditures $ 1,114 $ 954 $ 1,368 $ 1,197 $ 1,267 $ 887
------- ------- ------- -------- -------- --------
Number of Employees 70,000 72,500 73,000 70,500 69,000 63,500
======= ======= ======= ======== ======== ========
</TABLE>
Financial Glossary
Current ratio--
current assets divided by current liabilities
Total debt to capital ratio--
long-term debt plus notes payable and current maturities of long-term debt
divided by long-term debt, notes payable and current maturities of long-term
debt, deferred income taxes, minority interest and other liabilities, preferred
stock and total common shareholders' equity
Return on equity--
net earnings divided by average common shareholders' equity (computed monthly)
Return on capital employed--
net earnings plus after-tax interest expense and provision for deferred income
taxes divided by total assets minus accounts payable and accrued liabilities at
the beginning of the year
<TABLE>
<CAPTION>
Dollar amounts in millions, except
per share amounts and stock prices 1988 1987 1986 1985 1984
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Results of Operations
Net sales $ 9,587 $ 7,800 $ 5,540 $ 4,530 $ 4,750
Costs and expenses, excluding interest 8,224 6,952 5,030 4,379 4,590
Earnings before income taxes,
extraordinary item and cumulative
effect of accounting changes 1,198 681 454 159 144
Extraordinary item
Cumulative effect of accounting
changes
Net earnings 754 407 305 133 120
Earnings applicable to common shares 733 387 284 107 94
------- ------- ------- ------- -------
Financial Position
Working capital $ 781 $ 657 $ 296 $ 350 $ 574
Plants, properties and equipment, net 5,456 5,125 4,788 3,725 3,276
Forestlands 772 780 783 741 780
Total assets 9,462 8,710 7,848 6,039 5,795
Long-term debt 1,853 1,937 1,764 1,191 1,015
Common shareholders' equity 4,557 4,052 3,664 3,195 3,298
------- ------- ------- ------- -------
Per Share of Common Stock 7
Earnings before extraordinary
item and cumulative effect of
accounting changes $ 6.57 $ 3.68 $ 2.89 $ 1.08 $ .94
Extraordinary item
Cumulative effect of accounting
changes
Earnings 6.57 3.68 2.89 1.08 .94
Cash dividends 1.28 1.20 1.20 1.20 1.20
Common shareholders' equity 41.14 36.35 35.04 33.34 33.02
------- ------- ------- ------- -------
Common Stock Prices 7
High 49 3/8 57 3/4 40 28 7/8 29 7/8
Low 36 1/2 27 24 1/4 22 1/8 23
Year-end 46 3/8 42 1/4 37 1/2 25 3/8 26 7/8
------- ------- ------- ------- -------
Financial Ratios
Current ratio 1.5 1.4 1.2 1.5 1.9
Total debt to capital ratio 25.8 31.6 31.2 24.1 20.7
Return on equity 17.0 10.0 8.3 3.3 2.8
Return on capital employed 13.8 10.2 8.4 2.5 2.2
------- ------- ------- ------- -------
Capital Expenditures $ 645 $ 603 $ 576 $ 794 $ 628
------- ------- ------- ------- -------
Number of Employees 55,500 45,500 44,000 32,000 33,500
======= ======= ======= ======= =======
</TABLE>
1 Includes $17 million ($10 million after taxes or $.08 per share) of additional
earnings related to the change in accounting for start-up costs.
2 Includes $25 million ($.20 per share) of additional income tax expense to
revalue deferred tax balances to reflect the increase in the U.S. statutory
federal income tax rate.
3 Includes restructuring and other charges totaling $398 million ($263 million
after taxes or $2.17 per share).
4 Includes a $60 million pre-tax restructuring charge ($37 million after taxes
or $.33 per share) and additional expenses related to the adoption of SFAS No.
106 of $25 million ($16 million after taxes or $.15 per share).
5 Includes a $212 million pre-tax restructuring charge ($137 million after taxes
or $1.26 per share).
6 Reflects increase in short-term versus long-term borrowings due to favorable
interest rates.
7 Appropriate per share data and common stock prices have been adjusted to
reflect the 2-for-1 stock split in May 1987.
8 Return on equity was 6.7% and return on capital employed was 4.7% in 1994
before the accounting change. Return on equity was 5.1% and return on capital
employed was 3.8% in 1993 before the additional income tax expense. Return on
equity was 6.3% and return on capital employed was 3.7% in 1992 before the
accounting change, extraordinary item, and restructuring and other charges.
58-59
<PAGE>
INTERIM FINANCIAL RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
--------------------------------------
In millions, except per share amounts and stock prices First Second Third Fourth Year
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
1994
Net Sales $3,414 $3,633 $3,792 $4,127 $14,966
Gross Margin 1 847 2 918 2 971 2 1,087 3,823
Earnings Before Income Taxes and
Cumulative Effect of Accounting Change 118 2 140 2 171 2 235 664
Earnings Before Cumulative Effect of
Accounting Change 76 2 91 2 111 2 154 432
Cumulative Effect of Accounting Change (75) (75)
Net Earnings 1 2 91 2 111 2 154 357
Per Share of Common Stock
Earnings Before Cumulative Effect
of Accounting Change $ .61 2 $ .73 2 $ .89 2 $ 1.23 $ 3.46
Cumulative Effect of Accounting Change (.60) (.60)
Earnings .01 2 .73 2 .89 2 1.23 2.86
Dividends .42 .42 .42 .42 1.68
Common Stock Prices
High 77 7/8 72 7/8 80 3/8 80 1/2 80 1/2
Low 67 1/8 60 5/8 66 3/8 67 7/8 60 5/8
1993
Net Sales $3,362 $3,506 $3,405 $3,412 $13,685
Gross Margin 1 819 887 862 926 3,494
Earnings Before Income Taxes 101 122 119 158 500
Net Earnings 64 77 48 3 100 289 3
Per Share of Common Stock
Earnings $ .52 $ .62 $ .39 3 $ .81 $ 2.34 3
Dividends .42 .42 .42 .42 1.68
Common Stock Prices
High 69 7/8 68 68 3/8 68 5/8 69 7/8
Low 60 3/4 61 3/4 58 56 5/8 56 5/8
</TABLE>
1 Gross margin represents net sales less cost of products sold.
2 Amounts have been restated to reflect the change in accounting for start-up
costs. The additional earnings in each quarter is as follows: first quarter,
$7 million ($4 million after taxes or $.03 per share); second quarter, $6
million ($4 million after taxes or $.03 per share); and third quarter, $4
million ($2 million after taxes or $.02 per share).
3 A charge of $25 million ($.20 per share) was recorded in the 1993 third
quarter to revalue deferred tax balances to reflect the increase in the U.S.
statutory federal income tax rate.
60
<PAGE>
APPENDIX A
(Exhibit 13)
GRAPHS AND CHARTS
<PAGE>
INTERNATIONAL PAPER APPENDIX A
CHARTS
1. NET SALES (PAGE 1)
Bar chart of NET SALES for the years 1989 through 1994, in billions of dollars.
Data points as follows:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
11.4 13.0 12.7 13.6 13.7 15.0
2. NET EARNINGS (PAGE 1)
Bar chart of NET EARNINGS for the years 1989 through 1994, in millions of
dollars. Charts contain color keys for the years 1990 through 1994 to highlight
the following unusual or nonrecurring items: In 1990, Restructuring charge; in
1991, Accrual effect of SFAS No. 106, restructuring charge, and accounting
change; in 1992, Restructuring and other charges, extraordinary item and
accounting change; in 1993, Adjustment of deferred tax balances to reflect the
federal tax rate change; in 1994, change in accounting for start-up costs. Data
points as follows:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
NET EARNINGS BEFORE UNUSUAL ITEMS 864 706 452 405 314 422
Change in accounting for start-up costs (65)
Adjustment of deferred tax balances (25)
Restructuring and other charges (137) (37) (263)
Accounting change-SFAS No. 109 (50)
Extraordinary item (6)
Accounting change-SFAS No. 106 (215)
Accrual effect of SFAS No. 106 (16)
---- ---- ---- ---- ---- ----
NET EARNINGS 864 569 184 86 289 357
3. EARNINGS PER SHARE (PAGE 1)
Bar chart of EARNINGS PER SHARE for the years 1989 through 1994, in dollars.
Charts contain color keys for the years 1990 through 1994 to highlight the
following unusual or nonrecurring items: In 1990, Restructuring charge; In 1991,
Accrual effect of SFAS No. 106, restructuring charge, and accounting change; in
1992, Restructuring and other charges, extraordinary item and accounting change;
in 1993, Adjustment of deferred tax balances to reflect the federal tax rate
change; in 1994, change in accounting for start-up costs. Data points as
follows:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
EARNINGS PER SHARE BEFORE
UNUSUAL ITEMS 7.72 6.47 4.09 3.34 2.54 3.38
Change in accounting for
start-up costs (.52)
Adjustment of deferred tax balances (.20)
Restructuring and other charges (1.26) (.33) (2.17)
Accounting change-SFAS No. 109 (.41)
Extraordinary item (.05)
Accounting change-SFAS No. 106 (1.95)
Accrual effect of SFAS No. 106 (.15)
---- ---- ---- ---- ---- ----
EARNINGS PER SHARE 7.72 5.21 1.66 0.71 2.34 2.86
4. RETURN ON EQUITY (PAGE 1)
Bar chart of RETURN ON EQUITY for the years 1989 through 1994, expressed as a
percent. Charts contain color keys for the years 1990 through 1994 to highlight
the following unusual or nonrecurring items: In 1990, Restructuring charge; in
1991, Accrual effect of SFAS No. 106, restructuring charge, and accounting
change; in 1992, Restructuring and other charges, extraordinary item and
accounting change; in 1993, Adjustment of deferred tax balances to reflect the
federal tax rate change; in 1994, change in accounting for start-up costs. Data
points as follows:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
RETURN ON EQUITY BEFORE
UNUSUAL ITEMS 17.8 13.0 7.8 6.3 5.1 6.8
Change in accounting for
start-up costs (1.2)
Adjustment of deferred tax balances (.4)
Restructuring and other charges (2.5) (.6) (4.1)
Accounting change-SFAS No. 109 (.7)
Extraordinary item (.1)
Accounting change-SFAS No. 106 (3.7)
Accrual effect of SFAS No. 106 (.3)
---- ---- ---- ---- ---- ----
RETURN ON EQUITY 17.8 10.5 3.2 1.4 4.7 5.6
5. NET SALES (PAGE 29)
Bar chart of NET SALES for the years 1992 through 1994, in billions of dollars.
Data points as follows:
1992 1993 1994
---- ---- ----
13.6 13.7 15.0
6. PRINTING PAPERS-NET SALES AND OPERATING PROFIT (PAGE 31)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the years 1992
through 1994, in millions of dollars. NET SALES chart contains color keys to
show breakdown of U.S. and non-U.S. sales. OPERATING PROFIT chart contains color
key to highlight restructuring charge in 1992.
Data points for NET SALES as follows:
1992 1993 1994
----- ----- -----
U.S. 2,747 2,746 3,028
Non-U.S. 1,293 1,159 1,372
----- ----- -----
NET SALES 4,040 3,905 4,400
Data points for OPERATING PROFIT as follows:
1992 1993 1994
---- ---- ----
Operating profit before restructuring charge 19 (122) 20
Restructuring charge (89)
---- ---- ----
OPERATING PROFIT (70) (122) 20
7. PACKAGING-NET SALES AND OPERATING PROFIT (PAGE 33)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the years 1992
through 1994, in millions of dollars. NET SALES chart contains color keys to
show breakdown of U.S. and non-U.S. sales. OPERATING PROFIT chart contains color
key to highlight restructuring charge in 1992.
Data points for NET SALES as follows:
1992 1993 1994
----- ----- -----
U.S. 2,381 2,366 2,579
Non-U.S. 864 729 796
----- ----- -----
NET SALES 3,245 3,095 3,375
Data points for OPERATING PROFIT as follows:
1992 1993 1994
---- ---- ----
Operating profit before restructuring charge 330 188 293
Restructuring charge (22)
---- ---- ----
OPERATING PROFIT 308 188 293
8. DISTRIBUTION-NET SALES AND OPERATING PROFIT (PAGE 34)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the years 1992
through 1994, in millions of dollars. NET SALES chart contains color keys to
show breakdown of U.S. and non-U.S. sales. OPERATING PROFIT chart contains color
key to highlight restructuring charge in 1992.
Data points for NET SALES as follows:
1992 1993 1994
----- ----- -----
U.S. 2,617 2,853 3,145
Non-U.S. 363 287 325
----- ----- -----
NET SALES 2,980 3,140 3,470
Data points for OPERATING PROFIT as follows:
1992 1993 1994
---- ---- ----
Operating profit before restructuring charge 58 58 74
Restructuring charge (6)
---- ---- ----
OPERATING PROFIT 52 58 74
9. SPECIALTY PRODUCTS-NET SALES AND OPERATING PROFIT (PAGE 36)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the years 1992
through 1994, in millions of dollars. NET SALES chart contains color keys to
show breakdown of U.S. and non-U.S. sales. OPERATING PROFIT chart contains color
key to highlight restructuring and other charges in 1992.
Data points for NET SALES as follows:
1992 1993 1994
----- ----- -----
U.S. 1,656 1,749 1,840
Non-U.S. 804 711 750
----- ----- -----
NET SALES 2,460 2,460 2,590
Data points for OPERATING PROFIT as follows:
1992 1993 1994
---- ---- ----
Operating profit before restructuring and
other charges 238 263 268
Restructuring and other charges (155)
---- ---- ----
OPERATING PROFIT 83 263 268
10. FOREST PRODUCTS-NET SALES AND OPERATING PROFIT (PAGE 39)
Bar charts of NET SALES and OPERATING PROFIT for the segment for the years 1992
through 1994, in millions of dollars. NET SALES chart contains color keys to
show breakdown of U.S. and non-U.S. sales. OPERATING PROFIT chart contains color
key to highlight restructuring and other charges in 1992.
Data points for NET SALES as follows:
1992 1993 1994
----- ----- -----
U.S. 1,313 1,597 1,595
Non-U.S. 97 103 120
----- ----- -----
NET SALES 1,410 1,700 1,715
Data points for OPERATING PROFIT as follows:
1992 1993 1994
---- ---- ----
Operating profit before restructuring
and other charges 261 445 378
Restructuring and other charges (64)
---- ---- ----
OPERATING PROFIT 197 445 378
11. CASH FLOW FROM OPERATIONS (PAGE 41)
Bar chart of CASH FLOW FROM OPERATIONS for the years 1992 through 1994, in
millions of dollars. Data points as follows:
1992 1993 1994
----- ---- -----
1,009 981 1,275
12. TOTAL DEBT TO CAPITAL RATIO (PAGE 41)
Bar chart of TOTAL DEBT TO CAPITAL RATIO for the years 1992 through 1994,
expressed as a percent. Data points as follows:
1992 1993 1994
---- ---- ----
38.0 38.5 41.2
<PAGE>
APPENDIX B
(Exhibit 13)
PHOTOGRAPHS AND ILLUSTRATIONS
<PAGE>
INTERNATIONAL PAPER APPENDIX B
PHOTOGRAPHS AND ILLUSTRATIONS
1. Page 2: Four small photographs of the Chairman of the Board and Chief
Executive Officer.
2. Page 3: Four small pictures of children used in television advertising.
3. Page 7: A photograph of a globe of the world interspersed with sheets of
paper.
4. Page 8: A photograph of the sheeting area at the company's Kwidzyn, Poland,
mill.
5. Page 9: A photograph of a Japanese woman and boy drinking from gable-top
cartons.
6. Page 11: A photograph of aseptic packaging board produced at the company's
Raleigh, N.C., liquid packaging plant.
7. Page 12-13: A photograph of the new uncoated papers machine at the company's
Riverdale mill in Selma, Ala.
8. Page 15: A photograph of the deinking equipment at the company's Hudson
River mill in Corinth, N.Y.
9. Page 16-17: A photograph of a team of employees at the Nicolet mill in
De Pere, Wis.
10. Page 19: A photograph of corrugated boxes made from mottled white linerboard
and demonstrating high-impact graphics.
11. Page 20: A photograph of a bottling line using the Triton beverage packaging
system.
12. Page 21: A photograph of a residential home constructed with OmniWood
siding.
13. Page 23: A photograph of one of the company's SuperTree nurseries.
14. Page 24: A photograph of the bleaching towers at the company's Texarkana,
Texas, mill, one of four of our U.S. bleached mills converted to elemental
chlorine-free technology by the end of 1994.
15. Page 25: A photograph of an image from the advertising campaign launched by
the company in 1994, which features children of International Paper
employees.
16. Pages 28: A photograph of laser technology being used in our research
activities.
17. Page 29: A photograph of a globe of the world.
18. Pages 30: A photograph of Zanders' promotional brochures.
19. Pages 30: A photograph of several grades of International Papers uncoated
cutsize papers.
20. Pages 30: A photograph of Natural History magazine, which is printed on
International Paper's coated paper.
21. Page 31: A photograph of Olympic gold medalist Kristi Yamaguchi, wearing
apparel made from fiber containing International Paper specialty pulp.
22. Pages 32: A photograph of a Tropicana juice carton.
23. Pages 32: An illustration of an aseptic filling machine and a photograph of
an aseptic carton.
24. Page 33: A photograph of a corrugated box made by one of our European
container plants.
25. Page 33: A photograph of a folding carton made from Everest bleached board.
26. Page 35: A photograph of many of the products we distribute.
27. Page 35: A photograph of a delivery person.
28. Page 35: A photograph of a ResourceNet International truck.
29. Pages 36: A photograph of Polyrey high pressure laminates.
30. Page 37: A photograph of a piece of luggage containing an airline routing
tag and a name tag, both representing uses for pressure-sensitive labels.
31. Page 37: A photograph of a door made from CraftMaster prestained door
facings.
32. Page 37: A photograph of a baby in diapers.
33. Page 39: A photograph of various wood products.
EXHIBIT l8
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
----------------------------
Arthur Andersen LLP
February 9, 1995 ----------------------------
1345 Avenue of the Americas
New York NY 10105
International Paper Company
Two Manhattanville Road
Purchase, New York 10577
Re: Form 10-K Report for the Year Ended December 31, 1994
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
As of January 1, 1994, the Company changed from the deferred method of
accounting for startup costs to the direct expense method. According to the
management of the Company, this change was made to increase the focus on
controlling costs associated with facility start-ups.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we
have reviewed the pertinent factors, including those related to financial
reporting, in this particular case on a subjective basis, and our opinion stated
below is based on our determination in this manner.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under
the circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
EXHIBIT 21
Company and Subsidiary:
Percentage of voting
Sovereign power securities owned by
under which organized immediate parent
--------------------- --------------------
International Paper
Company (the "Company") New York Parent
IP Timberlands, Ltd.* Texas The Company owns 100% of
the Class A Common Stock
and Class B Common Stock
of IP Forest Resources
Company, managing
general partner of IPT,
and 84% of the Class A
Depositary Units and
100% of the Class B
Depositary Units of IPT.
Names of subsidiaries which, if considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary, have been omitted.
* For Regulation S-X purposes.
<PAGE>
[LOGO]
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
JOHN A. GEORGES
CHAIRMAN
March 31, 1995
Dear Fellow Shareholders:
The annual meeting of International Paper will be held this year at the
Windsor Court Hotel, 300 Gravier Street, New Orleans, Louisiana. The meeting
will start at 9:30 a.m., on Tuesday, May 9, 1995. You are cordially invited to
attend this meeting and we look forward to seeing you there.
The following Proxy Statement outlines the business to be conducted at the
meeting, which includes the election of one class of directors and two directors
to the remaining term of their designated class and approval of the appointment
of Arthur Andersen LLP as independent auditors for 1995.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR REPRESENTATION AND VOTE
ARE IMPORTANT. WE URGE YOU TO VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD.
Attendance at the meeting will be limited to shareholders of record as of
the close of business on March 24, 1995, or their duly appointed proxy holder
(not to exceed one proxy per shareholder), and to guests of management. If you
or your proxy holder plan to attend this meeting, please complete, sign and
return the enclosed Request for Admittance card.
Thank you for your continued support.
Sincerely,
[LOGO]
JOHN A. GEORGES
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE OWNERS OF COMMON STOCK OF
INTERNATIONAL PAPER COMPANY:
The annual meeting of shareholders of International Paper Company will be held
Tuesday, May 9, 1995, at 9:30 a.m. at the Windsor Court Hotel, 300 Gravier
Street, New Orleans, Louisiana to:
1. Elect one class of directors comprised of four members to the Board of
Directors and two directors to the remaining term of their designated class;
2. Approve the appointment of Arthur Andersen LLP as independent auditors for
1995; and
3. Transact such other business as may properly come before the meeting or any
adjournments thereof.
YOUR BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE FOR ITEMS 1 AND 2.
Shareholders of record at the close of business on March 24, 1995, will be
entitled to vote at the meeting or any adjournments thereof.
By order of the Board of Directors
JAMES W. GUEDRY
SECRETARY
March 31, 1995
<PAGE>
INTERNATIONAL PAPER COMPANY PROXY STATEMENT
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(914) 397-1500
GENERAL INFORMATION
This statement is furnished by the Board of Directors of International Paper
Company (the "Company") in connection with the solicitation of proxies to be
voted at the annual meeting of shareholders to be held on May 9, 1995. Owners of
shares of common stock outstanding are entitled to one vote for each share of
common stock held of record at the close of business on March 24, 1995. As of
that date, there were 126,677,141 shares of common stock outstanding.
The annual report, including the audited financial statements of the Company for
the fiscal year ended December 31, 1994, has been mailed to shareholders with
this Proxy Statement and should be read carefully in conjunction with this Proxy
Statement before voting on any proposals contained herein, as it contains
details of the Company's operations and other relevant disclosures.
PROXY PROCEDURE
Shares eligible to be voted and for which a proxy is properly signed and
returned, will be voted in accordance with the instructions specified thereon.
Where no instruction is received, eligible shares will be voted as recommended
by the Board of Directors in this Proxy Statement. If any other matters come
before the meeting, including any proposal submitted by a shareholder which was
omitted from this Proxy Statement in accordance with the applicable provisions
of the federal securities laws, the persons voting the proxies will vote them in
accordance with their best judgment. As of the time this Proxy Statement was
printed, management was not aware of any other matters to be voted upon. Any
proxy may be revoked at any time before its exercise by submitting a written
revocation or a new proxy, or by the shareholder's attendance and vote at the
annual meeting.
Solicitation of proxies from the Company's shareholders may be undertaken by
directors, officers and employees, as well as by Georgeson & Company Inc.
Payments to that firm as compensation are estimated at approximately $14,500
plus reimbursable expenses. This solicitation may be carried out either by mail,
telephone, telegraph, or personal interview. The cost of any such solicitation
will be borne by the Company.
The Company has a policy of confidentiality in the voting of shareholder proxies
generally and uses the services of its registrar and transfer agent, Chemical
Bank, as independent inspectors of election to receive and tabulate the proxy
vote.
This Proxy Statement and the form of Proxy were sent to shareholders commencing
March 31, 1995.
MEETING ADMITTANCE PROCEDURES
Shareholders of record as of the close of business on March 24, 1995 (or their
duly appointed proxy holder upon verification--not to exceed one proxy per
shareholder) will be entitled to vote and attend the meeting. The following
procedures have been adopted to insure that no inconvenience or delays are
caused to the Company's shareholders or their proxy holders when entering the
meeting.
If you plan to attend the annual meeting in person or will appoint a proxy to
attend the meeting (other than the proxies set forth on the proxy card), please
complete (including the name of the appointed proxy, if any), sign and return
the enclosed Request for Admittance promptly so that an admittance card can be
reserved for you or your proxy in advance of the meeting. These admittance cards
will be delivered to you or your proxy holder upon verification of
identification at the shareholders' admittance counter at the meeting.
Record shareholders who do not have admittance cards reserved for them at the
meeting will be admitted upon verification of ownership at the shareholders'
admittance counter. If you have not appointed a proxy in advance or have changed
the appointed proxy on the Request for Admittance, your duly appointed proxy
2
<PAGE>
who will attend the meeting will be required to present evidence of your
signature on the proxy (a copy of your driver's license or employment
identification card or other identification with your signature) in order to
determine that only valid proxies are admitted and voted.
Beneficial owners of record on March 24, 1995 (or their duly appointed proxy
holder upon verification--not to exceed one proxy per shareholder) can obtain
admittance cards only at the shareholders' admittance counter by presenting
evidence of common stock ownership in the Company. This evidence could be a
proxy from the institution that is the record holder of the stock or your most
recent bank or brokerage firm account statement, along with proper
identification. If you are a beneficial shareholder who will appoint a proxy to
attend the meeting on your behalf, your duly appointed proxy will be required to
comply with the procedures in this paragraph, as well as the admittance
procedures described above for duly appointed proxies not designated in advance
on the Request for Admittance.
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Board is classified into three classes of directors: Class I directors, of
which there are currently four, were elected at the 1992 and 1994 annual
meetings to serve until the 1995 annual meeting; Class II directors, of which
there are currently four, were elected at the 1993 and 1994 annual meetings to
serve until the 1996 annual meeting; and Class III directors, of which there are
currently three, were elected at the 1994 annual meeting to serve until the 1997
annual meeting. Each class is elected for a three-year term.
Eleven regular meetings and three special meetings of the Board of Directors
were held in 1994. In addition, there were 25 Committee meetings. Each director
attended at least 89% of the meetings of the Board and the Committees on which
he or she serves. All of the directors attended an average of 97% of such
meetings of the Board and the Committees on which he or she serves.
In December 1994, a Company affiliate sold 4,639 acres of property in Vermont to
The Conservation Fund, a not-for-profit natural resources conservation entity,
for $967,600, which price approximates the fair market value as determined by
the Company's land utilization department based upon an MAI independent
appraisal. Mr. Noonan, a director of the Company, is chairman and chief
executive officer of The Conservation Fund but did not participate in the sale
negotiations.
Beneficial ownership of current directors in equity securities of the Company is
shown in the table on page 5.
AUDIT COMMITTEE
The functions of the Audit Committee of the Board are to assist the Board in
carrying out its responsibilities for monitoring management's accounting for the
Company's financial results and for the timeliness and adequacy of the reporting
of those results; to discuss and make inquiry into the audits of the Company's
books made internally and by outside independent auditors, the Company's
financial and accounting policies, its internal controls and its financial
reporting; and to investigate and make a recommendation to the Board each year
with respect to the appointment of independent auditors for the following year.
Current members of the Committee, none of whom is an employee of the Company,
are J. C. Pfeiffer (Chairman), W. C. Butcher, A.G. Hansen, P. F. Noonan and R.
B. Smith.
Four meetings of the Committee were held in 1994.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The functions of the Management Development and Compensation Committee are to
review Company policies and programs for the development of management
personnel; to make recommendations to the Board with respect to any proposals
for compensation or compensation adjustments of officers who are also directors
of the Company; to authorize compensation or compensation adjustments for other
elected officers of the Company; to administer the Company's executive bonus and
Long-Term Incentive Compensation Plan; to review and endorse changes in Company
employee retirement and benefits plans; to review officer candidates and endorse
nominees for election as officers; and to make recommendations to the Board with
respect to directors' compensation.
3
<PAGE>
Current members of the Committee, none of whom is an employee of the Company,
are S.C. Gault (Chairman), W.C. Butcher, R. J. Eaton, T.C. Graham, E.T. Pratt,
Jr. and C. R. Shoemate.
Eight meetings of the Committee were held in 1994.
NOMINATING COMMITTEE
The functions of the Nominating Committee are to review the size and composition
of the Board; to review possible director candidates and director nominations
properly presented by shareholders; to recommend to the Board individuals
suitable for election as directors; and to review and recommend annually to the
full Board the slate of nominees for election by the Company's shareholders.
Current members of the Committee, none of whom is an employee of the Company,
are W.C. Butcher (Chairman), D.F. McHenry, J. C. Pfeiffer, E.T. Pratt, Jr. and
C. R. Shoemate.
Three meetings of the Committee were held in 1994.
ENVIRONMENT, HEALTH AND TECHNOLOGY COMMITTEE
The functions of the Environment, Health & Technology Committee are to discuss
and make inquiries into the environmental and safety audits performed by the
Company's internal auditors; to review environmental, safety and health and
technological policies and programs throughout the Company, to assure that they
are appropriate to the short and long-term objectives of the Company in terms of
industry leadership, compliance with federal and state laws and regulations and
social responsibility; and to advise the Board of the effectiveness of these
policies and programs.
Current members of the Committee are T.C. Graham (Chairman), J.T. Dillon, R. J.
Eaton, S.C. Gault, A.G. Hansen and P. F. Noonan.
Three meetings of the Committee were held in 1994.
OTHER COMMITTEES
Membership of the other regular Committees of the Board of Directors is shown on
page 61 of the Company's annual report which accompanies this Proxy Statement.
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS
Any shareholder proposals intended to be presented at the 1996 annual meeting
must be made in writing and received by the Secretary of the Company at the
Company's principal executive offices by the close of business on December 2,
1995, for inclusion in the 1996 Proxy Statement and form of proxy relating to
the meeting. Nomination by shareholders for directors, at a meeting called for
the purpose of electing directors, shall be made in accordance with Article II,
Section 9 of the Company's By-laws, as set forth below:
"Nominations for election to the Board of Directors of the
Corporation at a meeting of the Stockholders may be made by the
Board, or on behalf of the Board by any nominating committee
appointed by the Board, or by any Stockholder of the Corporation
entitled to vote for the election of Directors at such meeting.
Such nominations, other than those made by or on behalf of the
Board, shall be made by notice in writing delivered or mailed by
first class United States mail, postage prepaid, to the Secretary
of the Corporation, and received by him not less than thirty (30)
days nor more than sixty (60) days prior to any meeting of the
Stockholders called for the election of Directors; provided,
however, that if less than thirty-five (35) days notice of the
meeting is given to the Stockholders, such nomination shall have
been mailed or delivered to the Secretary of the Corporation not
later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such
notice shall set forth as to each proposed nominee who is not an
incumbent Director (i) the name, age, business address and, if
known, residence address of each nominee proposed in such notice,
(ii) the principal occupation or employment of each such nominee,
(iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee and by the nominating
Stockholder, and (iv) any other information concerning the nominee
that must be disclosed of
4
<PAGE>
nominees in proxy solicitations pursuant to Rule 14(a) of the
Securities Exchange Act of 1934. Such notice shall be accompanied
by the written consent of each proposed nominee to serve as a
Director of the Corporation. No person shall be eligible for
election as a Director of the Corporation unless nominated in
accordance with the procedures set forth herein.
"The Presiding Officer of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded."
The effect of this By-law is that shareholder nominations for the 1996 election
of directors must be received by the Secretary of the Company not earlier than
March 13, 1996, or later than April 10, 1996, if the annual meeting is held on
the second Tuesday of May 1996.
COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of March 24, 1995, the number of shares of Company
common stock beneficially owned (as defined by the Securities and Exchange
Commission) or otherwise claimed by each current director and each nominee for
director and by all directors and executive officers of the Company as a group.
To the best knowledge of the Company, no person or group beneficially owns more
than 5% of the Company's common stock outstanding, except as set forth below in
the table.
<TABLE>
<CAPTION>
-----------------------------------------------------------
SHARES PERCENT OF TOTAL
NAME OF INDIVIDUAL BENEFICIALLY COMMON STOCK
OR GROUP OWNED (1) OUTSTANDING
-----------------------------------------------------------
<S> <C> <C>
W.C. Butcher 2,592
J.T. Dillon 95,005
R. J. Eaton 1,100
S.C. Gault 8,454
No director or
executive
officer owns as much
J.A. Georges 224,933 as
T.C. Graham 6,580 1/5th of 1%
A.G. Hansen 2,308
D.F. McHenry 2,933
P.F. Noonan 1,025
J.C. Pfeiffer 2,725
E.T. Pratt 2,580
C.R. Shoemate 450
R.B. Smith 2,600
J.P Melican 65,197
C.W. Smith 65,174
M.A. Suwyn 40,928
All directors and
executive officers
as a group 524,584 0.41%
Bank trustee under
Company and subsidiary
employee benefit plans
(2) 10,514,604 8.30%
-----------------------------------------------------------
</TABLE>
(1) Ownership shown includes securities over which the individual has or
shares, directly or indirectly, voting or investment powers, including
shares held in the Restricted Stock Plan for Non-Employee Directors, shares
owned by a spouse or certain relatives and ownership by trusts for the
benefit of such relatives, as required to be reported by the Securities and
Exchange Commission. Certain individuals may disclaim beneficial ownership
of some of these shares, but they are included for the purpose of computing
the holdings and the percentages of common stock owned. Interests in shares
resulting from participation in the Company's Salaried Savings Plan,
Performance Share Awards, and Executive
5
<PAGE>
Continuity Awards, are included above. The above table does not include
424,100 shares represented by stock options granted executive officers under
the Long-Term Incentive Compensation Plan, including options for 167,500
shares for Mr. Georges, 68,600 shares for Mr. Dillon, 54,550 shares for Mr.
Melican, 41,100 shares for Mr. C.W. Smith and 20,650 shares for Mr. Suwyn.
In addition, under the Nonfunded Deferred Compensation Plan for Non-Employee
Directors or the Unfunded Savings Plan, the Directors and executive officers
listed below own the non-voting stock-equivalent Units set forth in the
following chart:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
STOCK STOCK
DIRECTOR/NAMED OFFICER UNITS DIRECTOR/NAMED OFFICER UNITS
----------------------------------------------------------------------------------
<S> <C> <C> <C>
W.C. Butcher 5,448 E.T. Pratt 14,596
J.T. Dillon 9,716 C.R. Shoemate 134
J.A. Georges 37,711 R.B. Smith 5,317
T.C. Graham 7,389 J.P. Melican 7,615
A.G. Hansen 4,073 C.W. Smith 5,001
D.F. McHenry 2,520 M.A. Suwyn 2,346
P.F. Noonan 573
----------------------------------------------------------------------------------
</TABLE>
(2) As of December 31, 1994, State Street Bank & Trust Co., N.A. holds such
shares as the independent trustee in trust funds for employee savings,
thrift, and similar employee benefit plans of the Company and its
subsidiaries ("Company Trust Funds"). In addition, State Street Bank & Trust
Co., N.A. is trustee for various third party trusts and employee benefit
plans and is an Investment Advisor. As a result of its holdings in all
capacities, State Street Bank & Trust Co., N.A. is the record holder of
11,528,650 shares of common stock of the Company. The trustee disclaims
beneficial ownership of all such shares except 1,011,736 shares of which it
has sole power to dispose or to direct the disposition of. The common stock
held by the Company Trust Funds is allocated to participants' accounts and
such stock or the cash equivalent will be distributed to participants upon
termination of employment or pursuant to withdrawal rights. The trustee
votes the shares of common stock held in the Company Trust Funds in
accordance with the instructions of the participants; shares for which no
instructions are received are voted proportionately to those shares voted by
participants.
MATTERS TO BE CONSIDERED AT THE MEETING
ITEM NO. 1--ELECTION OF DIRECTORS
Four (4) directors are to be elected as Class I directors for three-year terms
expiring in 1998. Two (2) directors who joined the Board since the last annual
meeting are to be elected as Class III directors, for terms expiring in 1997.
Each nominee is currently a director of the Company. Election requires the
affirmative vote by the holders of a plurality of outstanding common stock
voting at the annual meeting of shareholders. A plurality means that the six (6)
nominees receiving the largest number of votes cast will be elected. Votes which
are withheld from any nominee, as well as broker non-votes, will not be counted
in such nominee's favor. Shareholders voting at the meeting may not vote for
more than the number of nominees listed in the Proxy Statement. Proxies given to
management to vote will be voted according to instructions given, but only
6
<PAGE>
for nominees listed in the Proxy Statement. The term of the present Class I
directors expires at the adjournment of the 1995 annual meeting. The four
nominees for election at that meeting as Class I directors are listed below:
<TABLE>
<S> <C>
CLASS I NOMINEES--TERM EXPIRING IN 1998
[PHOTO] JOHN T. DILLON, 56, Executive Vice President--packaging since 1987. He
was elected senior vice president--land and timber, liquid packaging and
folding carton and label in 1986 and was vice president and group
executive--land and timber from 1982, assuming in 1985 the additional
responsibility of the wood products group. He is a director of Carter
Holt Harvey Limited, a New Zealand forest products and paper company. He
is a member of the Board of Trustees of the Executive Committee of The
Joint Council on Economic Education. He is the chairman of the Forest
Industries Committee on Timber Valuation and Taxation.
Director since March 1, 1991
[Photo] STANLEY C. GAULT, 69, Chairman and Chief Executive Officer of The
Goodyear Tire & Rubber Company since June 1991. Previously thereto, he
was chairman and chief executive officer of Rubbermaid Incorporated
(1980-1991). He is a director of Avon Products, Inc., PPG Industries,
Inc., The New York Stock Exchange, Inc., Rubbermaid Incorporated and The
Timken Company. He is a trustee and chairman of the board of The College
of Wooster and a director of the National Association of Manufacturers.
Director since January 8, 1980
[Photo] ARTHUR G. HANSEN, 70, Educational Consultant. He was director of
research of the Hudson Institute from 1987 to 1988, chancellor of the
Texas A&M University System from 1982 to 1986, president of Purdue
University from 1971 to 1982 and president of Georgia Institute of
Technology from 1969 to 1971. He is a director of American Electric
Power Company, Inc., The Interlake Corporation, IP Forest Resources
Company (the managing general partner of IP Timberlands, Ltd.) and
Navistar International Corporation. He is a member of the National
Academy of Engineering, a Commissioner of the Indiana Commission for
Higher Education and a fellow of the American Association for the
Advancement of Science.
Director since February 10, 1976
[Photo] ROGER B. SMITH, 69, former Chairman and Chief Executive Officer of
General Motors Corporation from 1981 to 1990, when he retired. He is a
director of Citicorp, IP Forest Resources Company (the managing general
partner of IP Timberlands, Ltd.), Johnson & Johnson and PepsiCo, Inc. He
is a member of The Business Council and is a trustee of the Michigan
Colleges Foundation, Inc. and the Sloan Foundation.
Director since December 1, 1989
</TABLE>
7
<PAGE>
The two nominees for election as Class III directors are listed below.
<TABLE>
<S> <C>
CLASS III NOMINEES--TERM EXPIRING IN 1997
[PHOTO] ROBERT J. EATON, 55, Chairman and Chief Executive Officer of the
Chrysler Corporation. He joined Chrysler in 1992, as vice chairman and
chief operating officer and a member of the Board. Prior to joining
Chrysler, his 29-year career with General Motors included various
management positions, the most recent being president of General Motors
Europe (1988-1992). He is a fellow of both the Society of Automotive
Engineers and the Engineering Society of Detroit and a member of the
National Academy of Engineering. He is a director of the American
Automobile Manufacturers Association and is a member of The Business
Council, The Business Roundtable, and the U.S./Japan Business Council.
He also is a member of the President's Advisory Committee on Trade
Policy and Negotiations and serves as a director of Detroit Renaissance,
United Way of Southeastern Michigan, Economic Club of Detroit, Detroit
Symphony Orchestra and the Michigan Leaders Health Care Group.
Director since January 10, 1995
[Photo] CHARLES R. SHOEMATE, 55, Chairman, President and Chief Executive Officer
of CPC International Inc. He was elected president and a member of its
board of directors in 1988, chief executive officer in August 1990 and
chairman in September 1990. He joined CPC International in 1962 and
progressed through a variety of positions in manufacturing, finance and
business management within the consumer foods and corn refining
businesses. In 1981, he was named president of Canada Starch Company,
CPC's Canadian subsidiary. He was elected vice president of the
corporation in 1983, and in 1986 became president of the Corn Refining
Division. He is a director of CIGNA Corporation; the Grocery
Manufacturers of America, Inc.; and the Americas Society. He is a member
of the Business Roundtable and part of its Education Task Force; a
trustee of the Committee for Economic Development; and a trustee of The
Conference Board.
Director since November 1, 1994
</TABLE>
Other directors who will continue to serve are listed below under their
respective classes. None of these directors are to be elected at the 1995 annual
meeting.
<TABLE>
<S> <C>
CLASS II DIRECTORS--TERM EXPIRING IN 1996
[PHOTO] WILLARD C. BUTCHER, 68, former Chairman and Chief Executive Officer of
The Chase Manhattan Bank, N.A. He is a director of ASARCO, Incorporated,
M.I.M. Holdings, Ltd. (Australia), Olympia & York Companies (U.S.A.) and
Texaco Inc. He is a member of The Business Council, the Advisory
Committee for Daimler-Benz of North America and vice chairman of the
Lincoln Center for the Performing Arts, Inc. He is a trustee emeritus of
the American Enterprise Institute for Public Policy Research and a
fellow emeritus of Brown University and a trustee of Business Committee
for the Arts, Inc.
Director since August 1, 1989
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
[Photo] THOMAS C. GRAHAM, 68, Chairman and Chief Executive Officer of AK Steel
Holding Corporation and AK Steel Corporation. He was elected to the
posts concurrent with the formation of AK Steel Holding Corporation, a
publicly held corporation which emerged from the privately-held Armco
Steel Company, L.P. in April of 1994. He had been named president and
chief executive officer of Armco Steel in June 1992. He was formerly
chairman and chief executive officer of Washington Steel Corporation
until he assumed his current position in 1992. He was vice
chairman-steel and diversified group and executive director of USX
Corporation from 1986 to 1991. He was named vice chairman and chief
operating officer -- steel and related resources, U.S. Steel
Corporation, in 1983. Prior to that time he served as president and
chief executive officer of Jones & Laughlin Steel Corporation. He is a
director of Hershey Foods Corporation and IP Forest Resources Company
(the managing general partner of IP Timberlands, Ltd.).
Director since October 14, 1986
[Photo] JANE C. PFEIFFER, 62, Management Consultant. She is a director of
Ashland Oil, Inc., IP Forest Resources Company (the managing general
partner of IP Timberlands, Ltd.), J.C. Penney Company, Inc. and The
Mutual Life Insurance Company of New York. She is a trustee of the
Conference Board, The University of Notre Dame and the Overseas
Development Council and a member of The Council on Foreign Relations.
Director since June 14, 1977
[Photo] EDMUND T. PRATT, JR., 68, former Chairman of the Board (from 1972 to
1992) and Chief Executive Officer from (1972 to 1991) of Pfizer Inc. He
is chairman emeritus and a director of Pfizer, Inc., a director of
Minerals Technologies, Inc., The Chase Manhattan Corporation, The Chase
Manhattan Bank, N.A., General Motors Corporation and chairman of the
board of WCD Investors Inc. He is a director and member of the Executive
Committee of AEA Investors, Inc. and a member of the Board of Trustees
of Logistics Management Institute.
Director since September 9, 1975
CLASS III DIRECTORS--TERM EXPIRING IN 1997
[PHOTO] JOHN A. GEORGES, 64, Chairman and Chief Executive Officer. He was
elected president in 1981, chief executive officer in 1984 and became
chairman and chief executive officer in 1985. He has been a director and
chairman of the board of IP Forest Resources Company (the managing
general partner of IP Timberlands, Ltd.) since 1985. He is a director of
AK Steel Holding Corporation, Ryder Systems, Inc., Scitex Corporation
Ltd. and Warner-Lambert Company. He is a member of The Business Council
and the Policy Committee of the Business Roundtable. He is a board
member of the Business Council of New York State, a member of The
Trilateral Commission and the President's Advisory Committee for Trade
Policy and Negotiations.
Director since February 1, 1980
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
[Photo] DONALD F. MCHENRY, 58, University Research Professor of Diplomacy and
International Affairs at Georgetown University since 1981. He is
president of the IRC Group and a director of American Telephone and
Telegraph Company, The Coca-Cola Company, Bank of Boston Corporation,
the First National Bank of Boston, SmithKline Beecham plc and the
Institute for International Economics. He is a trustee of the Johnson
Foundation, The Brookings Institution, The Mayo Foundation and Columbia
University; and chairman of the board of Africare.
Director since April 14, 1981
[Photo] PATRICK F. NOONAN, 52, Chairman and Chief Executive Officer of The
Conservation Fund (a nonprofit organization dedicated to conserving
America's land and water resources) since 1985. Prior to that he was
president of The Nature Conservancy. He is a trustee of The National
Geographic Society and the American Farmland Trust. He is also a
director of Ashland Oil, Inc., the Fund for Government Investors, Saul
Centers and the American Gas Association Index Fund. He is a member of
the Board of Visitors of Duke University School of the Environment.
Director since December 14, 1993
</TABLE>
ITEM NO. 2--APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS FOR 1995
The Audit Committee has considered the qualifications of Arthur Andersen LLP and
recommended that the Board of Directors appoint them as independent auditors of
the consolidated financial statements of the Company for the year 1995. This
included a review of their performance in prior years, as well as their
reputation for integrity and competence in the fields of accounting and
auditing. The Committee has expressed its satisfaction with Arthur Andersen LLP
in all of these respects. The Committee's review also included inquiry
concerning litigation involving Arthur Andersen LLP and the existence of any
investigations by the Securities and Exchange Commission into the financial
reporting practices of the companies audited by them. In this respect, the
Committee concluded that the ability of Arthur Andersen LLP to perform services
for the Company is not in any way adversely affected by any such investigation
or litigation.
The Board of Directors desires to obtain shareholders' approval of the Board's
action in appointing Arthur Andersen LLP, as independent auditors of the
consolidated financial statements of the Company for the year 1995.
A representative of Arthur Andersen LLP will be present at the annual meeting to
respond to appropriate questions and to make a statement if he or she desires
and answer appropriate questions.
Approval of Item No. 2 requires the affirmative vote of the holders of a
majority of the shares voting on this proposal. Abstentions and broker non-votes
will not be counted as having voted on this Item No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS OF THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY FOR 1995
10
<PAGE>
REPORT OF THE MANAGEMENT DEVELOPMENT
AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
As of December 31, 1994, the Management Development and Compensation Committee
(the "Committee") consisted of five outside directors: Willard C. Butcher,
Stanley C. Gault, Thomas C. Graham, Edmund T. Pratt, Jr. and Charles R.
Shoemate. Mr. Gault is chairman. The Committee met eight times in 1994 with a
96% attendance record. The chairman and chief executive officer of the Company
was not present during any discussion of his compensation.
GENERAL
Total compensation received by the named executive officers consists of salary,
cash bonus, stock options and restricted stock. The cash bonus and long-term
incentives introduce considerable risk in the total executive compensation
package, since the value of these components may vary significantly from year to
year based on Company performance, individual performance and Company stock
price.
The Committee periodically reviews each component of the Company's executive
compensation program to ensure that pay levels and incentive opportunities are
competitive and that incentive opportunities are linked to Company performance.
The Committee relates total compensation levels for the Company's executives to
the compensation paid at a select group of comparator companies. In 1994, these
companies were surveyed by the independent compensation consulting firms, Hewitt
Associates and The Hay Group, and included a cross section of approximately 40
manufacturing companies in industries that are close in size ($15 billion sales)
and manufacturing complexity to International Paper and compete directly with
International Paper for executive talent. The Committee reviews and approves the
selection of companies used for compensation comparisons. International Paper
also uses the independent compensation consulting firms of F. W. Cook and
Company, and Hewitt Associates to advise the Committee. In 1994, the Company's
compensation levels for each component of pay were targeted to the median of the
comparator group's competitive pay levels.
The Company's Management Incentive Plan (MIP) links payment of an annual cash
bonus directly to achievement of a specified level of net earnings, which
accounts for 80% of target bonus funds available, and predetermined targets for
qualitative nonfinancial performance factors, which were quality, safety and
employee development, which account for the remainder. In 1994, the Company
achieved a level of net earnings and performance compared to predetermined
nonfinancial targets which generated a bonus fund. Performance against the
financial target for 1994 was exceeded. Performance compared to the nonfinancial
targets for 1994 was attained or exceeded.
The Company's Long-Term Incentive Compensation Plan and amendments, which were
approved by the shareholders in 1989 and 1994, respectively, provides for awards
of stock options and restricted stock in the form of performance shares which
are made in amounts which the Committee determines to be competitive based on
the surveys described above. Stock options are granted at fair market value at
the time of the award and are restricted for four years. Contingent awards of
performance shares are made in December of the year preceding a five-year Award
Period. At the end of the five-year Award Period, the number of shares earned is
determined by financial performance which the Committee measures by comparing
the Company's and Peer Paper Group's (eight companies which comprise the Peer
Line of the Performance Graphs on page 13) and weighing equally, the five-year
average return on equity and earnings per share. If the threshold level of
performance is not attained, no shares are earned. Above the threshold, the
contingent award is reduced if the target goal is not met or supplemented if the
target goal is exceeded. Payouts of earned performance shares are made in
Company stock at the end of the five-year Award Period. One half of the shares
earned is mandatorily deferred for an additional three years, and payout is
subject to the executive's continued employment throughout that period.
From time to time executive continuity awards are made with long-term vesting
requirements which are designed to encourage retention of a small number of
senior executives designated by the Committee. The size of an award, and any
adjustments, is determined by the Committee to reflect an executive's level of
responsibility and individual performance. As provided by the Company's
Long-Term Incentive Compensation Plan, a continuity award may consist of
restricted stock or a tandem grant of restricted stock together
11
<PAGE>
with a related non-qualified stock option which is granted at fair market value
and restricted until a specified age. If the stock option is exercised, then the
related restricted shares are cancelled; if any portion of the stock option is
not exercised by the date the continuity award terminates, then the less
valuable component of the tandem award is cancelled.
The Committee has considered the provisions of the Omnibus Budget Reconciliation
Act of 1993 which limit deductibility of compensation paid to named executive
officers which exceeds $1 million. The Committee endorsed amendments to the
Company's Long-Term Incentive Compensation Plan in 1994 to make certain sections
of the plan compatible with those provisions, while maintaining the Committee's
flexibility in the Company's Management Incentive Plan to exercise business
judgment in determining awards to take account of business conditions or the
performance of individual executives. In 1994, the Committee recognized that a
portion of Mr. Georges's total current cash compensation is above $1 million.
1994 EXECUTIVE OFFICERS' COMPENSATION
The Committee approved merit salary increases for the named executive officers
based on competitiveness of the executives' pay and personal performance. In
June 1994, Mr. Georges' salary was increased to $985,000, with the increase
covering the twelve month period since his last salary adjustment and
approximating the median increase awarded CEOs in the group of surveyed
companies referred to above. Salaries paid to the named executive officers in
1994, including Mr. Georges' salary, were competitively positioned from slightly
above to below the median of the survey companies.
MIP awards for the named executive officers in 1994 were determined by the
Committee after review of respective levels of responsibility, personal
performance and Company performance compared to the predetermined 1994 financial
and nonfinancial goals. Actual awards to all named executive officers
represented 11.9% of the bonus fund. All named executive officers' MIP awards
increased compared to 1993 in recognition of the 33% improvement in earnings
before special charges and implementation of cost reduction and organization
redesign programs that are expected to achieve sustained improvement in earnings
through 1995.
The performance share guidelines described above were used by the Committee to
determine contingent performance share awards in December 1994 to the named
executive officers for the 1995-1999 Award Period and the payout in 1994 of
earned shares for the 1989-1993 Award Period. The pretax values of Mr. Georges'
performance share awards in 1994 were: $701,238 in contingent restricted stock
for the 1995-1999 Award Period; $183,288 in deferred restricted stock for the
Award Period 1989-1993; and $183,288 in earned shares (long-term incentive
payout) for the 1989-1993 Award Period. The shares earned for the 1989-1993
Award Period reflect Company performance which exceeded performance of the Peer
Paper Group.
The Committee granted stock options in 1994 based on competitive surveys
described earlier, without consideration of the amount of stock options already
held by named executive officers. Mr. Georges' 1994 stock option award was
19,000 shares, the same as his award in 1992 and 1993.
No executive continuity awards were granted or adjusted for any of the named
executive officers in 1994.
THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
Willard C. Butcher
Stanley C. Gault, chairman
Thomas C. Graham
Edmund T. Pratt, Jr.
Charles R. Shoemate
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer or other employee of the Company served as a member of the
Committee or as a member of the compensation committee on the board of any
company where an executive officer of such company is a member of the Committee.
Mr. Graham, a member of the Committee, is the chairman and chief executive
officer of AK Steel Holding Corporation; Mr. Georges, chairman and chief
executive officer of the Company, was elected to the board of AK Steel Holding
Corporation in 1994.
12
<PAGE>
PERFORMANCE GRAPHS
The following charts compare a $100 investment in International Paper stock with
a similar investment in a peer group of eight key competitor companies and the
S&P 500. The charts portray total nominal return, 1989-1994 and 1984-1994,
assuming reinvestment of dividends. The Company has presented information
pertaining to total shareholder return over two different time periods since all
holders of the common stock did not acquire their investment in International
Paper on the same date. The Company believes a presentation in this format more
accurately reflects the financial return provided to the holders of its Common
Stock which may not be evident if only one time period was highlighted.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
International Paper 100 98 133 128 134 152
S&P 500 Index 100 97 126 136 150 152
Peer Group 100 81 110 123 140 144
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL PAPER S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
1984 100 100 100
1985 99 132 115
1986 151 157 154
1987 175 165 167
1988 198 192 178
1989 249 253 195
1990 243 245 157
1991 330 320 214
1992 318 344 239
1993 332 379 272
1994 378 384 281
</TABLE>
* Total return assumes reinvestment of dividends.
** Includes Boise Cascade, Champion, Georgia Pacific, Mead,
Stone Container, Union Camp, Westvaco, and Weyerhauser.
13
<PAGE>
ADDITIONAL INFORMATION
REGARDING EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is approved by the
Committee except for the compensation of the officer-directors, which is
recommended by the Committee and approved by the Board of Directors.
The following tables set forth information with respect to the Chairman and
Chief Executive Officer and the four most highly compensated executive officers
of the Company for the years 1992-1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION CONTINGENT AWARDS
---------------------------------- --------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY BONUS COMPENSATION AWARD OPTIONS COMPENSATION
NAME AND POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Georges as 1994 $ 953,750 $1,115,000 $ 0 $1,051,857 19,000 $ 198,548
Chief Executive Officer 1993 $ 880,833 $ 525,000 $ 0 $ 819,672 19,000 $ 136,571
1992 $ 840,000 $ 555,000 $ 0 $ 794,195 112,632 $ 85,304
John T. Dillon as 1994 $ 430,000 $ 370,000 $ 0 $ 398,690 8,000 $ 96,681
Executive Vice 1993 $ 396,667 $ 230,000 $ 0 $ 332,316 8,000 $ 77,234
President 1992 $ 367,500 $ 240,000 $ 0 $ 322,040 54,900 $ 33,397
James P. Melican as 1994 $ 420,000 $ 345,000 $ 0 $ 362,664 32,296 $ 88,763
Executive Vice 1993 $ 386,667 $ 215,000 $ 0 $ 302,430 7,700 $ 69,747
President 1992 $ 357,917 $ 225,000 $ 0 $ 293,084 16,238 $ 20,578
Mark A. Suwyn as 1994 $ 363,500 $ 345,000 $ 0 $ 362,664 7,700 $ 58,617
Executive Vice 1993 $ 323,333 $ 210,000 $ 0 $1,193,205 6,800 $ 53,528
President 1992 $ 250,000 $ 175,000 $ 0 $2,612,669 6,150 $ 24,546
C. Wesley Smith as 1994 $ 333,750 $ 335,000 $ 357,784 $ 362,664 7,700 $ 78,922
Executive Vice 1993 $ 283,333 $ 190,000 $ 0 $ 944,705 6,800 $ 55,390
President 1992 $ 238,000 $ 190,000 $ 0 $ 786,035 4,300 $ 132,037
-----------------------------------------------------------------------------------------------------------------
<FN>
(1) Salary paid in 1994 including amounts deferred pursuant to Section 401(k)
of the Internal Revenue Code or pursuant to unfunded deferral arrangements.
(2) Management Incentive Plan awards paid in 1995, 1994 and 1993 attributable
to 1994, 1993 and 1992, respectively, including amounts deferred pursuant
to Section 401(k) of the Internal Revenue Code or pursuant to deferral
arrangements reported in the year earned.
(3) Represents settlement of tax equalization with respect to Mr. Smith's
expatriate assignment from 1989 to 1992.
(4) Represents (a) 150% of the value of gross target restricted performance
shares contingently awarded in 1994 for the 1995-1999 award period, in 1993
for the 1994-1998 award period and in 1992 for the 1993-1997 award period,
which is the maximum achievable for those award periods; only 100% of the
target restricted performance shares are earned if the target goal is met
for an award period, with the awards being reduced if the goal is not met
or entirely forfeited if a predetermined threshold goal is not met; (b)
150% of the value of incremental maximum awards for prior award periods
made upon promotion, subject to the same contingencies; and (c) the value
of continuity awards of $745,500 and $591,000 in 1993 and 1992 respectively
for Mr. Suwyn and $497,000 in 1993 for Mr. Smith. The number and dollar
value of restricted stock holdings at December 31, 1994 are as follows:
104,673/$7,889,727 for Mr. Georges; 46,048/$3,470,868 for Mr. Dillon;
44,925/$3,386,222 for Mr. Melican; 37,382/$2,817,668 for Mr. Suwyn and
40,673/$3,065,727 for Mr. Smith. These numbers include the restricted stock
portion of the tandem awards of restricted stock/options made to the
respective individuals under continuity awards. Dividends are paid on
restricted shares.
(5) Includes replacement options if applicable. These figures do not include
the tandem option awards made as part of the continuity awards referred to
in footnote (4) above insofar as the awards are characterized as restricted
stock awards. Such tandem options were for 40,000 and 60,000 shares for Mr.
Suwyn in 1993 and 1992, respectively, and for 40,000 shares for Mr. Smith
in 1993 and are restricted as to exercise prior to age 62. In 1994, there
were no new continuity awards made to the named executive officers.
(6) 1994 totals represent Company contributions to the Salaried Savings Plan
and Unfunded Savings Plan, premium payments grossed up for taxes for the
Executive Supplemental Insurance Plan (ESIP) and accruals for ESIP lump sum
dividend payments as follows: $71,112, $68,452 and $58,984 for Mr. Georges;
$32,478, $43,358 and $20,845 for Mr. Dillon; $31,290, $37,150 and $20,323
for Mr. Melican; $28,561, $30,056 and $0 for Mr. Suwyn; and $26,589,
$35,112 and $17,221 for Mr. Smith.
</TABLE>
14
<PAGE>
The table below sets out information on the option grants made in 1994 to the
named executive officers:
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED COMPOUND ANNUAL GROWTH RATES
OF STOCK PRICE APPRECIATION FOR OPTION TERM (2)
INDIVIDUAL GRANTS
---------------------------------------------------- ------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE OR
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME AND POSITION (#)(1) 1994 ($/SH) DATE 0% 5% 10%
------------------------------------------------------------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Georges as 19,000 1.42% $ 73.625 01/11/04 $ 0 $771,239 $1,899,599
Chief Executive
Officer
John T. Dillon as 8,000 0.60 % $ 73.625 01/11/04 $ 0 $324,732 $ 799,831
Executive Vice
President
James P. Melican 3,746 0.28 % $ 77.125 02/10/96 $ 0 $ 15,681 $ 31,425
as Executive Vice 2,126 0.16 % $ 77.125 02/09/97 $ 0 $ 17,543 $ 36,015
President 2,324 0.17 % $ 76.125 02/09/97 $ 0 $ 18,897 $ 38,791
2,285 0.17 % $ 76.125 01/12/98 $ 0 $ 27,418 $ 57,576
2,515 0.19 % $ 77.125 01/12/98 $ 0 $ 30,574 $ 64,204
4,800 0.36 % $ 77.125 01/10/99 $ 0 $ 79,780 $ 171,810
6,800 0.51 % $ 77.125 01/08/01 $ 0 $178,363 $ 404,645
7,700 0.58 % $ 73.625 01/11/04 $ 0 $312,555 $ 769,838
Mark A. Suwyn as 7,700 0.58 % $ 73.625 01/11/04 $ 0 $312,555 $ 769,838
Executive Vice
President
C. Wesley Smith as 7,700 0.58 % $ 73.625 01/11/04 $ 0 $312,555 $ 769,838
Executive Vice
President
--------------------------------------------------------------------------------------------------------------------------
Executive Officer 103,996 7.79 % (3) (3) $ 0 $3,203,336 $7,693,312
Group
All shareholders N/A N/A N/A N/A $ 0 $5,859,995,413 $14,850,378,915
--------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each option granted may be replaced upon exercise. This means that a new
option is granted for the same number of shares as is exercised, with the
then current market value becoming the new exercise price. The replacement
option does not extend the term of the original option. Options may not be
replaced more than three times.
(2) The dollar amounts under these columns are the result of calculations at
0%, and at the 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the stock
price. The Company did not use an alternative formula for a grant date
valuation, as it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors. No gain to the optionee is possible without an increase in stock
price, which will benefit all shareholders commensurately. A zero percent
gain in stock price will result in zero dollars for the optionee.
(3) Other than replacement grants, all stock option grants in 1994 were at an
exercise price of $73.625 per share, expiring January 11, 2004.
</TABLE>
15
<PAGE>
The table below sets out information on options exercised and options
outstanding.
AGGREGATED OPTION EXERCISES IN 1994
AND DECEMBER 31, 1994 OPTION VALUES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/94
SHARES VALUE REALIZED ($) OPTIONS AT 12/31/94 (#)(5) ($)(5)
ACQUIRED ON ---------------------- -------------------------- ------------------------
EXERCISE AGGREGATE ANNUALIZED RESTRICTED UNRESTRICTED RESTRICTED
NAME AND POSITION (1) (#)(1) (1) (2) UNRESTRICTED (3) (4) (3)(4)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Georges as 11,322 $ 159,924 $ 54,831 82,150 76,000 $ 785,221 $ 577,125
Chief Executive Officer
John T. Dillon as 7,200 $ 31,500 $ 27,000 32,700 31,000 $ 311,250 $ 234,000
Executive Vice
President
James P. Melican as 24,596 $ 690,266 $ 138,192 28,650 29,900 $ 160,815 $ 157,850
Executive Vice
President
Mark A. Suwyn as No Exercises N/A N/A 0 20,650 $ 0 $ 106,850
Executive Vice
President
C. Wesley Smith as No Exercises N/A N/A 10,300 23,100 $ 141,800 $ 221,788
Executive Vice
President
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) The number of incremental shares retained on exercises is as follows: 282
for Mr. Dillon and 5,602 for Mr. Melican.
(2) Represents the aggregate incremental value realized divided by the number
of years the option was held prior to exercise.
(3) All options are exercisable under the plan upon grant; however, columns (e)
and (g) indicate the number and value of options, the underlying shares of
which, while exercisable, cannot be sold or are otherwise restricted.
(4) Total value of options (market value minus exercise price) based on fair
market value of company stock of $75.375, as of December 31, 1994.
(5) Options granted as part of the tandem awards of restricted stock/options
made as continuity awards are not included; these awards are counted as
restricted stock awards and holdings.
</TABLE>
16
<PAGE>
RETIREMENT BENEFITS
The following table shows the total estimated annual pension benefits payable
for the named executive officers under the Company's qualified and supplementary
retirement plans upon retirement at age 65, calculated on a straight life
annuity basis and reduced by a Social Security offset:
COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
PENSIONABLE
REMUNERATION CREDITABLE YEARS OF SERVICE
-----------------------------------------------------------------------------
5 10 15 20 25 30
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 600,000 $ 150,000 $ 190,527 $ 285,790 $ 293,118 $ 293,118 $ 293,718
$ 800,000 $ 200,000 $ 255,527 $ 383,290 $ 393,118 $ 393,118 $ 393,918
$1,000,000 $ 250,000 $ 320,527 $ 480,790 $ 493,118 $ 493,118 $ 494,118
$1,500,000 $ 375,000 $ 483,027 $ 724,540 $ 743,118 $ 743,118 $ 744,618
$2,000,000 $ 500,000 $ 645,527 $ 968,290 $ 993,118 $ 993,118 $ 995,118
$2,500,000 $ 625,000 $ 808,027 $1,212,040 $1,243,118 $1,243,118 $1,245,618
-----------------------------------------------------------------------------
</TABLE>
"Pensionable Remuneration" for purposes of the table above means salary,
bonus and compensation deferred under the Unfunded Savings Plan or awards
deferred under the MIP.
Retirement benefits are payable under one or more of the following plans: a
qualified plan covering all salaried employees which provides pension benefits
based on final average earnings; a supplementary plan which provides a make-up
of qualified plan benefits limited by the imposition of statutory Code
limitations; and a supplementary plan covering designated senior managers which
provides supplemental benefits to the qualified plan. At December 31, 1994, the
number of creditable years of service and the currently applicable average
pensionable remuneration under the retirement plans for Mr. Georges were 15.58
years and $2,068,750; for Mr. Dillon, 27.92 years and $800,000; for Mr. Melican,
10.92 years and $765,000; for Mr. Suwyn, 2.83 years and $708,500; and for Mr.
Smith, 14.33 years and $668,750.
COMPENSATION OF DIRECTORS
The compensation of each non-employee director of the Company is a retainer fee
of $36,000 per year plus fees of $1,200 for each board and committee or other
meeting attended. Directors may elect to defer receipt of all or part of their
remuneration until a later date under a deferred compensation plan, at which
time the director will be paid in cash equal to (1) the cash amount deferred
plus interest at the higher of 6% per annum or the yield of U.S. Treasury bills
or (2) the value at the time of payment of units equivalent to the value of
Company common stock credited to the director's account at the time of each
deferral, plus dividend equivalents. Employees of the Company who are also
directors receive no compensation for services as a director or for attendance
at board or committee meetings.
The Company has established a Retirement Plan for Non-Employee Directors which
provides that directors who retire from service when they attain the mandatory
retirement age of 72 and have ten years of service, will receive an annual
retirement benefit equal to 100% of the annual retainer fee. The Plan also
provides for early retirement after attaining age 65 with at least five years of
service. If early retirement is taken, the retirement benefit is reduced by
increments of 10% for each year less than ten years of service, and is further
reduced by increments of 4% for each year prior to age 72 that the early
retirement payments begin.
In addition, under the Non-Employee Directors Restricted Stock Plan, awards of
900 shares of common stock are made upon the election or re-election of a
director to a full three-year term, or the appointment of a non-employee
director to fill an unexpired term (in which latter event the number of shares
to be awarded
17
<PAGE>
will be a pro-rata portion of the number issued to non-employee directors
elected to serve for a full term at the most recent annual meeting of
shareholders). Awards made in 1994 were 900 shares each for Class III directors,
pro-rata awards of 300 shares for two directors reclassified as Class I
directors and 600 shares for one director reclassified as a Class II director,
and a pro-rata award of 150 shares for one newly elected director. Directors
receive dividend payments represented by the shares awarded under the Restricted
Stock Plan, currently at $0.42 per share per quarter.
Further, four of the non-employee directors of the Company serve as directors of
IP Forest Resources Company ("IPFR"), a wholly-owned subsidiary which acts as
the managing general partner of IP
Timberlands, Ltd., a New York Stock Exchange-listed limited partnership. As
such, each of the four non-employee directors receives a retainer fee of $7,000
per year plus a fee of $1,200 for each IPFR board meeting attended. These fees
are paid by IPFR. There were four meetings of the board in 1994.
INDEMNIFICATION INSURANCE AND CONTRACTS
The Company provides liability insurance for the Company's directors and all
elected officers, as well as contractual arrangements with directors and certain
officers of the Company, agreeing to compensate them for costs and liabilities
incurred in actions brought against them while acting as directors or officers.
On June 15, 1994, the Company amended the aforementioned policies with Federal
Insurance Company at a current annual premium cost aggregating $525,825, such
policies expiring on June 15, 1995. No monies have been paid under such policies
by the carrier or by the Company under the contractual arrangements.
TERMINATION AGREEMENTS
The Company has agreements with members of the executive officer group,
providing for payments and other benefits if there is a change in control of the
Company and the officer's employment is terminated (i) by the Company or its
successor, other than for cause, disability or retirement, or (ii) by the
officer if the chief executive officer of the Company ceases to hold that
position for reasons other than cause, retirement or disability, or if the
officer determines that by reason of adverse changes in, among other things, the
officer's authority, compensation, duties, office location or responsibilities,
the officer is unable to perform the duties and responsibilities of the position
the officer held immediately prior to the change in control. These agreements
provide that if the officer's employment terminates under the circumstances
described above, the officer will receive: (a) continuation of medical and
dental insurance coverage until age 65 or eligibility to join a comparable plan
sponsored by another employer; (b) retiree medical coverage comparable to the
Company's pre-change in control retiree medical plan; (c) a lump-sum payment
equal to (i) his annual salary at termination together with his most recent
short-term annual incentive compensation payment during the year preceding
termination, multiplied by the smaller of the number "three" or the number of
years between the termination date and the date he reaches age 65 and (ii) an
amount necessary to offset any special federal excise tax on all payments
received under the termination agreement.
In addition to the foregoing provisions, Mr. Georges' agreement can be triggered
by a voluntary termination at any time within 18 months of the change in
control. The agreement provides him with the above benefits as well as (a)
payment of vested benefits under the pension plan which entitlement shall
include payments made under the agreement which constitute "compensation" under
the pension plan; (b) a lump-sum payment equal to the difference between (i) the
actuarial value on termination date of accrued vested pension benefits and (ii)
the actuarial value on termination date of what accrued pension benefits would
have been if the period and payments set out in (c)(i) and (c)(ii) below were
recognized under the pension plan; (c) a lump-sum payment equal to (i) his
annual salary at termination, (ii) the average of his short-term incentive
compensation award for three years preceding termination and (iii) the value of
his average earned award under the PSP for three years preceding termination,
multiplied by the number of years between the termination date and the date he
reaches age 65; (d) a lump-sum payment equal to the value of any deferred
incentive compensation or PSP awards and unvested Company matching contributions
under the SSP; (e) stock options equal to the average number of options awarded
during the three years preceding
18
<PAGE>
termination, multiplied by the number of years between the termination date and
the date he reaches age 65, plus the extension of each option held until the end
of the normal term of such option if he had not left the Company.
In addition to the foregoing, the Long-Term Incentive Compensation Plan contains
provisions that release restrictions from stock awards and stock options for all
members of the group if there is a change in control of the Company. Also, the
Supplemental Retirement Plan for senior managers provides that if a change in
control of the Company occurs, pension benefits will vest immediately and the
minimum benefit will be increased from 25% to 50% of pensionable remuneration.
The Company has authorized a grantor trust under Sections 671 through 677 of the
Code in connection with the Company's benefit plans and termination agreements.
Under the grantor trust, the trustee will pay the beneficiaries of the trust the
amounts to which they are entitled under such plans and agreements subject to
claims of the Company's creditors.
19
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated February 9, 1995 included in the
Company's 1994 Annual Report to Shareholders.
ARTHUR ANDERSEN LLP
New York, N.Y.
March 24, 1995
EXHIBIT 24
POWER OF ATTORNEY
Know all Men By These Presents, that the undersigned hereby
constitutes and appoints JAMES W. GUEDRY and JAMES P. MELICAN and
each of them (with full power to each of them to act alone) their true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for them on their behalf and in their name, place and stead, in
any and all capacities, to sign, execute and affix their seal thereto and file
the Annual Report of International Paper Company on Form 10-K (or any other
appropriate form), under the Securities Exchange Act of 1934, as amended,
together with any and all amendments to such Annual Report and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities Exchange Commission, granting unto said attorneys-in-fact,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises in order
to effectuate the same, for all intents and purposes, and that the undersigned
hereby ratify and confirm all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
Executed on the date set forth opposite their names.
Name Title Date
---- ----- ----
/s/ John T. Dillon
------------------------ Executive Vice March 14, 1995
(John T. Dillon) President and Director
/s/ Willard C. Butcher
------------------------ Director March 14, 1995
(Willard C. Butcher)
/s/ Robert J. Eaton
------------------------ Director March 14, 1995
(Robert J. Eaton)
/s/ Stanley C. Gault
------------------------ Director March 14, 1995
(Stanley C. Gault)
/s/ Thomas C. Graham
------------------------ Director March 14, 1995
(Thomas C. Graham)
/s/ Arthur G. Hansen
------------------------ Director March 14, 1995
(Arthur G. Hansen)
Name Title Date
---- ----- ----
/s/ Donald F. McHenry
------------------------ Director March 14, 1995
(Donald F. McHenry)
/s/ Patrick F. Noonan
------------------------ Director March 14, 1995
(Patrick F. Noonan)
/s/ Jane C. Pfeiffer
------------------------ Director March 14, 1995
(Jane C. Pfeiffer)
/s/ Edmund T. Pratt, Jr.
------------------------ Director March 14, 1995
(Edmund T. Pratt, Jr.)
/s/ Charles R. Shoemate
------------------------ Director March 14, 1995
(Charles R. Shoemate)
/s/ Roger B. Smith
------------------------ Director March 14, 1995
(Roger B. Smith)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
(Unaudited)
(In millions, except per-share amounts)
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 270
<SECURITIES> 0
<RECEIVABLES> 2,338
<ALLOWANCES> (97)
<INVENTORY> 2,075
<CURRENT-ASSETS> 4,830
<PP&E> 16,190
<DEPRECIATION> (7,051)
<TOTAL-ASSETS> 17,836
<CURRENT-LIABILITIES> 4,034
<BONDS> 4,464
<COMMON> 128
0
0
<OTHER-SE> 6,386
<TOTAL-LIABILITY-AND-EQUITY> 17,836
<SALES> 14,966
<TOTAL-REVENUES> 14,966
<CGS> 11,143
<TOTAL-COSTS> 13,953
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 349
<INCOME-PRETAX> 664
<INCOME-TAX> 232
<INCOME-CONTINUING> 432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (75)
<NET-INCOME> 357
<EPS-PRIMARY> 2.85
<EPS-DILUTED> 2.84
</TABLE>
<PAGE>
Introduction
The International Paper Company Unfunded Savings Plan (the USP or Plan) is a
savings plan designed to provide you with an opportunity to save through your
own deferrals of pay and through company matching contributions.
The USP is an unfunded deferred compensation plan. This means that the pay
which you defer under the USP and any company matching contributions credited to
your account are not invested in a separate trust. Instead, all deferred amounts
will be paid directly by the company out of its general assets at the time when
benefits become due and payable under the Plan.
The Plan was amended and restated effective January 1, 1995.
This booklet is intended to help you better understand your benefits under
the Plan. The full text of the Plan may be obtained by contacting Savings
Administration in Memphis. If there is any conflict between the information in
this Summary Plan Description and the provisions of the Plan, the plan document
always will control.
<PAGE>
Overview of the Plan
o You have the opportunity to defer more than the statutory maximum allowed in
the Salaried Savings Plan (the SSP);
o Company matching contributions are credited on your basic contributions;
o Basic contributions and company matching contributions are credited with
earnings based on a Company Stock Fund Equivalent;
o Supplemental contributions may be credited with earnings based on your choice
of four investment fund equivalents--the Fixed Income Fund Equivalent, the
Balanced Fund Equivalent, the Diversified Equity Fund Equivalent and the
Company Stock Fund Equivalent;
o Taxes are deferred on your contributions, company matching contributions and
earnings credited to your account until distributed from the Plan;
o The value of your contributions is vested immediately, and a liberal vesting
schedule is applied to company matching contributions;
o While you are actively employed, distributions of specific dollar amounts may
be made from your contributions without penalty or suspension, provided you
designate the amounts and dates of distribution prior to initial plan
participation;
o While you are actively employed, withdrawals of your contributions may be
made with a 10 percent forfeiture penalty and 12-month suspension of
contributions, if the withdrawal distribution is requested after initial plan
participation;
o You may transfer the balance of your supplemental contributions among the
four investment fund equivalents monthly;
o At age 60, you may transfer all or part of the balance of your basic
contributions and company matching contributions from the Company Stock Fund
Equivalent among the other investment fund equivalents monthly; and
o If you retire or become disabled, you may receive your account balance in a
lump sum or installments and may defer commencement up to age 70 1/2.
- 1 -
<PAGE>
Who Is Eligible
You are eligible to participate in the Plan if you are:
o Eligible to participate in the Salaried Savings Plan; and
o Employed in Position Level 18 or above (or equivalent) or have SSP plan
compensation in excess of $150,000 (indexed for cost-of-living) for the
preceding calendar year.
In order to participate, you must enroll in the Plan and be actively
contributing to the Salaried Savings Plan.
How To Enroll
When you become eligible, you will be given an enrollment form. If you choose
to make contributions to the Plan, you will:
o Select the percentage of total pay you want to contribute under the SSP and
the USP, in combination;
o Authorize the company to make payroll deductions for your contributions;
o Choose the investment option(s) for your supplemental contributions, if any;
o Designate any in-service distribution(s) to be paid to you; and
o Select your beneficiary(ies).
Important Note: If you choose not to join the Plan when you first become
eligible, you may join at a later date by completing a new enrollment form.
Participation
How the Plan Works
If you choose to participate in the USP, your SSP and USP contributions are
determined in combination, and are allocated between the two plans based on the
following:
o The percentage of compensation which you wish to save; and
o Your choice to either maximize before-tax contributions or to maximize
contributions to the SSP.
You also have the following optional choice:
o Your USP contributions may be limited to the maximum basic rate available.
When you become a participant in the Plan, an account is established for you.
Your account contains all the details relating to your contributions, company
matching contributions and any investment fund equivalent gains or losses. This
information is recorded separately for each investment fund equivalent in which
you have amounts credited.
- 2 -
<PAGE>
How Participation in the Plan Affects Your Other Benefits
Most salaried pensions under the Retirement Plan of International Paper
Company are based on Final Average Earnings. In general, earnings included in
the pension calculation are base pay, bonuses, salary deferrals to the Salaried
Savings Plan and to Internal Revenue Code Section 125 Plans (including Health
and Dependent Care contributions), but not salary deferred as contributions
under this Plan. Thus, making contributions to the Plan during your final years
of employment, when Final Average Earnings are calculated, could reduce your
annual pension from the Retirement Plan.
However, if your Retirement Plan pension is reduced by your contributions to
this Plan, the amount of the reduction will be paid as a benefit from the
International Paper Company Pension Restoration Plan at retirement. The Pension
Restoration Plan is a non-qualified plan, with benefits paid from the general
assets of the company.
Important Note: Making contributions to this Plan will not lower your life
insurance or disability insurance benefits from the company.
Types of Contributions
The following sections describe the various types of contributions you may
make to the SSP and USP, as well as any company matching contributions which may
be credited to your accounts under the SSP and USP.
You must designate the percentage of your total pay which you wish to
contribute to the combined SSP/USP. Your contributions will be designated as
basic or supplemental.
Basic Contributions
The first contributions which you make will be designated as basic
contributions. The range of percentages permitted for basic contributions is
listed in the Appendix.
Basic contributions are credited with company matching contributions.
Company Matching Contributions
The company will credit matching contributions to your SSP or USP account in
an amount equal to a percentage of the basic contributions which you make. The
company matching percentage is listed in the Appendix.
Supplemental Contributions
If you make the maximum basic contributions permitted, any excess
contributions will be designated as supplemental contributions. The range of
percentages permitted for supplemental contributions is listed in the Appendix.
Supplemental contributions are not eligible for company matching
contributions.
Changing Your Rate of Contributions
Once in any month, you may:
o Increase or decrease the percentage of total pay you contribute under the
combined SSP/USP; or
o Suspend your contributions.
- 3 -
<PAGE>
Investment Options
The Plan has four investment options: the Fixed Income Fund Equivalent; the
Balanced Fund Equivalent; the Diversified Equity Fund Equivalent and the Company
Stock Fund Equivalent. Since this is an unfunded plan, your contributions and
any company matching contributions are not invested in a separate trust.
Instead, your account is simply credited with the same investment gain or loss
that it would have received had it been invested in the Fixed Income Fund,
Balanced Fund, Diversified Equity Fund and/or Company Stock Fund of the
Salaried Savings Plan.
Basic and Company Matching Contributions
Basic and company matching contributions are invested in the Company Stock
Fund Equivalent.
Supplemental Contributions
You may invest your supplemental contributions among the Fixed Income Fund
Equivalent, the Balanced Fund Equivalent, the Diversified Equity Fund Equivalent
and the Company Stock Fund Equivalent, in multiples of 10 percent.
Changing Investment of Future Supplemental Contributions
You may change your choice of investment fund equivalent for your future
supplemental contributions once in any month.
Investment Fund Equivalents
The Fixed Income Fund Equivalent
The Fixed Income Fund Equivalent is based on the SSP Fixed Income Fund which
is invested in a diversified portfolio of fixed income securities and investment
contracts. The rate of return on the SSP fund reflects a blend of all the
interest rates from the individual holdings and changes in the market values of
the bonds.
The Balanced Fund Equivalent
The Balanced Fund Equivalent is based on the SSP Balanced Fund which follows
a diversified and balanced program of investing in high-quality stocks and
bonds. The bonds are held for relative capital stability, while the stocks are
held for potential growth. Under normal circumstances, the SSP fund will invest
60 percent to 70 percent of its total assets in common stocks and 30 percent to
40 percent of its assets in fixed income securities. The value of this
investment fluctuates with the market prices of the various stocks and bonds
held in the SSP fund.
- 4 -
<PAGE>
The Diversified Equity Fund Equivalent
The Diversified Equity Fund Equivalent is based on the SSP Diversified Equity
Fund which seeks long-term growth of capital and income by investing in a
portfolio of common stocks. The SSP fund attempts to replicate the performance
of the Standard and Poor's 500 Stock Index. The value of this investment
fluctuates with the market prices of the various common stocks held in the SSP
fund.
The Company Stock Fund Equivalent
The Company Stock Fund Equivalent is based on the SSP Company Stock Fund
which is invested in International Paper Company common stock. Dividends are
reinvested in additional shares of International Paper Company common stock. The
value of the SSP fund fluctuates depending upon dividends paid and the market
value of the stock.
Rate of Return on Your Investment
Any investment involves some degree of financial risk. Furthermore, since
your USP contributions are not in a separate trust but are part of the company's
general assets, participation in this Plan involves greater risks than
participation in the Salaried Savings Plan. The annual investment results will
vary depending on the growth of the equivalent investment fund which is being
mirrored. Investment results will be reported to you periodically.
Valuation of Your Account
Each of the investment fund equivalents is valued at the end of each calendar
month. The value of your account is equal to: the amounts you originally
contributed, plus your company matching contributions, plus deemed reinvested
earnings, plus any equivalent increase or less any equivalent decrease in the
market value of your investments, less any distributions from your account.
Quarterly, you will receive a statement showing the value of your account.
This statement will show all savings activity, including your contributions,
company matching contributions, investment experience and any transfers or
distributions made.
Market Value of an Initial Investment of $100
in Each SSP Investment Option on January 1, 1989
Results are reduced by investment manager fees but are not reduced by other
administrative fees which may be charged to the fund. Reinvestment of all income
is assumed.
Type of Fund 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
------------ -------- -------- -------- -------- --------
Fixed Income Fund $109 $119 $129 $140 $151
Balanced Fund 122 118 146 157 174
Diversified Equity Fund 131 127 166 177 193
Company Stock Fund 126 123 167 161 168
The results illustrate the past returns and past volatility of each
investment.
Past performance is not an indication of or a guarantee of future investment
results.
- 5 -
<PAGE>
Interfund Transfers
Supplemental Contributions Transfers
Once in any month, you may transfer the balance of your supplemental
contributions in the Plan among the Fixed Income Fund Equivalent, the Balanced
Fund Equivalent, the Diversified Equity Fund Equivalent and the Company Stock
Fund Equivalent so that the resulting investments in such investment fund
equivalents are in multiples of 10 percent.
Age-60 Transfers
When you are age 60 or older, you may transfer the balance of your basic and
company matching contributions from the Company Stock Fund Equivalent so that it
is reallocated among the Fixed Income Fund Equivalent, the Balanced Fund
Equivalent, the Diversified Equity Fund Equivalent and/or the Company Stock Fund
Equivalent. This transfer may be made once in any calendar quarter, and you must
designate the investment of the balance among the available investment fund
equivalents in multiples of 10 percent.
Vesting Rights
Vesting of Your Contributions
You always are 100 percent vested in the value of your contributions to the
Plan.
Vesting of Company Matching Contributions
You become vested in the value of company matching contributions as follows:
Years of Service Vested
Completed Percentage
----------------- ----------
Less than 3 0%
3 but less than 4 35%
4 but less than 5 70%
5 or more 100%
Withdrawals
To offer you the financial flexibility you may need, the Plan gives you
access to your account during your active employment through withdrawals,
subject to certain penalties described below.
Designated at Initial Plan Participation
At initial plan participation, you may designate specific dollar amount(s) to
be paid at specific date(s) in the future. These withdrawals are made from the
balance of your basic and supplemental contributions to the extent such
amount(s) are available and provided the designated date(s) occur before your
termination of employment. There are no penalties associated with this type of
withdrawal.
- 6 -
<PAGE>
Designated After Initial Plan Participation
After initial plan participation, you may request a withdrawal, for any
reason and in any amount, to be paid from the balance of your basic and
supplemental contributions. The withdrawal payment will be made in the year
following your request, at the date you designate. Because of the IRS
tax-deferred status of accounts under the Plan, your contributions to the Plan
will be suspended for the year during which the withdrawal is paid, and your
withdrawal amount will be reduced by 10 percent.
Important Note: Any withdrawal may be restricted to the extent necessary to
comply with certain statutory limitations regarding the five officers subject to
proxy disclosure reporting.
Distributions
Distribution of your account balance is made under a form of payment
described below, based on the event causing distribution.
Termination of Employment
If your employment terminates before retirement or disability, your account
balance will be distributed to you in a lump sum at termination.
Retirement or Disability
Normal Form
Under the normal form, if your employment terminates due to retirement at or
after age 55 with 10 years of service or due to disability, your account balance
will be distributed to you in a lump sum in the January following your
retirement.
Optional Form
If you do not want your distribution paid in the normal form, you may make a
choice prior to your retirement to have your distribution paid in an optional
form. Under this choice, you may defer receipt of your account balance to a
designated date beginning any time in the year following retirement and up to
age 70 1/2, and you may choose to receive distribution in either a lump sum or
installments over five to 20 years.
How Payments Are Made
The value of your account will be determined as soon as practicable after
your distribution date. You will receive payment approximately 45 days after
this date. No interest or dividend equivalents will be paid for the period of
time between the valuation date and the actual date of payment. All
distributions will be made in cash.
Distributions Upon Death
If you die while actively employed or before distribution of your account
balance, the value of your account will be paid to your designated
beneficiary(ies) in a lump sum as soon as practicable following your death.
If you die while receiving installment payments, the remaining installment
payments will continue to your designated beneficiary(ies). The plan
administrator, in its discretion, may choose to pay the balance in a lump sum to
your beneficiary(ies).
- 7 -
<PAGE>
Other Information
Non-assignability of Interest
Apart from your right to name one or more beneficiaries to receive any
distribution payable in the event of your death, federal law requires that no
right to payment under the Plan can be subject to sale, transfer, pledge,
assignment, attachment or encumbrance of any kind.
If You Are Transferred
If you are transferred to a subsidiary or group that is not covered by the
Plan and, as a result, are no longer eligible to make deferrals under the Plan,
your account will remain in the Plan until distributed. However, you will not be
able to make contributions under the Plan, and the company will not credit any
additional company matching contributions to your account.
Federal Income Tax Information
While any amount you choose to defer as USP contributions will reduce the
amount of your current reportable total pay for federal income and certain state
and local income tax purposes, your deferral will not reduce the amount of your
reportable total pay which is subject to Social Security and Medicare taxes. All
amounts deferred (and company matching contributions as they "vest") are
included in your Social Security and Medicare wage bases subject to the
statutory annual Social Security maximum wage base (the Medicare wage base is
unlimited).
When you receive a payment from the Plan, you will be responsible for paying
any income taxes that apply in the year you receive your payment. The total
amount of your distribution (including withdrawals) will be reflected on your
Form W-2 from the company and will be taxable as additional compensation in the
year of payment.
Federal and state laws require that applicable federal, state and local
income taxes be withheld from your distribution. The plan administrator will
provide you with a distribution statement showing the details.
Because the Plan is an unfunded, non-qualified deferred compensation plan,
the special federal tax treatment under the five-year (or ten-year) income
averaging or rollover rules is not available.
General Administration of the Plan
Plan Sponsor
The Plan described in this Summary Plan Description is sponsored by:
International Paper Company
2 Manhattanville Road
Purchase, NY 10577
Telephone (914) 397-1500
Plan Administrator
The administration of the Plan is the responsibility of the plan
administrator who is:
Senior Vice President-Human Resources
International Paper Company
2 Manhattanville Road
Purchase, NY 10577
Telephone (914) 397-1500
As an officer of the company, the plan administrator serves at the discretion
of the company's board of directors. No charge is made to the employee accounts
under this Plan for compensation of the plan administrator.
Amendment and Termination
The company reserves the right to amend, suspend or terminate the Unfunded
Savings Plan at any time, provided that any such action shall not adversely
affect any plan participant's right to receive payment, pursuant to the terms of
this Plan, of any unpaid vested amounts.
- 8 -
<PAGE>
ERISA Classification
The Plan is an unfunded employee pension benefit savings plan which is
maintained by the company "for the purpose of providing deferred compensation
for a select group of management or highly compensated employees." The Plan is,
therefore, exempt from Parts 2, 3 and 4 of Subtitle B of Title I of the Employee
Retirement Income Security Act of 1974, as amended (ERISA) which pertains to
participation and vesting, funding and fiduciary responsibilities. Pursuant to
regulations issued by the Secretary of Labor in 29 CFR 2520.104-23, the Plan is
exempted from the reporting and disclosure provisions of Part 1 of Subtitle B of
Title I of ERISA, except for providing plan documents to the Secretary of Labor
upon request. Title IV of ERISA relating to plan termination insurance does not
apply to the Plan, and insurance benefits of the type specified in Title IV of
ERISA will not be extended to plan participants or their beneficiaries.
Available Information
The company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the Exchange Act), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the Commission). Copies of such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; the Commission's regional offices at 26 Federal Plaza,
Room 1102, New York, NY 10278; and 219 S. Dearborn Street, Chicago, IL 60604.
Copies of such material also can be obtained at the offices of the New York
Stock Exchange, 20 Broad Street, New York, NY 10005, where the shares of the
company's common stock are listed.
The company hereby undertakes to provide without charge to each participant,
upon written or oral request of such person to the company at the address set
forth below, a copy of its most recent annual report to shareholders, as well as
any and all information that has been incorporated by reference in the
Registration Statement of which this document is a part, excluding exhibits to
the information incorporated by reference unless such exhibits are specifically
incorporated herein. Additional updating information with respect to the
securities and the Plan covered herein may be provided in the future by means of
updates to this document. Such written or oral requests should be directed to:
International Paper Company
2 Manhattanville Road
Purchase, NY 10577
Attn. Investor Relations Department
Telephone: (914) 397-1500
The company hereby incorporates by reference into this document the following
documents filed with the Commission:
o The company's Annual Report on Form 10-K for the year ended December 31,
1993;
o All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange
Act by the company and by the Plan since December 31, 1993; and
o The description of the common stock of the company contained in the
Registration Statements filed pursuant to Section 12 of the Exchange Act
relating thereto, including any amendment or report filed for the purpose of
updating such description.
All documents filed by the company pursuant to Section 13, 14 or 15(d) of the
Exchange Act after the date of this document and before the termination of this
offering of the company's common stock will be deemed to be incorporated by
reference into this document and to be part hereof from the date of filing of
such documents.
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<PAGE>
UNFUNDED SAVINGS PLAN
Appendix
Basic Supplemental Company
Organization Contributions Contributions Matching
(Percent of Pay) (Percent of Pay) Contributions
------------------ ---------------- ---------------- -------------------
Former Inter- 1 - 8% 1 - 77% 70% of basic up to
national Paper 4%; 50% of basic up
locations with SIP to next 4%
Masonite 1 - 6% 1 - 79% 50% of basic
ResourceNet Inter- 1 - 5% 1 - 80% 75% of basic
national (exclud-
ing Dillard,
Dixon, Leslie,
Ingram, Western
Pacific and Arvey
Stores)
Envelope 1 - 5% 1 - 80% 75% of basic
Converting
Nevamar 1 - 5% 1 - 80% 66 2/3% of basic up
to 3%; 50% of basic
up to next 2%
Anitec/Ilford 1 - 5% 1 - 80% 50% of basic
Haig Point 1 - 5% 1 - 80% 50% of basic
Arvey Stores None 1 - 85% None
J. B. Papers 1 - 5% 1 - 80% 75% of basic
Dillard 1 - 4% 1 - 81% 25% of basic
Dixon None 1 - 85% None
Leslie 1 - 4% 1 - 81% 25% of basic
Ingram 1 - 6% 1 - 79% 12 1/2% of basic
Western Pacific 1 - 5% 1 - 80% 50% of basic
EXHIBIT 99 (d)
INTERNATIONAL PAPER COMPANY
NONFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS
(As amended through April 9, 1991)
-------------
<PAGE>
Index
Page
----
Preamble 3
Method of Election to Defer Payment 4
Deferral in Cash with Interest or in Units 4
Time and Method of Payment 5
Termination or Modification of Election to Defer Payment 6
Payments Not Assignable 6
Payment in Hardship Cases 7
Amendment or Termination of Plan 7
Annual Statements 7
Designation of Beneficiary 7
Form of Notice of Election to Defer 8
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PREAMBLE
This Plan was originally adopted by the Board of Directors of
International Paper Company on December 11, 1973, (the "1973 Plan"). The Plan
was amended in 1979, 1983, and 1991. The text of the Plan set forth below is
effective April 9, 1991. Amounts deferred under earlier versions of the Plan
shall continue to be deferred pursuant to the applicable provisions of the Plan
at the time of the deferrals.
Payments of amounts deferred under the Plan are made only in the form of
cash. Stock units under the Plan are not "derivative securities" as defined in
SEC Rule 16a-l(c)(3)(ii).
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<PAGE>
INTERNATIONAL PAPER COMPANY NONFUNDED DEFERRED
COMPENSATION PLAN FOR DIRECTORS
(As amended effective April 9, 1991)
1. Method of Election to Defer Payment
Pursuant to the provisions of this Plan, any director of the Company may elect
on or before the last business day of any month to defer payment of all (or a
specified part) of that director's fees for advisory service and attendance at
Board and Committee meetings for the following calendar month and thereafter,
and all (or a specified part) of any other director's compensation or any
future dividends and other distributions which become payable with respect to
shares of restricted stock awarded under the International Paper Company
Restricted Stock Plan for Non-Employee Directors, by filing a written notice
(substantially in the form attached hereto as Annex A) with the Secretary of
the Company. The notice shall specify:
(a) the effective date of the deferral;
(b) the amounts to be deferred;
(c) the length of time of the deferral;
(d) the method of payment of the deferred amount; and
(e) the election as to whether to defer the amount in the
form of cash with accrued interest or to defer the
amount in the form of stock units.
2. Deferral in Cash with Interest or in Stock Units
All deferred amounts shall be credited to the participant's account. At the
participant's election, the account shall be credited either with:
(a) interest from the date such amounts would otherwise
have been paid at the higher of
(i) 6% per annum, or
(ii) the yield on U.S. Treasury Bills of 6 months
maturity as set at the first auction held each
January and July; or
(b) a number of stock units (calculated to the nearest
thousandth of a unit) computed by dividing the amount
of fees or other director's compensation deferred each
month, by the closing market price of the Company's
Common Stock as reported for New York Stock Exchange
Composite Transactions for the second Tuesday of each
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<PAGE>
month (or the next business day if that day is a legal
holiday). Whenever a dividend is declared, the number
of stock units in the participant's account shall be
increased by the result of the following calculation:
(i) the number of units in the participant's account
multiplied by any cash dividend declared by the
Company on a share of its Common Stock, divided by
the closing market price of such Common Stock on
the related dividend payment date as reported for
New York Stock Exchange Composite Transactions;
and/or
(ii) the number of units in the participant's account
on the related dividend payment date multiplied by
any stock dividend declared by the Company on a
share of its Common Stock. In the event of any
change in the number or kind of outstanding shares
of Common Stock of the Company including a stock
split or splits (other than a stock dividend as
provided above) an appropriate adjustment shall be
made in the number of units credited to the
participant's account.
3. Time and Method of Payment
After the participant ceases to be a director of the Company,
payment of the deferred amount shall be made in a lump sum in
January of the next calendar year, unless the participant has
indicated on the notice filed with the Secretary of the Company
that payment shall be made in not more than ten annual
installments beginning:
(a) On January 10th of a specified calendar year (prior to
attaining age 73); or
(b) On January 10th of the first calendar year after the
participant ceases to be a director of the Company; or
(c) On January 10th of the first calendar year after the
participant attains age 70; or
(d) On January 10th of the first calendar year after the
participant attains age 71; or
(e) on January 10th of the first calendar year after the
participant attains the age 72;
provided, however, that no payment with respect to a stock unit
under this Plan shall be made prior to a date which is at least
six months after the date of the participant's last acquisition
of a stock unit under this plan (except in the case of a
participant's death, disability, retirement or termination of
service as a director of the Company). Under this Plan, a
participant has an interest in the cash value represented by the
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<PAGE>
stock units in his or her account, but has no interests or rights in any
Company Common Stock or dividends and has no right to elect delivery of shares
of Company Common Stock.
In the event that the participant's account has been credited
with units calculated as provided in Section 2, the cash amount
payable to the participant in each instance shall be determined
by multiplying the number of units by the closing market price of
the Company's Common Stock on the day prior to the initial date
of payment (or the last business day prior to that date, if the
day prior to the date for initial payment is not a business day).
In the event the participant dies before payment of all of the
deferred amount, the full remaining balance shall be paid in a
lump sum to the beneficiary or other payee designated under
Section 9 of this Plan.
Where the participant receives the balance of the deferred
account in annual installments, the first installment of deferred
compensation shall be a fraction of the value of the entire
deferred compensation credited to a participant's account under
the preceding paragraph. The numerator of that fraction shall be
"one" (1) and the denominator shall be the total number of
installments during which the compensation is to be paid. Each
subsequent annual installment shall be calculated in the same
manner except that (a) the denominator in the fraction shall be
reduced by the number of annual installments which have been
previously paid and (b) the participant's account shall be
reduced by the amount of any installments paid, but shall be
credited with interest at the rate set out in Section 2(a) of the
plan.
4. Termination or Modification of Election to Defer Payment
A written election to defer payment pursuant to this Plan shall
continue in effect until the participant files a written notice
of termination or modification of such election with the
Secretary of the Company. The termination shall be effective as
of the date of receipt by the Secretary or as of such future date
as is specified in such notice. Amounts credited to the account
of a participant prior to the effective date of such termination
shall not be affected hereby and shall be paid only in accordance
with Section 3 of the Plan. An election may be modified as to:
(a) amount of deferral;
(b) length of time of deferral;
(c) method of payment of the deferred amount; and
(d) form of deferral (whether interest or units).
Any modification shall be effective upon the last day of the
calendar month in which such written notice is received by the
Secretary of the Company or such later date as is specified in
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<PAGE>
the notice. No more than two (2) modifications of (a), (b), (c)
or (d) above, may be made in any calendar year.
5. Payments Not Assignable
The participant's deferred payment account under this Plan
(including interest credited and stock units earned) shall not be
subject to assignment by the participant. If any such assignment
is made, the Company may disregard such assignment and may
discharge its obligation hereunder by making payment as though no
such assignment had been made.
6. Payment in Hardship Cases
A participant may request, and the Company may for good cause in
its sole discretion approve, payment of the participant's
deferred accounts in a lump sum or accelerated installments in
lieu of the method of payment elected by the participant;
provided, however, that no such payment with respect to a stock
unit under this Plan shall be made prior to a date which is at
least six months after the date of the participant's last
acquisition of a stock unit under this Plan (except in the case
of a participant's death, disability, retirement, or termination
of service as a director of the Company).
7. Amendment or Termination of Plan
The Company reserves the right to amend, modify or terminate this
Plan at any time by action of its Board of Directors, provided
that such action shall not adversely affect any participant's
right to receive payment pursuant to the terms of this Plan of
any unpaid amounts which were deferred prior to such action.
8. Annual Statements
A Statement shall be delivered to each participant in this Plan
as soon as practicable after the end of each calendar year
setting forth the amount deferred, the amount of interest accrued
thereon or units earned, the amount of any payments made during
the year, the current rate of interest applicable to the Plan as
determined by the Treasurer, and the closing market price of
Company Common Stock used for determining the number of units
earned and credited through dividend equivalents.
9. Designation of Beneficiary
A participant may file with the Secretary of the Company a designation of a
beneficiary or beneficiaries on a form approved by the Secretary (which
designation may be changed or revoked by the participant's sole action) to
receive distribution of all or a designated portion of the participant's
deferred payment account under this Plan upon the death of the participant. If
no beneficiary has been designated or survives the participant, then the account
will be distributed as directed by the executor or administrator of the
participant's estate.
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