<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1995.
REGISTRATION NO. 33-62283
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C>
INTERNATIONAL PAPER COMPANY NEW YORK 13-0872805
INTERNATIONAL PAPER CAPITAL TRUST DELAWARE 62-6296765
(Exact name of registrant as specified in its charter) (State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
------------------------------
TWO MANHATTANVILLE ROAD, PURCHASE, NEW YORK 10577, (914) 397-1500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES W. GUEDRY, ESQ.
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD, PURCHASE, NEW YORK 10577, (914) 397-1500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPY TO:
VINCENT J. PISANO, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE, NEW YORK, NEW YORK 10022, (212) 735-3000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, (the "Securities Act") other than securities offered only in
connection with dividend or interest reinvestment plans, please check the
following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (4) OFFERING PRICE (4) FEE (1)
<S> <C> <C> <C> <C>
Convertible Preferred Securities of
International Paper Capital Trust........... 9,000,000 $47.375(1) $426,375,000(1) $147,025.86
Convertible Junior Subordinated Deferrable
Interest Debentures of International Paper
Company..................................... (2) -- -- --
Common Stock of International Paper
Company(4)(5)............................... (3) -- -- --
Preferred Securities Guarantee(6)............
Total.................................... 9,000,000 100% $426,375,000 $147,025.86(7)
<FN>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act.
(2) $450,000,000 in aggregate principal amount of 5 1/4% Convertible Junior
Subordinated Deferrable Interest Debentures (the "Convertible Junior
Subordinated Debentures") of International Paper Company (the "Company")
were issued and sold to International Paper Capital Trust (the "Trust") in
connection with the issuance by the Trust of 9,000,000 of its 5 1/4%
Convertible Preferred Securities (the "Convertible Preferred Securities").
The Convertible Junior Subordinated Debentures may be distributed, under
certain circumstances, to the holders of Convertible Preferred Securities
for no additional consideration.
(3) Such indeterminate number of shares of International Paper Common Stock as
may be issuable upon conversion of the Convertible Preferred Securities
registered hereunder, including such shares as may be issuable pursuant to
anti-dilution adjustments.
(4) Exclusive of accrued interest and distributions, if any.
(5) Includes International Paper Common Stock purchase rights. Prior to the
occurrence of certain events, the purchase rights will not be exercisable or
evidenced separately from the International Paper Common Stock. No separate
consideration will be received for the International Paper Common Stock
purchase rights.
(6) Includes the rights of holders of the Convertible Preferred Securities under
the Preferred Securities Guarantee and certain back-up undertakings as
described in the Registration Statement. No separate consideration will be
received for the Preferred Securities Guarantee and the back-up
undertakings.
(7) Previously paid.
</TABLE>
------------------------------
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933
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<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1995
9,000,000 Convertible Preferred Securities
INTERNATIONAL PAPER CAPITAL TRUST
5 1/4% Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred Security)
guaranteed to the extent set forth herein by, and convertible into Common Stock
of,
INTERNATIONAL PAPER COMPANY
------------
This Prospectus relates to the 5 1/4% Convertible Preferred Securities (the
"Convertible Preferred Securities"), liquidation preference $50 per Convertible
Preferred Security, which represent undivided beneficial ownership interests in
the assets of the International Paper Capital Trust, a statutory business trust
formed under the laws of the State of Delaware (the "Trust" or the "Issuer"),
and the shares of the common stock, par value $1.00 per share, and the
accompanying common stock purchase rights as described herein ("International
Paper Common Stock") of International Paper Company, a New York corporation
("International Paper" or the "Company"), issuable upon conversion of the
Convertible Preferred Securities. The Convertible Preferred Securities were
issued and sold (the "Original Offering") on July 20, 1995 (the "Original
Offering Date") to the Initial Purchasers (as defined herein, see "Selling
Holders") and were simultaneously sold by the Initial Purchasers in transactions
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), in the United States to persons reasonably
believed by the Initial Purchasers to be qualified institutional buyers as
defined in Rule 144A under the Securities Act, to certain qualified
institutional buyers acting on behalf of institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and
outside the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act. International Paper, directly
or indirectly owns all the common securities issued by the Trust (the "Common
Securities" and, together with the Convertible Preferred Securities, the "Trust
Securities"). The Issuer exists for the sole purpose of issuing the Trust
Securities and using the proceeds thereof to purchase from International Paper
its 5 1/4% Convertible Junior Subordinated Deferrable Interest Debentures Due
2025 (the "Convertible Junior Subordinated Debentures") having the terms
described herein. The holders of the Convertible Preferred Securities will have
a preference with respect to cash distributions and amounts payable upon
liquidation, redemption or otherwise over the holders of the Common Securities
of the Issuer.
The Convertible Preferred Securities and the International Paper Common
Stock issuable upon conversion of the Convertible Preferred Securities (the
"Offered Securities") may be offered and sold from time to time by the holders
named herein or by their transferees, pledgees, donees or their successors
(collectively, the "Selling Holders") pursuant to this Prospectus. The Offered
Securities may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
of the net proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any, applicable to any such
sale. The Company is responsible for payment of all other expenses incident to
the offer and sale of the Offered Securities. The Selling Holders and any
broker-dealers, agents or underwriters which participate in the distribution of
the Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
(CONTINUED ON FOLLOWING PAGE)
Prospective investors should carefully consider matters discussed under the
caption "Risk Factors" starting on page 5.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 14, 1995.
<PAGE>
(CONTINUED FROM FRONT COVER)
Holders of the Convertible Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 5 1/4% of the liquidation
preference of $50 per Convertible Preferred Security, accruing from the date of
original issuance and payable quarterly in arrears on each March 15, June 15,
September 15 and December 15, commencing September 15, 1995. See "Description of
the Convertible Preferred Securities -- Distributions". The payment of
distributions and payments on liquidation of the Issuer or the redemption of
Convertible Preferred Securities, as described below (but only to the extent of
funds of the Trust available therefor), are guaranteed by International Paper to
the extent described herein (the "Guarantee"). International Paper's obligations
under the Guarantee are subordinate and junior to all other liabilities of
International Paper, except any liabilities that may be made PARI PASSU
expressly by their terms and certain other guarantees, but are PARI PASSU with
the most senior preferred stock issued, from time to time, if any, by
International Paper. See "Description of the Guarantee". If International Paper
fails to make interest payments on the Convertible Junior Subordinated
Debentures, the Issuer will have insufficient funds to pay distributions on the
Convertible Preferred Securities. The Guarantee does not cover payment of
distributions when the Issuer does not have sufficient funds to pay such
distributions. In such event, the remedy of a holder of Convertible Preferred
Securities is to rely on the enforcement by the Trustee (as defined herein) of
its rights as registered holder of the Convertible Junior Subordinated
Debentures against International Paper. The obligations of International Paper
under the Convertible Junior Subordinated Debentures are subordinate and junior
in right of payment to Senior Indebtedness (as defined herein) of International
Paper. At June 30, 1995, Senior Indebtedness of International Paper aggregated
approximately $7.2 billion. See "Capitalization".
International Paper has the right under the Indenture (as defined herein)
for the Convertible Junior Subordinated Debentures to defer the interest
payments due from time to time on the Convertible Junior Subordinated Debentures
for successive periods not exceeding 20 consecutive quarters for each such
period, and, as a consequence, quarterly distributions on the Convertible
Preferred Securities would be deferred by the Issuer (but would continue to
accumulate quarterly and accrue interest) until the end of any such interest
deferral period. See "Risk Factors -- Option to Extend Interest Payment Period;
Tax Consequences", "Description of the Convertible Preferred Securities --
Distributions" and "Description of the Convertible Junior Subordinated
Debentures -- Option to Extend Interest Payment Period".
Each Convertible Preferred Security is convertible in the manner described
herein at the option of the holder into shares of International Paper Common
Stock, at the rate of 0.925926 shares of International Paper Common Stock (as
adjusted to reflect the two-for-one split of the International Paper Common
Stock effective as of August 18, 1995 (the "Stock Split") for each Convertible
Preferred Security (equivalent to a conversion price of $54.00 per share of
International Paper Common Stock, as adjusted to reflect the Stock Split),
subject to adjustment in certain circumstances. See "Description of the
Convertible Preferred Securities -- Conversion Rights". The last reported sale
price of International Paper Common Stock, which is listed under the symbol "IP"
on the New York Stock Exchange ("NYSE") Composite Tape, on August 28, 1995, was
$81 5/8 per share. See "Recent Developments". Whenever International Paper
issues shares of International Paper Common Stock upon conversion of the
Convertible Preferred Securities, International Paper will, subject to certain
conditions, issue, together with each share of International Paper Common Stock,
one Right (as defined herein) entitling the holder thereof, under certain
circumstances, to purchase one share of International Paper Common Stock. See
"Description of the Convertible Preferred Securities -- Conversion Rights".
The Convertible Preferred Securities are effectively redeemable at the
option of the Company, in whole or in part, from time to time, after June 30,
1999, at the prices set forth herein, plus accrued and unpaid distributions
thereon to the date fixed for redemption (the "Redemption Price"). See
"Description of the Convertible Preferred Securities -- Optional Redemption".
Upon the repayment of the Convertible Junior Subordinated Debentures at maturity
or upon any acceleration, earlier
2
<PAGE>
redemption or otherwise, the proceeds from such repayment will be applied to
redeem the Convertible Preferred Securities and Common Securities on a PRO RATA
basis. In addition, upon the occurrence of certain events arising from a change
in law or a change in legal interpretation, International Paper will liquidate
the Trust and cause to be distributed to the holders of the Convertible
Preferred Securities, on a PRO RATA basis, Convertible Junior Subordinated
Debentures or, in certain limited circumstances, will cause the redemption of
the Convertible Preferred Securities in whole at the liquidation preference of
$50 per share plus accrued and unpaid distributions. See "Description of the
Convertible Preferred Securities -- Tax Event or Investment Company Event
Redemption or Distribution". See "Description of the Convertible Junior
Subordinated Debentures".
In the event of the liquidation of the Trust, the holders of the Convertible
Preferred Securities will be entitled to receive for each Convertible Preferred
Security a liquidation preference of $50 plus accrued and unpaid distributions
thereon to the date of payment, unless, in connection with such liquidation,
Convertible Junior Subordinated Debentures are distributed to the holders of the
Convertible Preferred Securities. See "Description of the Convertible Preferred
Securities -- Liquidation Distribution Upon Dissolution".
3
<PAGE>
AVAILABLE INFORMATION
International Paper is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "SEC" or the "Commission"). Such reports, proxy
statements, and other information filed by International Paper can be inspected
and copied at the public reference facilities of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at the following
Regional Offices of the Commission: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material may also be obtained from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, at prescribed rates. Certain securities of International
Paper are listed on, and reports, proxy statements and other information
concerning International Paper can be inspected at the offices of, the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
International Paper has filed with the Commission a Registration Statement
on Form S-3 (herein together with all amendments and exhibits thereto, called
the "Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to International Paper and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are on
file at the offices of the Commission and may be obtained upon payment of the
fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any documents referred to are not necessarily complete, and, in each
such instance, are qualified in all respects by reference to the applicable
documents filed with the Commission.
No separate financial statements of the Issuer have been included herein.
International Paper does not consider that such financial statements would be
material to holders of the Convertible Preferred Securities because (i) all of
the voting securities of the Issuer will be owned, directly or indirectly, by
International Paper, a reporting company under the Exchange Act, (ii) the Issuer
has no independent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of the
Issuer and investing the proceeds thereof in Convertible Junior Subordinated
Debentures issued by International Paper and (iii) the obligations of the Issuer
under the Trust Securities (as defined herein) are fully and unconditionally
guaranteed by International Paper to the extent that the Issuer has funds
available to meet such obligations. See "Description of the Convertible Junior
Subordinated Debentures" and "Description of the Guarantee".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by International Paper with the SEC pursuant
to the Exchange Act (File No. 1-3157) are incorporated in this Prospectus by
reference: (a) Annual Report on Form 10-K for the year ended December 31, 1994;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; (c)
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; (d) the
description of International Paper's capital stock which is contained in
International Paper's registration statement on Form 8-A, dated July 20, 1976,
as amended, and International Paper's registration statements on Form S-3, filed
January 8, 1992 (No. 33-44855), December 23, 1993 (No. 33-51447) and April 1,
1994 (No. 33-52945); (e) International Paper's registration statement on Form
8-A, dated April 17, 1987, as amended December 14, 1989 (relating to the
Rights), and the related Current Report on Form 8-K, dated April 17, 1987, and
(f) Current Reports on Form 8-K, dated January 10, 1995, March 6, 1995, April
11, 1995, April 21, 1995, July 11, 1995, August 30, 1995 and November 13, 1995.
4
<PAGE>
All documents filed by International Paper with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which indicates
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part of this Prospectus from the date of filing
of such documents.
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
International Paper hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to above
which have been or may be incorporated by reference in this Prospectus (other
than certain exhibits). Such written or oral request should be directed to
International Paper Company, Two Manhattanville Road, Purchase, New York 10577,
Attention: Investor Relations Department ((914) 397-1632).
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE OFFERED SECURITIES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS:
SUBORDINATION OF GUARANTEE AND CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES. International Paper's obligations under the Guarantee are
subordinate and junior in right of payment to all other liabilities of
International Paper, with certain limited exceptions. The obligations of
International Paper under the Convertible Junior Subordinated Debentures are
subordinate and junior in right of payment to Senior Indebtedness (as defined
herein) of International Paper. As of June 30, 1995, International Paper had
approximately $7.2 billion principal amount of Senior Indebtedness. See
"Capitalization". There are no terms of the Convertible Preferred Securities,
the Convertible Junior Subordinated Debentures or the Guarantee that limit
International Paper's ability to incur additional indebtedness or liabilities,
including indebtedness or liabilities that would rank senior to the Convertible
Junior Subordinated Debentures and the Guarantee. See "Description of the
Guarantee -- Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures -- Subordination".
The ability of the Issuer to pay amounts due on the Convertible Preferred
Securities is wholly dependent upon International Paper's making payments on the
Convertible Junior Subordinated Debentures.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. International
Paper has the right under the Indenture to defer interest payments from time to
time on the Convertible Junior Subordinated Debentures for successive periods
not exceeding 20 consecutive quarters for each such period. Upon the termination
of any Deferral Period and the payment of all amounts then due, International
Paper may select a new Deferral Period, subject to the requirements described
herein. As a consequence, during any such Deferral Period, quarterly
distributions on the Convertible Preferred Securities would be deferred (but
would continue to accrue with interest thereon) by the Issuer. In the event that
International Paper exercises this right, during such period International Paper
(i) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than stock dividends paid by International Paper
which consist of stock of the same class as that on which the dividend is being
paid), (ii) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by
International Paper that rank PARI PASSU with or junior to the Convertible
Junior Subordinated Debentures, and (iii) shall not make any guarantee payments
with
5
<PAGE>
respect to the foregoing (other than pursuant to the Guarantee). Prior to the
termination of any such Deferral Period, International Paper may further extend
the Deferral Period; PROVIDED that such Deferral Period, together with all
previous and further extensions thereof, may not exceed 20 consecutive quarters
and that such Deferral Period may not extend beyond the maturity date of the
Convertible Junior Subordinated Debentures. If International Paper should
determine to exercise its deferral right in the future, the market price of the
Convertible Preferred Securities is likely to be adversely affected. See
"Description of the Convertible Preferred Securities -- Distributions" and
"Description of the Convertible Junior Subordinated Debentures -- Option to
Extend Interest Payment Period".
Should a Deferral Period occur, a Preferred Securityholder (as defined
herein) will continue to accrue interest income for United States Federal income
tax purposes. As a result, such a holder will be required to include such
interest in gross income for United States Federal income tax purposes in
advance of the receipt of cash, and such holder will not receive the cash from
the Issuer related to such income if such holder disposes of or converts its
Convertible Preferred Securities prior to the record date for payment of
distributions. See "United States Taxation -- Potential Extension of Interest
Payment Period and Original Issue Discount".
RIGHTS UNDER THE GUARANTEE. The Guarantee Trustee (as defined herein) will
hold the Guarantee for the benefit of the holders of the Convertible Preferred
Securities. The Guarantee guarantees to the holders of the Convertible Preferred
Securities the payment (but not the collection) of (i) any accrued and unpaid
distributions on the Convertible Preferred Securities to the extent of funds of
the Trust available therefor, (ii) the amount payable upon redemption, including
all accrued and unpaid distributions, of the Convertible Preferred Securities
called for redemption by the Issuer, to the extent of funds of the Trust
available therefor and (iii) upon a voluntary or involuntary dissolution,
winding up or termination of the Issuer (other than in connection with a
redemption of all of the Convertible Preferred Securities), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on the Convertible Preferred Securities to the date of payment to the extent of
funds of the Trust available therefor and (b) the amount of assets of the Issuer
remaining available for distribution to holders of the Convertible Preferred
Securities upon the liquidation of the Issuer. The holders of a majority in
liquidation amount of the Convertible Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee
Trustee fails to enforce the Guarantee, any holder of Convertible Preferred
Securities may, after such holder's written request to the Guarantee Trustee to
enforce the Guarantee, institute a legal proceeding directly against
International Paper to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity. If International Paper were to
default on its obligations under the Convertible Junior Subordinated Debentures,
the Issuer would lack available funds for the payment of distributions or
amounts payable on redemption of the Convertible Preferred Securities or
otherwise, and in such event holders of the Convertible Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, holders of the Convertible Preferred Securities would be required to
rely on the enforcement by the Trustee of its rights, as registered holder of
the Convertible Junior Subordinated Debentures, against International Paper
pursuant to the terms of the Convertible Junior Subordinated Debentures and may
also vote to appoint a Special Trustee who shall have the same rights, powers
and privileges of the IP Trustees (as defined herein). See "Description of the
Guarantee -- Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures -- Subordination" herein. The
Declaration will provide that each holder of Convertible Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee (including the
subordination provisions thereof) and the Indenture.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION. Upon the
occurrence of a Tax Event or Investment Company Event, International Paper will,
except in certain limited circumstances, cause the IP Trustees to liquidate the
Issuer and cause Convertible Junior Subordinated
6
<PAGE>
Debentures to be distributed PRO RATA to the holders of the Convertible
Preferred Securities. In certain circumstances, International Paper will have
the right to redeem the Convertible Junior Subordinated Debentures, in whole
(but not in part), at par plus accrued and unpaid interest, in lieu of a
distribution of the Convertible Junior Subordinated Debentures, in which event
the Convertible Preferred Securities will be redeemed in whole at the
liquidation preference of $50 per Convertible Preferred Security plus accrued
and unpaid distributions. In the case of a Tax Event, International Paper may
also elect to cause the Convertible Preferred Securities to remain outstanding
and pay Additional Interest (as defined herein) on the Convertible Junior
Subordinated Debentures. See "Description of the Convertible Preferred
Securities -- Tax Event or Investment Company Event Redemption or Distribution"
and "Description of the Convertible Junior Subordinated Debentures -- General".
Under current United States Federal income tax law, a distribution of the
Convertible Junior Subordinated Debentures would not be a taxable event to
holders of the Convertible Preferred Securities. However, if the relevant
Special Event (as defined herein) is a Tax Event which results in the Issuer
being treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Convertible Preferred
Securities. See "United States Taxation -- Receipt of Convertible Junior
Subordinated Debentures or Cash Upon Liquidation of the Issuer".
LIMITED VOTING RIGHTS. Holders of Convertible Preferred Securities will
have limited voting rights and, except upon the occurrence of certain events
described herein, will not be entitled to vote to appoint, remove or replace the
Issuer Trustees (as defined herein), the right to which is vested exclusively in
the holder of the Common Securities.
TRADING CHARACTERISTICS OF CONVERTIBLE PREFERRED SECURITIES. The
Convertible Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid distributions. A holder who disposes of
its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Convertible Junior Subordinated Debentures through the date of disposition
in income as ordinary income (I.E., original issue discount), and to add such
amount to its adjusted tax basis in its PRO RATA share of the underlying
Convertible Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of original issue discount, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
Federal income tax purposes. See "United States Taxation".
LACK OF PUBLIC MARKET FOR THE CONVERTIBLE PREFERRED SECURITIES. There is no
existing trading market for the Convertible Preferred Securities, and there can
be no assurance regarding the future development of a market for the Convertible
Preferred Securities, or the ability of holders of the Convertible Preferred
Securities to sell their Convertible Preferred Securities or the price at which
such holders may be able to sell their Convertible Preferred Securities. If such
a market were to develop, the Convertible Preferred Securities could trade at
prices that may be higher or lower than the initial offering price depending on
many factors, including prevailing interest rates, the price of the
International Paper Common Stock, the Company's operating results and the market
for similar securities. The Initial Purchasers currently make a market in the
Convertible Preferred Securities. The Initial Purchasers are not obligated to do
so, however, and any market making with respect to the Convertible Preferred
Securities may be discontinued at any time without notice. Therefore, there can
be no assurance as to the liquidity of any trading market for the Convertible
Preferred Securities or that an active public market for the Convertible
Preferred Securities will develop. The Company does not intend to apply for
listing or quotation of the Convertible Preferred Securities on any securities
exchange or stock market.
7
<PAGE>
INTERNATIONAL PAPER CAPITAL TRUST
International Paper Capital Trust is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust (the "Declaration") executed
by International Paper, as sponsor of the Trust, and the trustees of the Issuer
(the "Issuer Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware. International Paper has directly or
indirectly acquired Common Securities in an aggregate liquidation amount equal
to 3% of the total capital of the Issuer. The Common Securities rank PARI PASSU,
and payment will be made thereon PRO RATA, with the Convertible Preferred
Securities, except that, upon the occurrence and during the continuance of an
event of default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Convertible Preferred Securities. The assets of the Trust consist
principally of the Convertible Junior Subordinated Debentures. The Issuer exists
for the exclusive purpose of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Convertible Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees will initially be
five. Three of the Issuer Trustees (the "IP Trustees") will be individuals who
are employees or officers of or who are affiliated with International Paper. The
fourth trustee will be a financial institution that is unaffiliated with
International Paper (the "Trustee"). The fifth trustee will be an entity which
maintains its principal place of business in the State of Delaware (the
"Delaware Trustee"). Initially, The Bank of New York, a New York banking
corporation, will act as Trustee and its affiliate, The Bank of New York
(Delaware), a Delaware banking corporation, will act as Delaware Trustee until,
in each case, removed or replaced by the holder of the Common Securities. The
Bank of New York will also act as indenture trustee under the Guarantee (the
"Guarantee Trustee") and under the Indenture (the "Indenture Trustee"). See
"Description of the Guarantee" and "Description of the Convertible Preferred
Securities". In certain circumstances, the holders of a majority of the
Convertible Preferred Securities will be entitled to appoint one additional
trustee (a "Special Trustee"), who need not be an officer or employee of or
otherwise affiliated with International Paper, who will have the same rights,
powers and privileges as the IP Trustees. See "Description of the Convertible
Preferred Securities -- Voting Rights".
The Trustee holds title to the Convertible Junior Subordinated Debentures
for the benefit of the holders of the Trust Securities and the Trustee will have
the power to exercise all rights, powers and privileges under the Indenture (as
defined herein) as the holder of the Convertible Junior Subordinated Debentures.
In addition, the Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Convertible Junior Subordinated Debentures for the
benefit of the holders of the Trust Securities. The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Convertible Preferred
Securities. Subject to the right of the holders of the Convertible Preferred
Securities to appoint a Special Trustee, International Paper, as the direct or
indirect holder of all the Common Securities, has the right to appoint, remove
or replace any of the Issuer Trustees and to increase or decrease the number of
trustees, provided that the number of trustees shall be at least three, a
majority of which shall be IP Trustees. International Paper will pay all fees
and expenses related to the Trust and the offering of the Convertible Preferred
Securities. See "Description of the Convertible Junior Subordinated Debentures".
The rights of the holders of the Convertible Preferred Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration and the Delaware Business Trust Act, as amended (the "Trust
Act"). See "Description of the Convertible Preferred Securities". The
Declaration, the Indenture and the Guarantee also incorporate by reference the
terms of the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Declaration, the Indenture and the Guarantee will be qualified under
the Trust Indenture Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of International Paper. See
"The Company".
8
<PAGE>
THE COMPANY
The Company is a worldwide forest products company and is one of the world's
largest producers of bleached paperboard used primarily in consumer packaging
and uncoated free sheet used in printing and writing, two major and growing
segments in the paper industry. The Company is also a leading producer of
linerboard, which is used in industrial packaging. Additionally, the Company is
a producer of wood pulp, lumber, wood panels, laminated wood products and
specialty products, including photosensitive films and papers, nonwovens,
chemicals and minerals.
At December 31, 1994, the Company had manufacturing operations in 28
countries and sales in 130 countries. In 1994, international operations and
export sales generated revenues of $4.5 billion, 30% of the Company's total
sales. 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. Internationally, in Europe, Asia, Latin America and Canada, the
Company operates 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. Through over 280 distribution
branches, the Company is one of the largest distributors in the United States of
printing papers and is a major distributor of industrial and office supply
products. The Company produces photosensitive films and papers and photographic
equipment at three U.S. and six international locations and specialty chemicals
at seven U.S. and two international locations, and engages in domestic oil and
gas and real estate activities. The Company, principally through its majority
ownership interest in the public limited partnership, IP Timberlands, Ltd.,
controls approximately 6.1 million acres of timberlands, making it one of the
largest private landowners in the United States. Substantially all of the
Company's businesses have experienced and are likely to continue to experience
cycles relating to available industrial capacity and general economic
conditions.
The Company's strategy for improved profitability and growth is based on
improving the cost position and efficiency of the Company's mill system,
emphasizing higher value products in its core paper businesses, expanding into
fast-growing markets worldwide and strengthening its specialty products and
distribution businesses. As a result of this strategy, which in part has been
implemented through acquisitions, the Company's total sales have more than
tripled since 1985 to approximately $15.0 billion in 1994. During this period,
annual sales of specialty products increased significantly to $2.6 billion and
sales in Europe increased from $213 million to over $2.9 billion.
From 1990 through 1994, the Company's capital expenditures approximated $5.9
billion. 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 $1.5 billion in 1995.
Currently, the Company is embarked on a capital program which will
substantially upgrade its facilities around the world. This program included
building a modern 360,000 ton white paper machine (the largest in the world) at
Selma, Alabama and a world class pulp mill at Saillat, France, and will also
encompass a 408,000 ton linerboard machine at Mansfield, Louisiana, and the
start-up of a fourth paper machine at Kwidzyn, Poland to produce coated
paperboard. As new low-cost capacity is added, the Company has shut down older,
higher cost capacity, some of which has been converted to other uses.
The Company has grown substantially as a result of acquisitions. Since 1986,
the Company has completed over 37 acquisitions at an aggregate cost, including
the assumption of debt, of approximately $8.3 billion.
In November 1991, the Company entered into a joint venture agreement with
Brierley Investments Limited ("Brierley") to control 32% of Carter Holt Harvey
Limited ("CHH"), a major New Zealand paper and forest products company. CHH also
has substantial assets in Chile. In March 1994, the Company, through a
subsidiary, acquired approximately one-half of Brierley's holdings in CHH.
9
<PAGE>
The purchase increased the Company's ownership of CHH to 24% and left Brierley
with 8%. In April 1995, the Company acquired from Brierley their remaining 131.8
million shares of CHH stock for NZ $470 million (approximately $316 million).
Also in April 1995, an additional 325.8 million CHH shares were acquired by the
Company through a subsidiary in open-market purchases for NZ $3.80 per share
(approximately $834 million) bringing the Company's total ownership in CHH to
50.2% on a fully diluted basis. All of the share purchases in April 1995,
including the acquisition from Brierley, were financed with borrowings totaling
approximately $1.1 billion. Beginning May 1, 1995, CHH was consolidated in the
financial statements of the Company.
In December 1994, the Company acquired additional stock of Zanders
Feinpapiere AG, a major German paper producer in which the Company has owned a
stake since 1989. In December 1993, the Company acquired assets of Monsanto
Company's Kentucky-based Fome-Cor division, a manufacturer of polystyrene foam
products. In 1992, the Company acquired an equity interest in Scitex Corporation
Ltd., an Israel-based world leader in color electronic prepress systems for the
graphic design, printing, publishing and video industries; Zaklady
Celulozowa-Papierniecze S.A. w Kwidzynie ("Kwidzyn") from the Government of the
Republic of Poland, Poland's largest white papers manufacturer and Poland's only
integrated bleached pulp and paper company; and certain assets of the chemical
division of Norway-based M. Peterson & Son AS.
In October 1995, the Company acquired the ink resin business of DSM located
in Niort, France. In September 1995, the high pressure laminates business of
Westinghouse located in Hampton, South Carolina was acquired. In January 1995,
the Company acquired the assets of two Michigan-based paper distributors,
Carpenter Paper Company and Seaman-Patrick Holding Company. 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. 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 1993, J.B. Papers, Inc., a paper distribution
company located in Union, New Jersey, was purchased. In the first quarter of
1992, the operating assets of Western Paper Company, a printing and industrial
paper distribution business based in Portland, Oregon, were purchased.
As a result of its capital expenditure and acquisition programs, the Company
has reduced its exposure to price fluctuations in the market pulp segment,
typically the most volatile commodity grade in terms of pricing in the paper
industry. In 1994, the Company produced approximately 1.3 million short tons of
market pulp. Approximately 30% of this tonnage represents specialty grades of
dissolving pulp used to make rayon and acetate products. Dissolving pulp has
historically been less volatile in price than paper pulp. The Company also
purchases significant volumes of market pulp, which provides, on a Company-wide
basis, for a substantially balanced net pulp position.
The Company's future investment strategy is to continue to invest
selectively to reduce costs further in core commodity businesses such as
unbleached kraft, paper, pulp and wood products. More significant investment
will occur in higher growth value-added lines in which the Company has a
material market position such as uncoated white papers, bristols, specialty
linerboard, pulps and bleached board.
The Company was incorporated in 1941 under the laws of the State of New York
as the successor to the New York corporation of the same name organized in 1898.
The Company's corporate headquarters are located at Two Manhattanville Road,
Purchase, New York 10577, and its telephone number is (914) 397-1500.
10
<PAGE>
RECENT DEVELOPMENTS
On July 3, 1995, the Company announced that on August 2, 1995, it would
redeem the entire outstanding principal amount of its $200 million 5 3/4%
Convertible Subordinated Debentures Due 2002 at 100% of their principal amount
plus accrued interest. Substantially all of the 5 3/4% Convertible Subordinated
Debentures Due 2002 were converted to International Paper Common Stock on August
2, 1995.
On July 11, 1995, International Paper announced an increase in its quarterly
dividend from $0.42 per share to $0.50 per share. The Company also announced a
two for one split of the International Paper Common Stock to holders of record
on August 18, 1995, payable September 15, 1995 (the "Stock Split"). Following
the Stock Split, the dividend per share of International Paper Common Stock will
be $0.25.
On October 10, 1995, International Paper reported third-quarter net earnings
of $328 million or $1.27 per share, a threefold increase over 1994 third-quarter
net earnings of $111 million or $0.45 per share. Third-quarter sales were $5.1
billion, a 36% increase over third-quarter 1994 sales of $3.8 billion.
On November 6, 1995, International Paper and Federal Paper Board announced
that they have agreed to merge. Once the merger is complete, Federal Paper
Board, a diversified forest products company will become a wholly owned
subsidiary of International Paper. The transaction, which is valued at
approximately $3.5 billion, including assumption of debt, is subject to approval
by Federal Paper Board's shareholders, as well as by regulatory authorities. It
is expected to close in the first quarter of 1996.
Under the terms of the merger agreement, Federal Paper Board's shareholders
will be entitled to receive at their election, either $55 in cash per share or
$55 worth of International Paper common stock per share, subject to the
limitation that not more than 1.612 and not less than 1.275 International Paper
common shares will be issued for each Federal Paper Board share exchanged for
International Paper common stock. The shareholder election to receive cash or
International Paper common stock will be subject to adjustment so that, in the
aggregate, approximately 49 percent of the Federal Paper Board shares will be
exchanged for cash. The merger is intended to qualify as a tax-free
reorganization.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth International Paper's ratio of earnings to
fixed charges on a historical basis for each of the five years in the period
ended December 31, 1994, and for the six-month periods ended June 30, 1994 and
June 30, 1995.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------- ----------
1990 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.............................................. 3.56 2.47 1.44 2.26 2.43 2.21 3.86
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
include pre-tax earnings before extraordinary charges and the cumulative effect
of accounting changes, interest expense and the estimated interest factor in
rent expense (which, in the opinion of International Paper, approximates
one-third of rent expense), and adjustments for undistributed equity earnings
and the amortization of capitalized interest. Fixed charges include interest
incurred (including amounts capitalized) and the estimated interest factor in
rent expense.
11
<PAGE>
CAPITALIZATION
(UNAUDITED)
The following table sets forth the capitalization of International Paper and
its consolidated subsidiaries as of June 30, 1995, and as adjusted to give
effect to the sale of the Convertible Preferred Securities, the application of
the estimated gross proceeds from such sale to repay short-term indebtedness of
the Company and the call and subsequent conversion of the Company's 5 3/4%
Convertible Subordinated Debentures Due 2002 discussed in "Recent Developments".
The table should be read in conjunction with International Paper's consolidated
financial statements and notes thereto and other financial data incorporated
herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1995
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
INDEBTEDNESS:
Short-Term Indebtedness...................................................................... $ 3,152 $ 2,702
Current Maturities of Long-Term Indebtedness................................................. 569 569
------- -----------
Total Short-Term Indebtedness.............................................................. 3,721 3,271
Long-Term Indebtedness, excluding Current Maturities (1)..................................... 5,641 5,441
------- -----------
Total Indebtedness....................................................................... 9,362 8,712
International Paper-obligated mandatorily redeemable preferred securities of Trust holding
solely International Paper subordinated debentures (2)........................................ -- 450
COMMON SHAREHOLDERS' EQUITY: (3)
Common Stock, par value $1.00 per share; 400 million shares authorized; 128.7 million (131.6
million as adjusted) issued and outstanding (1)............................................. 129 132
Paid-in capital (1).......................................................................... 1,944 2,141
Retained earnings............................................................................ 5,167 5,167
Less: Common Stock held in treasury, at cost; 1.7 million shares........................... 81 81
------- -----------
Total Common Shareholders' Equity........................................................ 7,159 7,359
------- -----------
Total Capitalization................................................................... $16,521 $16,521
------- -----------
------- -----------
<FN>
- ------------------------
(1) The amounts in the "As Adjusted" column assume that all of the Company's
5 3/4% Convertible Subordinated Debentures Due 2002 were converted into
International Paper Common Stock at a conversion price of $68.50 per share.
(2) As described herein, the sole assets of the Trust will be the 5 1/4%
Convertible Junior Subordinated Debentures due July 20, 2005 of the Company
with a principal amount of $463,917,550, and upon redemption of such debt,
the Convertible Preferred Securities will be mandatorily redeemable.
(3) The data included in the table does not reflect the Stock Split announced
on July 11, 1995. See "Recent Developments".
</TABLE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with
International Paper's financial statements. It is expected that the Convertible
Preferred Securities will be reflected in International Paper's consolidated
financial statements as a minority interest consisting of International
Paper-obligated mandatorily redeemable preferred securities of a trust holding
convertible subordinated debentures of International Paper. All of the assets of
the Trust will be approximately $464 million of Convertible Junior Subordinated
Debentures of the Company which will bear interest at a rate of 5 1/4% per
annum.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. Neither International Paper nor the Issuer will receive any
proceeds from the sale of the Offered Securities.
12
<PAGE>
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
THE FOLLOWING SUMMARY OF CERTAIN MATERIAL TERMS AND PROVISIONS OF THE
CONVERTIBLE PREFERRED SECURITIES DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT
TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE DECLARATION. THE
CONVERTIBLE PREFERRED SECURITIES WERE ISSUED PURSUANT TO THE TERMS OF THE
DECLARATION. THE DECLARATION INCORPORATES BY REFERENCE TERMS OF THE TRUST
INDENTURE ACT. THE DECLARATION WILL BE QUALIFIED UNDER THE TRUST INDENTURE ACT.
THE BANK OF NEW YORK, AS TRUSTEE, ACTS AS INDENTURE TRUSTEE FOR THE DECLARATION
FOR PURPOSES OF COMPLIANCE WITH THE TRUST INDENTURE ACT. CAPITALIZED TERMS NOT
OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASSIGNED TO THEM IN THE DECLARATION.
GENERAL
The Convertible Preferred Securities were issued in fully registered form
without interest coupons.
The Convertible Preferred Securities represent undivided beneficial
ownership interests in the assets of the Issuer and entitle the holders thereof
to a preference in certain circumstances with respect to distributions and
amounts payable on redemption or liquidation over the Common Securities, as well
as other benefits as described in the Declaration.
All of the Common Securities are owned, directly or indirectly, by
International Paper. The Common Securities rank PARI PASSU, and payments are
made thereon PRO RATA, with the Convertible Preferred Securities except as
described under "-- Subordination of Common Securities". The Convertible Junior
Subordinated Debentures are owned by the Trustee and held for the benefit of the
holders of the Trust Securities. The Guarantee is a full and unconditional
guarantee with respect to the Convertible Preferred Securities, but does not
guarantee payment of distributions or amounts payable on redemption or
liquidation of the Convertible Preferred Securities when the Issuer does not
have funds available to make such payments.
DISTRIBUTIONS
The distributions payable on each Convertible Preferred Security are fixed
at a rate per annum of 5 1/4% of the stated liquidation preference of $50 per
Convertible Preferred Security. Deferred distributions (and interest thereon)
will accrue interest (compounded quarterly) at the same rate. The term
"distributions" as used herein includes any such distributions payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Convertible Preferred Securities will be cumulative,
accrue from the date of initial issuance and will be payable quarterly in
arrears on each March 15, June 15, September 15 and December 15, commencing
September 15, 1995, when, as and if available. International Paper has the right
under the Indenture to defer interest payments from time to time on the
Convertible Junior Subordinated Debentures for successive periods not exceeding
20 consecutive quarters for each such period, and, as a consequence, quarterly
distributions on the Convertible Preferred Securities would be deferred by the
Issuer (but would continue to accrue with interest) during any such Deferral
Period. In the event that International Paper exercises this right, during such
period International Paper (i) shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than stock
dividends paid by International Paper which consist of stock of the same class
as that on which the dividend is being paid), (ii) shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by International Paper that rank PARI PASSU with or
junior to the Convertible Junior Subordinated Debentures, and (iii) shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee). Prior to the termination of any Deferral Period,
International Paper may further extend such Deferral Period; PROVIDED that such
Deferral Period together with all previous and further deferrals thereof may not
exceed 20 consecutive quarters. Upon the termination of any Deferral Period,
International Paper is required to pay all amounts then due and, upon such
payment, International Paper may select a new
13
<PAGE>
Deferral Period, subject to the above requirements. In no event shall any
Deferral Period extend beyond the maturity of the Convertible Junior
Subordinated Debentures. See "Description of the Convertible Junior Subordinated
Debentures -- Interest" and "-- Option to Extend Interest Payment Period".
Distributions on the Convertible Preferred Securities must be paid quarterly
on the dates payable to the extent of funds of the Trust available for the
payment of such distributions. Amounts available to the Trust for distribution
to the holders of the Convertible Preferred Securities will be limited to
payments under the Convertible Junior Subordinated Debentures. See "Description
of the Convertible Junior Subordinated Debentures". The payment of
distributions, to the extent of funds of the Trust available therefor, is
guaranteed by International Paper, as set forth under "Description of the
Guarantee".
Distributions on the Convertible Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Issuer on the
relevant record dates, which will be fifteen days prior to the relevant payment
dates. Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "--Book-Entry-
Only Issuance -- The Depository Trust Company" below. In the event that any date
on which distributions are payable on the Convertible Preferred Securities is
not a Business Day, payment of the distribution payable on such date will be
made on the next succeeding day which is a Business Day (without any
distribution or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than a
day on which banking institutions in The City of New York are authorized or
required by law to close.
CONVERSION RIGHTS
GENERAL. Convertible Preferred Securities will be convertible at any time,
at the option of the holder thereof and in the manner described below, into
shares of International Paper Common Stock at an initial conversion rate of
0.925926 shares of International Paper Common Stock (as adjusted to reflect the
Stock Split) for each Convertible Preferred Security (equivalent to a conversion
price of $54.00 per share of International Paper Common Stock, as adjusted to
reflect the Stock Split), subject to adjustment as described under "--
Conversion Price Adjustments" below. The Issuer has agreed in the Declaration
not to convert Convertible Junior Subordinated Debentures held by it except
pursuant to a notice of conversion delivered to the Conversion Agent by a holder
of Convertible Preferred Securities. A holder of a Convertible Preferred
Security wishing to exercise its conversion right shall deliver an irrevocable
conversion notice, together, if the Convertible Preferred Security is a
Certificated Security (as defined herein), with such Certificated Security, to
the Conversion Agent which shall, on behalf of such holder, exchange such
Convertible Preferred Security for a portion of the Convertible Junior
Subordinated Debentures and immediately convert such Convertible Junior
Subordinated Debentures into International Paper Common Stock. Holders may
obtain copies of the required form of the conversion notice from the Conversion
Agent.
Whenever International Paper issues shares of International Paper Common
Stock upon conversion of Convertible Preferred Securities, International Paper
will issue, together with each such share of International Paper Common Stock,
one right entitling the holder thereof, under certain circumstances, to purchase
one share of International Paper Common Stock pursuant to, and upon the terms
indicated in, the Rights Agreement (the "Rights Agreement") dated as of April
14, 1987, as amended, between International Paper and Chemical Bank (successor
to Manufacturers Hanover Trust Company), as Rights Agent, or any similar rights
issued to holders of International Paper Common Stock in addition thereto or in
replacement thereof (such rights, together with any additional or replacement
rights, being collectively referred to as the "Rights"), whether or not such
Rights shall be exercisable at such time, but only if such Rights are issued and
outstanding and held by other holders
14
<PAGE>
of International Paper Common Stock (or are evidenced by outstanding share
certificates representing International Paper Common Stock) at such time and
have not expired or been redeemed. As distributed, the Rights trade together
with the International Paper Common Stock. The Rights may be exercised or traded
separately only after the earlier to occur of: (i) the tenth business day after
the commencement of, or first public disclosure of an intention to commence, a
tender or exchange offer by a person or group other than International Paper or
any subsidiary or employee benefit plan of International Paper or any subsidiary
if, upon consummation of the offer, such person or group would acquire
beneficial ownership of 20% or more of the outstanding International Paper
Common Stock or (ii) the tenth day after the first public announcement that an
Acquiring Person (as such term is defined in the Rights Agreement) has acquired
the beneficial ownership of 20% or more of the shares of International Paper
Common Stock outstanding. The Rights will expire on April 28, 1997, unless
earlier redeemed by International Paper as provided in the Rights Agreement.
Until a Right is exercised, the holder thereof will have no additional rights as
a shareholder of International Paper, including, without limitation, the right
to vote or to receive dividends on shares of International Paper Common Stock
subject to the Rights. The foregoing description of the Rights is qualified in
its entirety by reference to the Rights Agreement, which is an exhibit to
International Paper's registration statement on Form 8-A, dated April 17, 1987,
as amended, incorporated by reference herein.
Holders of Convertible Preferred Securities at the close of business on a
distribution record date will be entitled to receive the distribution payable on
such Convertible Preferred Securities on the corresponding distribution payment
date notwithstanding the conversion of such Convertible Preferred Securities
following such distribution record date but prior to such distribution payment
date. Except as provided in the immediately preceding sentence, neither the
Issuer nor International Paper will make, or be required to make, any payment,
allowance or adjustment for accumulated and unpaid distributions, whether or not
in arrears, on converted Convertible Preferred Securities. International Paper
will make no payment or allowance for distributions on the shares of
International Paper Common Stock issued upon such conversion, except to the
extent that such shares of International Paper Common Stock are held of record
on the record date for any such distributions. Each conversion will be deemed to
have been effected immediately prior to the close of business on the day on
which the related conversion notice was received by the Issuer.
No fractional shares of International Paper Common Stock will be issued as a
result of conversion, but in lieu thereof such fractional interest will be paid
by International Paper in cash.
CONVERSION PRICE ADJUSTMENTS -- GENERAL. The conversion price will be
subject to adjustment in certain events including, without duplication: (i) the
payment of dividends (and other distributions) payable in International Paper
Common Stock on any class of capital stock of International Paper; (ii) the
issuance to all holders of International Paper Common Stock of rights or
warrants, or the occurrence of an event under the Company's Rights Agreement,
entitling holders of such rights or warrants to subscribe for or purchase
International Paper Common Stock at less than the then current market price;
(iii) subdivisions and combinations of International Paper Common Stock; (iv)
the payment of dividends (and other distributions) to all holders of
International Paper Common Stock consisting of evidences of indebtedness of
International Paper, securities or capital stock, cash or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to in clauses (i) and (ii) and dividends and distributions paid
exclusively in cash); (v) the payment of dividends (and other distributions) on
International Paper Common Stock paid exclusively in cash, excluding (A) cash
dividends that do not exceed the per share amount of the immediately preceding
regular cash dividend (as adjusted to reflect any of the events referred to in
clauses (i) through (vi) of this sentence) and (B) cash dividends if the
annualized per share amount thereof does not exceed 15% of the current market
price of International Paper Common Stock as of the trading day immediately
preceding the date of declaration of such dividend; and (vi) payment to holders
of International Paper Common Stock in respect of a tender or exchange offer
(other than an odd-lot offer) by International Paper or any subsidiary of
International Paper for International Paper
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Common Stock at a price in excess of 110% of the current market price of
International Paper Common Stock as of the trading day next succeeding the last
date tenders or exchanges may be made pursuant to such tender or exchange offer.
International Paper from time to time may reduce the conversion price of the
Convertible Junior Subordinated Debentures (and thus the conversion price of the
Convertible Preferred Securities) by any amount selected by International Paper
for any period of at least 20 days, in which case International Paper shall give
at least 15 days' notice of such reduction. International Paper may, at its
option, make such reductions in the conversion price, in addition to those set
forth above, as the International Paper Board of Directors deems advisable to
avoid or diminish any income tax to holders of International Paper Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "United
States Taxation -- Adjustment of Conversion Price".
No adjustment of the conversion price will be made upon the issuance of any
shares of International Paper Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on
securities of International Paper and the investment of additional optional
amounts in shares of International Paper Common Stock under any such plan or the
issuance of any shares of International Paper Common Stock or options or rights
to purchase such shares pursuant to any present or future employee, director or
consultant benefit plan or program of International Paper or pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible security
outstanding as of the date the Convertible Preferred Securities were first
issued. There shall also be no adjustment of the conversion price in case of the
issuance of any International Paper Common Stock (or securities convertible into
or exchangeable for International Paper Common Stock), except as specifically
described above. If any action would require adjustment of the conversion price
pursuant to more than one of the anti-dilution provisions, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value to holders of the Convertible Preferred Securities. No
adjustment in the conversion price will be required unless such adjustment would
require an increase or decrease of at least 1% of the conversion price, but any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment.
CONVERSION PRICE ADJUSTMENTS -- MERGER, CONSOLIDATION OR SALE OF ASSETS OF
INTERNATIONAL PAPER. In the event that International Paper is a party to any
transaction (including, without limitation, a merger, consolidation, sale of all
or substantially all of the assets of International Paper, recapitalization or
reclassification of International Paper Common Stock or any compulsory share
exchange (each of the foregoing being referred to as a "Transaction")), in each
case, as a result of which shares of International Paper Common Stock shall be
converted into the right (i) in the case of any Transaction other than a
Transaction involving a Common Stock Fundamental Change (as defined herein), to
receive securities, cash or other property, each Convertible Preferred Security
shall thereafter be convertible into the kind and amount of securities, cash and
other property receivable upon the consummation of such Transaction by a holder
of that number of shares of International Paper Common Stock into which a
Convertible Preferred Security was convertible immediately prior to such
Transaction, with such adjustments as provided below, or (ii) in the case of a
Transaction involving a Common Stock Fundamental Change, to receive common stock
of the kind received by holders of International Paper Common Stock (but in each
case after giving effect to any adjustment discussed below relating to a
Fundamental Change if such Transaction constitutes a Fundamental Change). The
holders of Convertible Preferred Securities will have no voting rights with
respect to any Transaction described in this section.
If any Fundamental Change (as defined herein) occurs, the conversion price
in effect will be adjusted immediately after such Fundamental Change as
described below. In addition, in the event of a Common Stock Fundamental Change,
each Convertible Preferred Security shall be convertible solely into common
stock of the kind received by holders of International Paper Common Stock as a
result of such Common Stock Fundamental Change.
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The conversion price in the case of any Transaction involving a Fundamental
Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined herein),
the conversion price of the Convertible Preferred Securities will thereupon
become the lower of (A) the conversion price in effect immediately prior to
such Non-Stock Fundamental Change, but after giving effect to any other
prior adjustments, and (B) the result obtained by multiplying the greater of
the Applicable Price (as defined herein) or the then applicable Reference
Market Price (as defined herein) by a fraction of which the numerator will
be $50 and the denominator will be the then current Redemption Price (as
defined herein) or, prior to June 30, 1999, an amount per Convertible
Preferred Security determined by International Paper in its sole discretion,
after consultation with an investment banking firm, to be the equivalent of
the hypothetical redemption price that would have been applicable if the
Convertible Preferred Securities had been redeemable during such period; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Convertible Preferred Securities in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other
prior adjustments, will thereupon be adjusted by multiplying such conversion
price by a fraction of which the numerator will be the Purchaser Stock Price
(as defined herein) and the denominator will be the Applicable Price;
PROVIDED, HOWEVER, that in the event of a Common Stock Fundamental Change in
which (A) 100% of the value of the consideration received by a holder of
International Paper Common Stock is common stock of the successor, acquiror
or other third party (and cash, if any, is paid only with respect to any
fractional interests in such common stock resulting from such Common Stock
Fundamental Change) and (B) all of the International Paper Common Stock will
have been exchanged for, converted into, or acquired for common stock (and
cash with respect to fractional interests) of the successor, acquiror or
other third party, the conversion price of the Convertible Preferred
Securities in effect immediately prior to such Common Stock Fundamental
Change will thereupon be adjusted by multiplying such conversion price by a
fraction of which the numerator will be one and the denominator will be the
number of shares of common stock of the successor, acquiror, or other third
party received by a holder of one share of International Paper Common Stock
as a result of such Common Stock Fundamental Change.
In the absence of the Fundamental Change provisions, in the case of a
Transaction each Convertible Preferred Security would become convertible into
the securities, cash, or property receivable by a holder of the number of shares
of International Paper Common Stock into which such Convertible Preferred
Security was convertible immediately prior to such Transaction. Thus, in the
absence of the Fundamental Change provisions, a Transaction could substantially
lessen or eliminate the value of the conversion privilege associated with the
Convertible Preferred Securities. For example, if International Paper were
acquired in a cash merger, each Convertible Preferred Security would become
convertible solely into cash and would no longer be convertible into securities
whose value would vary depending on the future prospects of International Paper
and other factors.
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all the International Paper
Common Stock is converted into securities, cash, or property and not more than
50% of the value received by the holders of International Paper Common Stock
consists of stock listed or admitted for listing subject to notice of issuance
on a national securities exchange or quoted on the National Market System of the
National Association of Securities Dealers, Inc. (a "Non-Stock Fundamental
Change", as defined herein), to increase the securities, cash, or property into
which each Convertible Preferred Security is convertible.
In a Non-Stock Fundamental Change transaction in which the initial value
received per share of International Paper Common Stock (measured as described in
the definition of Applicable Price below) is lower than the then applicable
conversion price of a Convertible Preferred Security but greater than or equal
to the "Reference Market Price" (initially $29.625, as adjusted to reflect the
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Stock Split, but subject to adjustment in certain events as described below),
the conversion price will be adjusted as described above with the effect that
each Convertible Preferred Security will be convertible into securities, cash or
property of the same type received by the holders of International Paper Common
Stock in such transaction with the conversion price adjusted as though such
initial value had been the Applicable Price.
In a Non-Stock Fundamental Change transaction in which the initial value
received per share of International Paper Common Stock (measured as described in
the definition of Applicable Price below) is lower than both the Applicable
Conversion Price of a Convertible Preferred Security and the Reference Market
Price, the conversion price will be adjusted as described above but calculated
as though such initial value had been the Reference Market Price.
In a Fundamental Change transaction in which all or substantially all of the
International Paper Common Stock is converted into securities, cash, or property
and more than 50% of the value received by the holders of International Paper
Common Stock consists of listed or National Market System-traded common stock (a
"Common Stock Fundamental Change", as defined herein), the foregoing adjustments
are designed to provide in effect that (a) where International Paper Common
Stock is converted partly into such common stock and partly into other
securities, cash or property, each Convertible Preferred Security will be
convertible solely into a number of shares of such common stock determined so
that the initial value of such shares (measured as described in the definition
of "Purchaser Stock Price" below) equals the value of the shares of
International Paper Common Stock into which such Convertible Preferred Security
was convertible immediately before the transaction (measured as aforesaid) and
(b) where International Paper Common Stock is converted solely into such common
stock, each Convertible Preferred Security will be convertible into the same
number of shares of such common stock receivable by a holder of the number of
shares of International Paper Common Stock into which such Convertible Preferred
Security was convertible immediately before such transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock Fundamental
Change in which the holder of the International Paper Common Stock receives only
cash, the amount of cash received by the holder of one share of International
Paper Common Stock and (ii) in the event of any other Non-Stock Fundamental
Change or any Common Stock Fundamental Change, the average of the Closing Prices
(as defined herein) for the International Paper Common Stock during the ten
trading days prior to and including the record date for the determination of the
holders of International Paper Common Stock entitled to receive such securities,
cash, or other property in connection with such Non-Stock Fundamental Change or
Common Stock Fundamental Change or, if there is no such record date, the date
upon which the holders of the International Paper Common Stock shall have the
right to receive such securities, cash, or other property (such record date or
distribution date being hereinafter referred as the Entitlement Date), in each
case as adjusted in good faith by International Paper to appropriately reflect
any of the events referred to in clauses (i) through (vi) of the first paragraph
under "-- Conversion Price Adjustments -- General".
The term "Closing Price" means on any day the last reported sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on the NYSE Composite Tape or, if the
stock is not listed or admitted to trading on such exchange, on the principal
national securities exchange on which such stock is listed or admitted to
trading or if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by any
NYSE member firm, selected by International Paper for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of International Paper) of the consideration received by holders of
International Paper Common Stock consists of common stock that for each of the
ten consecutive trading days prior to the Entitlement Date has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities
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exchange or quoted on the National Market System of the National Association of
Securities Dealers, Inc.; PROVIDED, HOWEVER, that a Fundamental Change shall not
be a Common Stock Fundamental Change unless International Paper continues to
exist after the occurrence of such Fundamental Change and the outstanding
Convertible Preferred Securities continue to exist as outstanding Convertible
Preferred Securities.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the International Paper Common Stock shall be exchanged for, converted into,
acquired for or constitute solely the right to receive securities, cash or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED that, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the International Paper Common Stock shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive securities, cash, or
other property, but the adjustment shall be based upon the highest weighted
average per share consideration that a holder of International Paper Common
Stock could have received in such transaction or event as a result of which more
than 50% of the International Paper Common Stock shall have been exchanged for,
converted into, or acquired for or constitute solely the right to receive
securities, cash or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
International Paper to appropriately reflect any of the events referred to in
clauses (i) through (vi) of the first paragraph under "-- Conversion Price
Adjustments -- General".
The term "Reference Market Price" shall initially mean $29.625 (as adjusted
to reflect the Stock Split) (which is an amount equal to 66 2/3% of the last
reported sale price for the International Paper Common Stock on the NYSE
Composite Tape on July 13, 1995) and, in the event of any adjustment to the
conversion price other than as a result of a Non-Stock Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the Reference
Market Price to the conversion price after giving effect to any such adjustment
shall always be the same as the ratio of $29.625 (as adjusted to reflect the
Stock Split) to the initial conversion price of the Convertible Preferred
Securities.
OPTIONAL REDEMPTION
International Paper is permitted to redeem the Convertible Junior
Subordinated Debentures as described herein under "Description of the
Convertible Junior Subordinated Debentures -- Optional Redemption", in whole or
in part, from time to time, after June 30, 1999, upon not less than 30 nor more
than 60 days' notice. See "Description of the Convertible Junior Subordinated
Debentures -- Optional Redemption". Upon any redemption in whole or in part of
the Convertible Junior Subordinated Debentures at the option of International
Paper, the Issuer will, to the extent of the proceeds of such redemption, redeem
Convertible Preferred Securities and Common Securities at the Redemption Price.
In the event that fewer than all the outstanding Convertible Preferred
Securities are to be so redeemed, the Convertible Preferred Securities to be
redeemed will be selected as described under "-- Book-Entry-Only Issuance -- The
Depository Trust Company" below.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, register the transfer of or exchange any Convertible Preferred
Security during a period beginning at the opening of business 15 days before any
selection for redemption of Convertible Preferred Securities and ending at the
close of business on the earliest date in which the relevant notice of
redemption is deemed to
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have been given to all holders of Convertible Preferred Securities to be so
redeemed and (ii) register the transfer of or exchange any Convertible Preferred
Securities so selected for redemption, in whole or in part, except for the
unredeemed portion of any Convertible Preferred Securities being redeemed in
part.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event (as defined herein) shall occur and be continuing,
International Paper shall cause the IP Trustees to liquidate the Issuer and
cause Convertible Junior Subordinated Debentures to be distributed to the
holders of the Convertible Preferred Securities in liquidation of the Issuer
within 90 days following the occurrence of such Tax Event; PROVIDED, HOWEVER,
that such liquidation and distribution shall be conditioned on (i) the IP
Trustees' receipt of an opinion of nationally recognized independent tax counsel
(reasonably acceptable to the IP Trustees) experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the holders of the Convertible
Preferred Securities will not recognize any income, gain or loss for United
States Federal income tax purposes as a result of such liquidation and
distribution of Convertible Junior Subordinated Debentures, and (ii)
International Paper being unable to avoid such Tax Event within such 90-day
period by taking some ministerial action or pursuing some other reasonable
measure that, in the sole judgment of International Paper, will have no adverse
effect on the Issuer, International Paper or the holders of the Convertible
Preferred Securities and will involve no material cost. Furthermore, if (i)
International Paper has received an opinion (a "Redemption Tax Opinion") of
nationally recognized independent tax counsel (reasonably acceptable to the IP
Trustees) experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that International Paper would be precluded from
deducting the interest on the Convertible Junior Subordinated Debentures for
United States Federal income tax purposes, even after the Convertible Junior
Subordinated Debentures were distributed to the holders of the Convertible
Preferred Securities upon liquidation of the Issuer as described above, or (ii)
the IP Trustees shall have been informed by such tax counsel that it cannot
deliver a No Recognition Opinion, International Paper shall have the right, upon
not less than 30 nor more than 60 days' notice and within 90 days following the
occurrence of the Tax Event, to redeem the Convertible Junior Subordinated
Debentures, in whole (but not in part) for cash, at par plus accrued and unpaid
interest and, following such redemption, all the Convertible Preferred
Securities will be redeemed by the Issuer at the liquidation preference of $50
per Convertible Preferred Security plus accrued and unpaid distributions;
PROVIDED, HOWEVER, that, if at the time there is available to International
Paper or the Issuer the opportunity to eliminate, within such 90-day period, the
Tax Event by taking some ministerial action or pursuing some other reasonable
measure that, in the sole judgment of International Paper, will have no adverse
effect on the Issuer, International Paper or the holders of the Convertible
Preferred Securities and will involve no material cost, the Issuer or
International Paper will pursue such measure in lieu of redemption. See "--
Mandatory Redemption". In lieu of the foregoing options, International Paper
will also have the option of causing the Convertible Preferred Securities to
remain outstanding and pay Additional Interest (as defined herein) on the
Convertible Junior Subordinated Debentures. See "Description of the Convertible
Junior Subordinated Debentures -- Additional Interest".
"Tax Event" means that International Paper shall have obtained an opinion of
nationally recognized independent tax counsel (reasonably acceptable to the IP
Trustees) experienced in such matters to the effect that, as a result of (a) any
amendment to or change (including any announced prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the Original Offering Date), which
amendment or change is effective or which interpretation or pronouncement is
announced on or after the Original Offering Date, there is more than an
insubstantial risk that (i) the Issuer is or will be subject to United States
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Federal income tax with respect to interest received on the Convertible Junior
Subordinated Debentures, (ii) interest payable to the Issuer on the Convertible
Junior Subordinated Debentures is not or will not be deductible for United
States Federal income tax purposes or (iii) the Issuer is or will be subject to
more than a DE MINIMIS amount of other taxes, duties, assessments or other
governmental charges.
If an Investment Company Event (as hereinafter defined) shall occur and be
continuing, International Paper shall cause the IP Trustees to liquidate the
Issuer and cause the Convertible Junior Subordinated Debentures to be
distributed to the holders of the Convertible Preferred Securities in
liquidation of the Issuer within 90 days following the occurrence of such
Investment Company Event.
The distribution by International Paper of the Convertible Junior
Subordinated Debentures will effectively result in the cancellation of the
Convertible Preferred Securities.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Issuer is or will
be considered an investment company which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the Original Offering Date.
A "Special Event" means either an Investment Company Event or a Tax Event.
After the date fixed for any distribution of Convertible Junior Subordinated
Debentures (i) the Convertible Preferred Securities will no longer be deemed to
be outstanding, (ii) The Depository Trust Company (the "Depository" or "DTC") or
its nominee, as the record holder of the Global Certificates, will receive a
registered global certificate or certificates representing the Convertible
Junior Subordinated Debentures to be delivered upon such distribution and (iii)
any certificates representing Convertible Preferred Securities not held by DTC
or its nominee will be deemed to represent Convertible Junior Subordinated
Debentures having a principal amount equal to the aggregate of the stated
liquidation preference of such Convertible Preferred Securities, with accrued
and unpaid interest equal to the amount of accrued and unpaid distributions on
such Convertible Preferred Securities, until such certificates are presented to
International Paper or its agent for transfer or reissuance.
MANDATORY REDEMPTION
The Convertible Junior Subordinated Debentures will mature on July 20, 2025,
and may be redeemed, in whole or in part, at any time after June 30, 1999 or at
any time in certain circumstances upon the occurrence of a Special Event. Upon
the repayment or payment of the Convertible Junior Subordinated Debentures,
whether at maturity or upon redemption or otherwise, the proceeds from such
repayment or redemption shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the Convertible
Junior Subordinated Debentures so repaid or redeemed at the applicable
redemption price together with accrued and unpaid distributions through the date
of redemption; PROVIDED that holders of the Trust Securities shall be given not
less than 30 nor more than 60 days' notice of such redemption. See "-- Tax Event
or Investment Company Event Redemption or Distribution" and "Description of the
Convertible Junior Subordinated Debentures -- General" and "Optional
Redemption". Upon the repayment of the Convertible Junior Subordinated
Debentures at maturity or upon any acceleration, earlier redemption or
otherwise, the proceeds from such repayment will be applied to redeem the
Convertible Preferred Securities and Common Securities, in whole, upon not less
than 30 nor more than 60 days' notice.
REDEMPTION PROCEDURES
The Convertible Preferred Securities will not be redeemed unless all accrued
and unpaid distributions have been paid on all Convertible Preferred Securities
for all quarterly distribution periods terminating on or prior to the date of
redemption.
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If the Issuer gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, the Issuer will irrevocably deposit with
DTC funds sufficient to pay the amount payable on redemption and will give DTC
irrevocable instructions and authority to pay such amount in respect of
Convertible Preferred Securities represented by the Global Certificates and will
irrevocably deposit with the paying agent for the Convertible Preferred
Securities funds sufficient to pay such amount in respect of any Certificated
Securities and will give such paying agent irrevocable instructions and
authority to pay such amount to the holders of Certificated Securities upon
surrender of their certificates. Notwithstanding the foregoing, distributions
payable on or prior to the redemption date for any Convertible Preferred
Securities called for redemption shall be payable to the holders of such
Convertible Preferred Securities on the relevant record dates for the related
distribution dates. If notice of redemption shall have been given and funds are
deposited as required, then upon the date of such deposit, all rights of holders
of such Convertible Preferred Securities so called for redemption will cease,
except the right of the holders of such Convertible Preferred Securities to
receive the redemption price, but without interest on such redemption price. In
the event that any date fixed for redemption of Convertible Preferred Securities
is not a Business Day, then payment of the amount payable on such date will be
made on the next succeeding day which is a Business Day (without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the redemption price in
respect of Convertible Preferred Securities is improperly withheld or refused
and not paid either by the Issuer or by International Paper pursuant to the
Guarantee described under "Description of the Guarantee", distributions on such
Convertible Preferred Securities will continue to accrue at the then applicable
rate, from the original redemption date to the date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the amount payable upon redemption (other than for
purposes of calculating any premium).
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), International Paper or its subsidiaries
may at any time and from time to time purchase outstanding Convertible Preferred
Securities by tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made PRO RATA based on the liquidation
preference of the Trust Securities; PROVIDED, HOWEVER, that, if on any
distribution date or redemption date a Declaration Event of Default (as defined
below under "-- Declaration Events of Default") under the Declaration shall have
occurred and be continuing, no payment of any distribution on, or amount payable
upon redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid distributions on
all outstanding Convertible Preferred Securities for all distribution periods
terminating on or prior thereto, or in the case of payment of the amount payable
upon redemption of the Convertible Preferred Securities, the full amount of such
amount in respect of all outstanding Convertible Preferred Securities shall have
been made or provided for, and all funds available to the Trustee shall first be
applied to the payment in full in cash of all distributions on, or the amount
payable upon redemption of, Convertible Preferred Securities then due and
payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Convertible
Preferred Securities have been cured, waived or otherwise eliminated. Until any
such Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Trustee shall
act solely on behalf of the holders of the Convertible Preferred Securities and
not the holder of the Common Securities, and only the holders of the Convertible
Preferred Securities will have the right to direct the Trustee to act on their
behalf.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding up or termination of the Issuer, the holders of the Convertible
Preferred Securities at the time will be entitled to receive out of the assets
of the Issuer available for distribution to holders of Trust Securities after
satisfaction of liabilities of creditors of the Trust, before any distribution
of assets is made to the holders of the Common Securities, an amount equal to
the aggregate of the stated liquidation preference of $50 per Convertible
Preferred Security and accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
liquidation, dissolution, winding up or termination, Convertible Junior
Subordinated Debentures in an aggregate principal amount equal to the
Liquidation Distribution have been distributed on a PRO RATA basis to the
holders of the Trust Securities.
Pursuant to the Declaration, the Issuer shall be dissolved and its affairs
shall be wound up upon the earliest to occur of the following: (i) October 28,
2058, the expiration of the term of the Issuer, (ii) the bankruptcy of
International Paper or the holder of the Common Securities, (iii) the filing of
a certificate of dissolution or its equivalent with respect to International
Paper or such holder, or the revocation of International Paper's or such
holder's charter and the expiration of 90 days after the date of notice to
International Paper or such holder of revocation without a reinstatement of its
charter, (iv) the distribution of all the assets of the Trust, (v) the entry of
a decree of a judicial dissolution of International Paper, the Trust or such
holder, or (vi) the redemption of all the Trust Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE ISSUER
The Issuer may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity or person,
except as described below. The Issuer may, without the consent of the holders of
the Convertible Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by, a trust organized as such under the laws of any state
of the United States of America or of the District of Columbia; PROVIDED that
(i) if the Issuer is not the survivor, such successor entity either (x)
expressly assumes all of the obligations of the Issuer under the Convertible
Preferred Securities or (y) substitutes for the Convertible Preferred Securities
other securities having substantially the same terms as the Convertible
Preferred Securities (the "Successor Securities") as long as the Successor
Securities rank, with respect to participation in the profits and distributions
or in the assets of the successor entity, at least as high as the Convertible
Preferred Securities rank with respect to participation in the profits and
dividends or in the assets of the Issuer, (ii) International Paper expressly
acknowledges such successor entity as the holder of the Convertible Junior
Subordinated Debentures, (iii) the Convertible Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Convertible Preferred Securities are then listed, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Convertible Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of the holders of the
Convertible Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of the Issuer, (vii) International Paper has provided a
guarantee to the holders of the Successor Securities with respect to such
successor entity having substantially the same terms as the Guarantee and (viii)
prior to such merger, consolidation, amalgamation or replacement, International
Paper has received an opinion of nationally recognized independent counsel
(reasonably acceptable to the Trustee) to the Issuer experienced in such matters
to the effect that (x) such successor entity will be treated as a grantor trust
for United States Federal income tax purposes, (y) following such merger,
consolidation, amalgamation or replacement, neither International Paper nor such
successor entity will be required to register as an investment company under the
1940 Act and (z) such merger, consolidation, amalgamation or replacement will
not adversely affect the limited liability of the holders of the
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Convertible Preferred Securities. Notwithstanding the foregoing, the Issuer
shall not, except with the consent of holders of 100% in liquidation amount of
the Common Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Issuer or the Successor
Entity to be classified as other than a grantor trust for United States Federal
income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Event of Default") or a default
by International Paper under the Guarantee constitutes an event of default under
the Declaration with respect to the Trust Securities (a "Declaration Event of
Default"); PROVIDED that, pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Convertible Preferred Securities have been cured, waived or
otherwise eliminated. Until such Declaration Events of Default with respect to
the Convertible Preferred Securities have been so cured, waived or otherwise
eliminated, the Trustee will be deemed to be acting solely on behalf of the
holders of the Convertible Preferred Securities and only the holders of the
Convertible Preferred Securities will have the right to direct the Trustee with
respect to certain matters under the Declaration and, therefore, the Indenture.
As long as the Convertible Preferred Securities are outstanding, upon the
occurrence of a Declaration Event of Default, the Trustee as the sole holder of
the Convertible Junior Subordinated Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Junior
Subordinated Debentures to be immediately due and payable. International Paper
and the Issuer are each required to file annually with the Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act and under "Description of
the Guarantee -- Amendments and Assignment", and as otherwise required by law
and the Declaration, the holders of the Convertible Preferred Securities will
have no voting rights.
If (i) the Issuer fails to pay distributions in full on the Convertible
Preferred Securities for six consecutive quarterly distribution periods (whether
or not a Deferral Period is in effect) or (ii) a Declaration Event of Default
occurs and is continuing (each an "Appointment Event"), then the holders of the
Convertible Preferred Securities, acting as a single class, will be entitled by
the majority vote of such holders to appoint a Special Trustee. For purposes of
determining whether the Issuer has failed to pay distributions in full for six
consecutive quarterly distribution periods, distributions shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative distributions have been or contemporaneously are paid with respect to
all quarterly distribution periods terminating on or prior to the date of
payment of such cumulative distributions. Any holder of Convertible Preferred
Securities (other than International Paper or any of its affiliates) shall be
entitled to nominate any person to be appointed as Special Trustee. Not later
than 30 days after such right to appoint a Special Trustee arises, the IP
Trustees shall convene a meeting of the holders of Convertible Preferred
Securities for the purpose of appointing a Special Trustee. If the IP Trustees
fail to convene such meeting within such 30-day period, the holders of not less
than 10% of the aggregate stated liquidation amount of the outstanding
Convertible Preferred Securities will be entitled to convene such meeting. The
provisions of the Declaration relating to the convening and conduct of the
meetings of the holders will apply with respect to any such meeting. Any Special
Trustee so appointed shall cease to be a Special Trustee if the Appointment
Event pursuant to which the Special Trustee was appointed and all other
Appointment Events cease to be continuing. Notwithstanding the appointment of
any such Special Trustee, International Paper shall retain all rights under the
Indenture, including the right to defer payments of interest by extending the
interest
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payment period as provided under "Description of the Convertible Junior
Subordinated Debentures -- Option to Extend Interest Payment Period". If such an
extension occurs, there will be no Event of Default under the Indenture and,
consequently, no Declaration Event of Default for failure to make any scheduled
interest payment during the Deferral Period on the date originally scheduled.
Subject to the requirement of the Trustee obtaining a tax opinion in certain
circumstances set forth in the last sentence of this paragraph, the holders of a
majority in aggregate liquidation amount of the Convertible Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or direct the exercise of any trust or
power conferred upon the Trustee under the Declaration including the right to
direct the Trustee, as holder of the Convertible Junior Subordinated Debentures,
to (i) exercise the remedies available under the Indenture with respect to the
Convertible Junior Subordinated Debentures, (ii) waive any past Event of Default
that is waiveable under the Indenture or (iii) exercise any right to rescind or
annul a declaration that the principal of all the Convertible Junior
Subordinated Debentures shall be due and payable; PROVIDED, HOWEVER, that, where
a consent or action under the Indenture would require the consent or act of the
holders of more than a majority of the aggregate principal amount of Convertible
Junior Subordinated Debentures affected thereby, only the holders of the
percentage of the aggregate stated liquidation preference of the Convertible
Preferred Securities which is at least equal to the percentage required under
the Indenture may direct the Trustee to give such consent or take such action.
If the Trustee fails to enforce its rights under the Convertible Junior
Subordinated Debentures, a holder of record of Convertible Preferred Securities
may, after such holder's having made a written request to the Trustee to enforce
such rights, institute a legal proceeding directly against International Paper
to enforce the Trustee's rights under the Convertible Junior Subordinated
Debentures without first instituting any legal proceeding against the Trustee or
any other person or entity. The Trustee shall notify all holders of the
Convertible Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Junior Subordinated
Debentures. Such notice shall state that such Event of Default also constitutes
a Declaration Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Trustee shall not
take any of the actions described in clause (i), (ii) or (iii) above unless the
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of such action, the Issuer will not fail to be classified as a grantor trust or
a partnership for United States Federal income tax purposes.
In the event the consent of the Trustee, as the holder of the Convertible
Junior Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Trustee shall
request the direction of the holders of the Trust Securities with respect to
such amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a majority in liquidation
amount of the Trust Securities voting together as a single class; PROVIDED,
HOWEVER, that, where a consent under the Indenture would require the consent of
the holders of more than a majority of the aggregate principal amount of the
Convertible Junior Subordinated Debentures, the Trustee may only give such
consent at the direction of the holders of at least the same proportion in
aggregate stated liquidation preference of the Trust Securities. The Trustee
shall not take any such action in accordance with the directions of the holders
of the Trust Securities unless the Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States Federal income tax
the Issuer will not be classified as other than a grantor trust or a
partnership.
A waiver of an Event of Default under the Indenture will constitute a waiver
of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Convertible Preferred
Securities may be given at a separate meeting of holders of Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
holders of Trust Securities or pursuant to written consent. The IP Trustees will
cause a notice of any meeting at which holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be mailed to
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each holder of record of Convertible Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Convertible Preferred Securities will be required for the
Issuer to redeem and cancel Convertible Preferred Securities or distribute
Convertible Junior Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned at such time by
International Paper or any entity directly or indirectly controlling or
controlled by, or under direct or indirect common control with, International
Paper, shall not be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if such Convertible Preferred Securities were not
outstanding.
The procedures by which holders of Convertible Preferred Securities may
exercise their voting rights are described below. See "-- Book-Entry-Only
Issuance -- The Depository Trust Company" below.
Except in the limited circumstances described above, in connection with the
appointment of a Special Trustee, holders of the Convertible Preferred
Securities will have no rights to appoint or remove the Issuer Trustees, who may
be appointed, removed or replaced solely by International Paper as the indirect
or direct holder of all of the Common Securities.
REGISTRATION RIGHTS
In connection with the Original Offering the Company entered into a
registration rights agreement dated July 20, 1995 (the "Registration Rights
Agreement") with the Initial Purchasers, for the benefit of the holders of the
Convertible Preferred Securities, pursuant to which the Company would, at its
cost, (a) file a Registration Statement on Form S-3 (a "Shelf Registration
Statement") covering resales of the Convertible Preferred Securities (together
with the Convertible Junior Subordinated Debentures, the Guarantee, the
International Paper Common Stock and the related Rights) pursuant to Rule 415
under the Securities Act, (b) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act and (c)
keep the Shelf Registration Statement effective until three years after its
effective date. The Company would, in the event a Shelf Registration Statement
is filed, among other things, provide to each holder for whom such Shelf
Registration Statement was filed copies of this Prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement had become effective and take certain other actions as
are required to permit unrestricted resales of such Securities. A holder selling
such Securities pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related Prospectus and
to deliver the Prospectus to purchasers, would be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and would be bound by the provisions of the Registration Rights Agreement
which are applicable to such holder (including certain indemnification
obligations).
If (i) by September 4, 1995, the Shelf Registration Statement had not been
filed with the SEC; (ii) by November 17, 1995, the Shelf Registration Statement
had not been declared effective by the SEC; or (iii) after the Shelf
Registration Statement had been declared effective, such Registration Statement
ceases to be effective or usable (subject to certain exceptions) in connection
with resales of Convertible Preferred Securities in accordance with and during
the periods specified in the Registration Rights Agreement (each such event
referred to in clauses (i) through (iii) a "Registration Default"), the
Convertible Junior Subordinated Debentures would bear interest at the rate per
annum of 5 3/4% and, therefore, distributions would accrue on the Convertible
Preferred Securities at the rate of 5 3/4% per annum, from and including the
date on which any such Registration Default shall have occurred to but excluding
the date on which all Registration Defaults have been cured. At all
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other times, interest will accrue on the Convertible Junior Subordinated
Debentures and distributions will accrue on the Convertible Preferred Securities
at a rate of 5 1/4% per annum. This Prospectus is a part of the Shelf
Registration Statement filed in accordance with the foregoing requirements.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company or the
Initial Purchasers.
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect transfers
of interest in the global certificate or certificates issued in connection with
sales of Convertible Preferred Securities made pursuant to this Prospectus.
Except as described in the next paragraph, the Convertible Preferred Securities
were issued only as fully registered securities registered in the name of Cede &
Co. (as nominee for DTC). One or more fully registered global Convertible
Preferred Security certificates (without restrictive legends) (the "Global
Certificates") will be issued, representing, in the aggregate, Convertible
Preferred Securities sold pursuant to this Prospectus, and will be deposited
with DTC. In the event of a transfer of securities which were issued in fully
registered, certificated form, the holder of such certificates will be required
to exchange them for interests in the Global Certificates representing the
number of Convertible Preferred Securities being transferred.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Convertible Preferred Securities within the DTC system must be
made by or through Participants, which will receive a credit for the Convertible
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of Convertible Preferred Securities ("Beneficial Owner") is in turn to
be recorded on the Participants' and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Participants or Indirect Participants through which the Beneficial
Owners purchased Convertible Preferred Securities. Transfers of ownership
interests in the Convertible Preferred Securities are to be accomplished by
entries made on the books of Participants and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Convertible Preferred Securities,
except in the event that use of the book-entry system for the Convertible
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Convertible
Preferred Securities; DTC's records reflect only the identity of the
Participants to whose accounts such Convertible
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Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Convertible Preferred Securities held
in book-entry form shall be sent to Cede & Co. If less than all of the
Convertible Preferred Securities are being redeemed, DTC will determine the
amount of the interest of each Participant to be redeemed in accordance with its
procedures.
Although voting with respect to the Convertible Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Convertible Preferred Securities.
Under its usual procedures, DTC would mail an Omnibus Proxy to the Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the
Convertible Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).
Distributions on the Convertible Preferred Securities held in book-entry
form will be made to DTC in immediately available funds. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants and Indirect Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and Indirect Participants and not of DTC, the Issuer or
International Paper, subject to any statutory or regulatory require-ments as may
be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Issuer, disbursement of such payments to Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a global
Convertible Preferred Security will not be entitled to receive physical delivery
of Convertible Preferred Securities. Accordingly, each Beneficial Owner must
rely on the procedures of DTC to exercise any rights under the Convertible
Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Convertible Preferred Securities at any time by giving notice to
the Issuer. Under such circumstances, in the event that a successor securities
depository is not obtained, Convertible Preferred Security certificates are
required to be printed and delivered. Additionally, the Issuer (with the consent
of International Paper) may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository). In that event,
certificates for the Convertible Preferred Securities will be printed and
delivered. In each of the above circumstances, International Paper will appoint
a paying agent with respect to the Convertible Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that International Paper and the Issuer believe
to be reliable, but neither International Paper nor the Issuer takes
responsibility for the accuracy thereof.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Convertible Preferred
Securities as represented by a Global Certificate.
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PAYMENT AND PAYING AGENCY
Payments in respect of the Convertible Preferred Securities shall be made to
DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of Certificated Securities, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The Paying Agent shall initially be
The Bank of New York. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Issuer Trustees. In the event that The
Bank of New York shall no longer be the Paying Agent, the Trustee shall appoint
a successor to act as Paying Agent (which shall be a bank or trust company).
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
The Bank of New York will act as registrar, transfer agent, paying agent and
Conversion Agent for the Convertible Preferred Securities.
Registration of transfers of Convertible Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment (with
the giving of such indemnity as the Issuer or International Paper may require)
in respect of any tax or other government charges which may be imposed in
relation to it.
The Issuer will not be required to register or cause to be registered the
transfer of Convertible Preferred Securities after such Convertible Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE TRUSTEE
The Trustee, prior to the occurrence of a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Trustee is under no obligation to exercise any
of the powers vested in it by the Declaration at the request of any holder of
Convertible Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Convertible Preferred Securities will not be required to
offer such indemnity in the event such holders, by exercising their voting
rights, direct the Trustee to take any action following a Declaration Event of
Default.
International Paper and certain of its subsidiaries maintain deposit
accounts and conduct other banking transactions with the Trustee in the ordinary
course of their businesses.
GOVERNING LAW
The Declaration and the Convertible Preferred Securities will be governed
by, and construed in accordance with, the internal laws of the State of
Delaware.
MISCELLANEOUS
The Issuer Trustees are authorized and directed to conduct the affairs of
and to operate the Issuer in such a way that the Issuer will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for Federal income tax purposes and
so that the Convertible Junior Subordinated Debentures will be treated as
indebtedness of International Paper for United States Federal income tax
purposes. In this connection, the Issuer Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Declaration that the Issuer Trustees determine in their discretion to be
necessary or desirable for such purposes as long as such action does not
adversely affect the interests of the holders of the Convertible Preferred
Securities.
Holders of the Convertible Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE GUARANTEE
SET FORTH BELOW IS A SUMMARY OF INFORMATION CONCERNING THE GUARANTEE WHICH
WAS EXECUTED AND DELIVERED BY INTERNATIONAL PAPER FOR THE BENEFIT OF THE HOLDERS
FROM TIME TO TIME OF CONVERTIBLE PREFERRED SECURITIES. THE SUMMARY DOES NOT
PURPORT TO BE COMPLETE AND IS SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE GUARANTEE. THE GUARANTEE
INCORPORATES BY REFERENCE THE TERMS OF THE TRUST INDENTURE ACT. THE GUARANTEE
WILL BE QUALIFIED UNDER THE TRUST INDENTURE ACT. THE BANK OF NEW YORK WILL ACT
AS TRUSTEE UNDER THE GUARANTEE. THE BANK OF NEW YORK, AS THE GUARANTEE TRUSTEE,
HOLDS THE GUARANTEE FOR THE BENEFIT OF THE HOLDERS OF THE CONVERTIBLE PREFERRED
SECURITIES.
GENERAL
Pursuant to the Guarantee, International Paper irrevocably and
unconditionally agreed, to the extent set forth herein, to pay in full, to the
holders of the Convertible Preferred Securities, the Guarantee Payments (as
defined below), as and when due, regardless of any defense, right of set off or
counterclaim which the Issuer may have or assert. The following payments with
respect to the Convertible Preferred Securities, to the extent not paid by the
Issuer (the "Guarantee Payments"), will be subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on the Convertible Preferred Securities to the extent of funds of the Trust
available therefor, (ii) the amount payable upon redemption of the Convertible
Preferred Securities, payable out of funds of the Trust available therefor with
respect to any Convertible Preferred Securities called for redemption by the
Issuer and (iii) upon a liquidation of the Issuer, the lesser of (a) the
aggregate of the liquidation preference and all accrued and unpaid dividends on
the Convertible Preferred Securities to the date of payment and (b) the amount
of assets of the Issuer remaining available for distribution to holders of
Convertible Preferred Securities upon the liquidation of the Issuer.
International Paper's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by International Paper to the holders of
Convertible Preferred Securities or by causing the Issuer to pay such amounts to
such holders.
If International Paper fails to make interest payments on the Convertible
Junior Subordinated Debentures or pay amounts payable upon the redemption,
acceleration or maturity of the Convertible Junior Subordinated Debentures, the
Issuer will have insufficient funds to pay distributions on or to pay amounts
payable upon the redemption or repayment of the Convertible Preferred
Securities. The Guarantee does not cover payment of distributions or the amount
payable upon redemption or repayment in respect of the Convertible Preferred
Securities when the Issuer does not have sufficient funds to pay such
distributions or such amount.
Because the Guarantee is a guarantee of payment and not of collection,
holders of the Convertible Preferred Securities may proceed directly against
International Paper as guarantor, rather than having to proceed against the
Issuer before attempting to collect from International Paper, and International
Paper waives any right or remedy to require that any action be brought against
the Issuer or any other person or entity before proceeding against International
Paper. Such obligations will not be discharged except by payment of the
Guarantee Payments in full.
CERTAIN COVENANTS OF INTERNATIONAL PAPER
In the Guarantee, International Paper has covenanted that, so long as any
Convertible Preferred Securities remain outstanding, if at such time (i)
International Paper has exercised its option to defer interest payments on the
Convertible Junior Subordinated Debentures and such deferral is continuing, (ii)
International Paper shall be in default with respect to its payment or other
obligations under the Guarantee or (iii) there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default under the Indenture, then International Paper (a) shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than stock dividends paid by International Paper which
consist of the stock of the same class as that on which the dividend is being
paid), (b) shall not make any payment of interest, principal or premium, if any,
on or
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repay, repurchase or redeem any debt securities issued by International Paper
that rank PARI PASSU with or junior to the Convertible Junior Subordinated
Debentures, and (c) shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
As part of the Guarantee, International Paper has agreed that it will honor
all obligations described therein relating to the conversion of the Convertible
Preferred Securities into International Paper Common Stock as described in
"Description of the Convertible Preferred Securities -- Conversion Rights".
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Convertible Preferred Securities (in which case no vote
will be required), the Guarantee may be changed only with the prior approval of
the holders of not less than 66 2/3% in aggregate stated liquidation preference
of the outstanding Convertible Preferred Securities. The manner of obtaining any
such approval of holders of the Convertible Preferred Securities will be as set
forth under "Description of the Convertible Preferred Securities -- Voting
Rights". All guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of International
Paper and shall inure to the benefit of the holders of the Convertible Preferred
Securities then outstanding. Except in connection with any permitted merger or
consolidation of International Paper with or into another entity or any
permitted sale, transfer or lease of International Paper's assets to another
entity as described below under "Description of the Convertible Junior
Subordinated Debentures -- Restrictions", International Paper may not assign its
rights or delegate its obligations under the Guarantee without the prior
approval of the holders of at least 66 2/3% of the aggregate stated liquidation
preference of the Convertible Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Convertible Preferred
Securities and be of no further force and effect upon (a) full payment of the
applicable redemption price of such holder's Convertible Preferred Securities or
(b) the distribution of International Paper Common Stock to such holder in
respect of the conversion of such holder's Convertible Preferred Securities into
International Paper Common Stock and will terminate completely upon full payment
of the amounts payable upon liquidation of the Issuer. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Convertible Preferred Securities must restore payment of any
sums paid under such Convertible Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of International Paper and
ranks (i) subordinate and junior in right of payment to all liabilities of
International Paper, except any liabilities that may be made PARI PASSU
expressly by their terms, (ii) PARI PASSU with the most senior preferred or
preference stock now or hereafter issued by International Paper and with any
guarantee now or hereafter entered into by International Paper in respect of any
preferred or preference stock or preferred securities of any affiliate of
International Paper and (iii) senior to International Paper Common Stock. The
Declaration provides that each holder of Convertible Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee. Upon the bankruptcy, liquidation or winding up of International
Paper, its obligations under the Guarantee will rank junior to all its other
liabilities (except as aforesaid) and, therefore, funds may not be available for
payment under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, has undertaken
to perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Guarantee Trustee is under no obligation
to exercise
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any of the powers vested in it by the Guarantee at the request of any holder of
Convertible Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee is governed by and construed in accordance with the laws of
the State of New York.
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
SET FORTH BELOW IS A DESCRIPTION OF THE SPECIFIC TERMS OF THE CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES IN WHICH THE ISSUER INVESTED WITH THE PROCEEDS OF
THE ISSUANCE AND SALE OF (I) THE CONVERTIBLE PREFERRED SECURITIES AND (II) THE
COMMON SECURITIES. THE FOLLOWING DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INDENTURE DATED AS OF JULY 1,
1995 (THE "INDENTURE"), BETWEEN INTERNATIONAL PAPER AND THE BANK OF NEW YORK, AS
TRUSTEE (THE "INDENTURE TRUSTEE"). THE INDENTURE WILL BE QUALIFIED UNDER THE
TRUST INDENTURE ACT. WHENEVER PARTICULAR PROVISIONS OR DEFINED TERMS IN THE
INDENTURE ARE REFERRED TO HEREIN, SUCH PROVISIONS OR DEFINED TERMS ARE
INCORPORATED BY REFERENCE HEREIN.
Under certain circumstances involving the dissolution of the Issuer
following the occurrence of a Tax Event or Investment Company Event, Convertible
Junior Subordinated Debentures may be distributed to the holders of the
Convertible Preferred Securities in liquidation of the Issuer. See "Description
of the Convertible Preferred Securities -- Tax Event or Investment Company Event
Redemption or Distribution".
GENERAL
The Convertible Junior Subordinated Debentures were issued as a series of
Junior Subordinated Debentures under the Indenture. The Convertible Junior
Subordinated Debentures were limited in aggregate principal amount to
approximately 103.092784% of the aggregate stated liquidation preference of the
Convertible Preferred Securities, such amount being the sum of the aggregate
stated liquidation preference of the Convertible Preferred Securities and the
Common Securities. The Indenture does not limit the aggregate principal amount
of Junior Subordinated Debentures which may be issued thereunder.
The entire principal amount of the Convertible Junior Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest, if any, on July 20, 2025.
The Convertible Junior Subordinated Debentures, if distributed to holders of
Convertible Preferred Securities in a dissolution of the Issuer, will initially
be issued as a global security to the extent of any Global Certificates at the
time representing any Convertible Preferred Securities and otherwise in fully
registered, certificated form. In the event that Convertible Junior Subordinated
Debentures are issued in certificated form, such Convertible Junior Subordinated
Debentures will be in denominations of $50 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Convertible Junior Subordinated Debentures issued as a global
security will be made to DTC, as the depository for the Convertible Junior
Subordinated Debentures. In the event Convertible Junior Subordinated Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Junior Subordinated Debentures will be registrable
and Convertible Junior Subordinated Debentures will be exchangeable for
Convertible Junior Subordinated Debentures of other denominations of a like
aggregate principal amount at the corporate trust office of the Indenture
Trustee in The City of New York; PROVIDED that, unless the Convertible Junior
Subordinated Debentures are held by the Issuer or any successor permissible
under "Description of the Convertible Preferred Securities -- Merger,
Consolidation or Amalgamation of the Issuer", payment of interest may be made at
the option of International Paper by check mailed to the address of the persons
entitled thereto.
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The Indenture does not contain any provisions that afford holders of
Convertible Junior Subordinated Debentures protection in the event of a highly
leveraged transaction involving International Paper. The Convertible Junior
Subordinated Debentures are not entitled to the benefit of any sinking fund.
INTEREST
Each Convertible Junior Subordinated Debenture bears interest at the rate of
5 1/4% per annum from the original date of issuance, payable quarterly in
arrears on March 15, June 15, September 15 and December 15 (each, an "Interest
Payment Date"), commencing September 15, 1995, to the person in whose name such
Convertible Junior Subordinated Debenture is registered at the close of business
on the fifteenth day immediately preceding such Interest Payment Date. Interest
will compound quarterly and will accrue at the annual rate of 5 1/4% on any
interest installment not paid when due.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Convertible Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
International Paper shall have the right at any time during the term of the
Convertible Junior Subordinated Debentures to defer interest payments from time
to time for successive periods not exceeding 20 consecutive quarters for each
such period. At the end of each Deferral Period, International Paper shall pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for the Convertible Junior Subordinated Debentures to the extent
permitted by applicable law). In no event shall any Deferral Period extend
beyond the maturity of the Convertible Junior Subordinated Debentures. During
any Deferral Period, International Paper (i) shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to, any of its capital stock (other than
stock dividends paid by International Paper which consist of stock of the same
class as that on which the dividend is being paid), (ii) shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by International Paper that rank PARI PASSU
with or junior to the Convertible Junior Subordinated Debentures, and (iii)
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Guarantee). Prior to the termination of any such Deferral
Period, International Paper may further extend such Deferral Period; PROVIDED
that such Deferral Period together with all previous and further extensions
thereof may not exceed 20 consecutive quarters. Upon the termination of any
Deferral Period and the payment of all amounts then due, International Paper may
select a new Deferral Period, subject to the above requirements. No interest
during a Deferral Period, except at the end thereof, shall be due and payable.
If the Issuer shall be the sole holder of the Convertible Junior Subordinated
Debentures, International Paper shall give the Issuer notice of its selection of
such Deferral Period at least one Business Day prior to the earlier of (i) the
date the distributions on the Convertible Preferred Securities are payable or
(ii) the date the Issuer is required to give notice to any applicable
self-regulatory organization or to holders of the Convertible Preferred
Securities of the record date or the date such distribution is payable, but in
any event not less than ten Business Days prior to such record date.
International Paper shall cause the Issuer to give notice of International
Paper's selection of such Deferral Period to the holders of the Convertible
Preferred Securities. If the Issuer shall not be the sole holder of the
Convertible Junior Subordinated Debentures, International Paper shall give the
holders of the Convertible Junior Subordinated Debentures notice of its
selection of such Deferral Period at least ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) the date International Paper is
required to give
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notice to any applicable self-regulatory organization or to holders of the
Convertible Junior Subordinated Debentures of the record or payment date of such
related interest payment, but in any event not less than two Business Days prior
to such record date.
ADDITIONAL INTEREST
If the Issuer would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case,
International Paper will pay as additional interest ("Additional Interest") such
amounts as shall be required so that the net amounts received and retained by
the Issuer after paying any such taxes, duties, assessments or governmental
charges will be not less than the amounts the Issuer would have received had no
such taxes, duties, assessments or governmental charges been imposed.
CONVERSION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures are convertible into
International Paper Common Stock at the option of the holders of the Convertible
Junior Subordinated Debentures at any time at the initial conversion price set
forth on the cover page of this Prospectus subject to the conversion price
adjustments described under "Description of the Convertible Preferred Securities
- -- Conversion Rights". The Issuer has agreed not to convert Convertible Junior
Subordinated Debentures held by it except pursuant to a notice of conversion
delivered to the Conversion Agent by a holder of Convertible Preferred
Securities. Upon surrender of a Convertible Preferred Security to the Conversion
Agent for conversion, the Issuer will distribute $50 principal amount of the
Convertible Junior Subordinated Debentures to the Conversion Agent on behalf of
the holder of the Convertible Preferred Securities so converted, whereupon the
Conversion Agent will convert such Convertible Junior Subordinated Debentures to
International Paper Common Stock on behalf of such holder. International Paper's
delivery to the holders of the Convertible Junior Subordinated Debentures
(through the Conversion Agent) of the fixed number of shares of International
Paper Common Stock into which the Convertible Junior Subordinated Debentures are
convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy International Paper's obligation to pay the
principal amount of the Convertible Junior Subordinated Debentures so converted,
and the accrued and unpaid interest thereon attributable to the period from the
last date to which interest has been paid or duly provided for; PROVIDED,
HOWEVER, that if any Convertible Junior Subordinated Debenture is converted
after a record date for payment of interest, the interest payable on the related
interest payment date with respect to such Convertible Junior Subordinated
Debenture shall be paid to the Issuer (which will distribute such interest to
the converting holder) or other holder of Convertible Junior Subordinated
Debentures, as the case may be, despite such conversion.
OPTIONAL REDEMPTION
International Paper shall have the right to redeem the Convertible Junior
Subordinated Debentures, in whole or in part, at any time or from time to time
after June 30, 1999, upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to $51.58 per $50 principal amount of the Convertible
Junior Subordinated Debentures to be redeemed plus any accrued and unpaid
interest, including Additional Interest, if any, to the redemption date, if
redeemed on or before June 30, 2000, and at the following redemption prices per
$50 principal amount of Convertible Junior Subordinated Debentures, if redeemed
during the 12-month period ending June 30:
<TABLE>
<CAPTION>
PRICE PER $50
PRINCIPAL
YEAR AMOUNT
- -------------------------------------------------------------- -------------
<S> <C>
2001.......................................................... $51.31
2002.......................................................... 51.05
2003.......................................................... 50.79
2004.......................................................... 50.53
2005.......................................................... 50.26
</TABLE>
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<PAGE>
and thereafter at $50 per $50 principal amount of Convertible Junior
Subordinated Debentures plus, in each case, accrued and unpaid interest,
including Additional Interest, if any, to the redemption date.
In the event of any redemption in part, International Paper shall not be
required to (i) issue, register the transfer of or exchange any Convertible
Junior Subordinated Debenture during a period beginning at the opening of
business 15 days before any selection for redemption of Convertible Junior
Subordinated Debentures and ending at the close of business on the earliest date
on which the relevant notice of redemption is deemed to have been given to all
holders of Convertible Junior Subordinated Debentures to be so redeemed and (ii)
register the transfer of or exchange any Convertible Junior Subordinated
Debentures so selected for redemption, in whole or in part, except the
unredeemed portion of any Convertible Junior Subordinated Debenture being
redeemed in part.
SUBORDINATION
The Indenture provides that the Convertible Junior Subordinated Debentures
are subordinate and junior in right of payment to all Senior Indebtedness of
International Paper as provided in the Indenture. No payment of principal of
(including redemption payments), or interest on, the Convertible Junior
Subordinated Debentures may be made (i) if any Senior Indebtedness is not paid
when due, any applicable grace period with respect to such default has ended and
such default has not been cured or waived, or (ii) if the maturity of any Senior
Indebtedness has been accelerated because of a default. Upon any distribution of
assets of International Paper to creditors upon any dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal of, and
premium, if any, and interest due or to become due on, all Senior Indebtedness
must be paid in full before the holders of the Convertible Junior Subordinated
Debentures are entitled to receive or retain any payment. In the event that,
notwithstanding the foregoing, any payment or distribution of cash, property or
securities shall be received or collected by a holder of the Convertible Junior
Subordinated Debentures in contravention of the foregoing provisions, such
payment or distribution shall be held for the benefit of and shall be paid over
to the holders of Senior Indebtedness or their representative or representatives
or to the trustee or trustees under any indenture under which any instrument
evidencing Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay in full all Senior
Indebtedness then due, after giving effect to any concurrent payment to the
holders of Senior Indebtedness. Subject to the payment in full of all Senior
Indebtedness, the rights of the holders of the Convertible Junior Subordinated
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Convertible Junior Subordinated
Debentures are paid in full.
The term "Senior Indebtedness" shall mean in respect of International Paper
(i) the principal, premium, if any, and interest in respect of (A) indebtedness
of such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise, and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or PARI PASSU with the
Convertible Junior Subordinated Debentures and (2) any indebtedness (including
all other debt securities and guarantees in respect of those debt securities)
initially issued to any other trust, or a trustee of such trust, partnership or
other entity affiliated with International Paper that is, directly or
indirectly, a financing vehicle of International Paper (a "Financing Entity") in
connection with the issuance by such Financing Entity of preferred securities or
other similar securities. Such Senior
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Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
International Paper may issue. At June 30, 1995, Senior Indebtedness of
International Paper aggregated approximately $7.2 billion. See "Capitalization".
CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an Event of
Default, (ii) International Paper shall be in default with respect to its
payment of any obligations under the Guarantee, or (iii) International Paper
shall have given notice of its election to defer payments of interest on the
Convertible Junior Subordinated Debentures by extending the interest payment
period as provided in the Indenture and such period, or any extension thereof,
shall be continuing, then International Paper (a) shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than stock dividends paid by International Paper which consist of stock
of the same class as that on which the dividend is being paid), (b) shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by International Paper that rank
PARI PASSU with or junior to the Convertible Junior Subordinated Debentures, and
(c) shall not make any guarantee payments with respect to the foregoing (other
than pursuant to the Guarantee).
International Paper has agreed (i) to directly or indirectly maintain 100%
ownership of the Common Securities of the Trust; PROVIDED, HOWEVER, that any
permitted successor of International Paper under the Indenture may succeed to
International Paper's ownership of such Common Securities and (ii) to use its
reasonable efforts to cause the Trust (x) to remain a statutory business trust,
except in connection with the distribution of Convertible Junior Subordinated
Debentures to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (y)
to otherwise continue to be classified as a grantor trust for United States
Federal income tax purposes.
RESTRICTIONS
The Indenture provides that International Paper shall not consolidate with
or merge with or into any other corporation, or, directly or indirectly, convey,
transfer or lease all or substantially all of the properties and assets of
International Paper on a consolidated basis to any Person, unless either
International Paper is the continuing corporation or such corporation or Person
assumes by supplemental indenture all the obligations of International Paper
under the Indenture and the Convertible Junior Subordinated Debentures, no
default or Event of Default shall exist immediately after the transaction, and
the surviving corporation or such Person is a corporation, partnership or trust
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Convertible Junior Subordinated Debentures: (i) failure for
30 days to pay interest on the Convertible Junior Subordinated Debentures,
including any Additional Interest in respect thereof, when due; or (ii) failure
to pay principal of or premium, if any, on the Convertible Junior Subordinated
Debentures when due whether at maturity, upon redemption, by declaration or
otherwise; or (iii) failure by International Paper to deliver shares of
International Paper Common Stock upon an election by a holder of Convertible
Preferred Securities to convert such Convertible Preferred Securities; or (iv)
failure to observe or perform any other covenant contained in the Indenture for
90 days after notice; or (v) the dissolution, winding up or termination of the
Issuer, except in connection with the distribution of Convertible Junior
Subordinated Debentures to the holders of Convertible Preferred Securities in
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<PAGE>
liquidation of the Issuer and in connection with certain mergers, consolidations
or amalgamations permitted by the Declaration; or (vi) certain events in
bankruptcy, insolvency or reorganization of International Paper.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Junior Subordinated Debentures
may declare the principal of and interest (including any Additional Interest) on
the Convertible Junior Subordinated Debentures due and payable immediately on
the occurrence of an Event of Default; PROVIDED, HOWEVER, that, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Convertible Junior
Subordinated Debentures may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal, have been cured or waived as provided in the Indenture. For
information as to waiver of defaults, see "-- Modification of the Indenture".
The Trustee is the initial holder of the Convertible Junior Subordinated
Debentures. However, while the Convertible Preferred Securities are outstanding,
the Trustee has agreed not to waive an Event of Default with respect to the
Convertible Junior Subordinated Debentures without the consent of holders of
66 2/3% in aggregate liquidation preference of the Convertible Preferred
Securities then outstanding.
A default under any other indebtedness of International Paper or the Issuer
would not constitute an Event of Default under the Convertible Junior
Subordinated Debentures.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of
Convertible Junior Subordinated Debentures, unless such holders shall have
offered to the Indenture Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Indenture Trustee, the holders of a
majority in aggregate principal amount of the Convertible Junior Subordinated
Debentures then outstanding will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee
with respect to such series.
No holder of any Convertible Junior Subordinated Debenture will have any
right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such holder shall have previously given to the
Indenture Trustee written notice of a continuing Event of Default and, if the
Issuer is not the sole holder of Convertible Junior Subordinated Debentures,
unless the holders of at least 25% in aggregate principal amount of the
Convertible Junior Subordinated Debentures then outstanding shall also have made
written request, and offered reasonable indemnity, to the Indenture Trustee to
institute such proceeding as Indenture Trustee, and the Indenture Trustee shall
not have received from the holders of a majority in aggregate principal amount
of the outstanding Convertible Junior Subordinated Debentures a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of a Convertible Junior Subordinated Debenture for
enforcement of payment of the principal of or interest on such Convertible
Junior Subordinated Debenture on or after the respective due dates expressed in
such Convertible Junior Subordinated Debenture.
The holders of a majority in aggregate outstanding principal amount of all
series of the Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
past default, except a default in the payment of principal, premium, if any, or
interest. International Paper is required to file annually with the Indenture
Trustee and the Trustee a certificate as to whether or not International Paper
is in compliance with all the conditions and covenants under the Indenture.
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<PAGE>
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting International Paper and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the Junior Subordinated Debentures of each series which
are affected by the modification, to modify the Indenture or any supplemental
indenture affecting that series or the rights of the holders of that series of
Junior Subordinated Debentures; PROVIDED that no such modification may, without
the consent of the holder of each outstanding Junior Subordinated Debenture
affected thereby, (i) extend the fixed maturity of any Junior Subordinated
Debentures of any series, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce any premium
payable upon the redemption thereof, or adversely affect the right to convert
convertible Junior Subordinated Debentures, without the consent of the holder of
each Junior Subordinated Debenture so affected, or (ii) reduce the percentage of
Junior Subordinated Debentures, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of each
Junior Subordinated Debenture then outstanding and affected thereby.
In addition, International Paper and the Indenture Trustee may execute,
without the consent of any holder of Convertible Junior Subordinated Debentures,
any supplemental indenture for certain other usual purposes including the
creation of any new series of Junior Subordinated Debentures.
SETOFF
Notwithstanding anything contained to the contrary in the Indenture,
International Paper shall have the right to set off any payment with respect to
the Convertible Junior Subordinated Debentures it is otherwise required to make
thereunder with and to the extent International Paper has theretofore made, or
is concurrently on the date of such payment making, a payment under the
Guarantee.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures is governed
by, and construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Indenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Issuer is to issue
the Trust Securities and use the proceeds thereof to purchase from International
Paper the Convertible Junior Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Junior Subordinated Debentures, such payments will be sufficient to
cover distributions and payments due on the Convertible Preferred Securities
primarily because (i) the aggregate principal amount of Convertible Junior
Subordinated Debentures will be equal to the sum of the aggregate stated
liquidation preference of the Convertible Preferred Securities and the Common
Securities; (ii) the interest rate and interest and other payment dates on the
Convertible Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Convertible Preferred Securities;
(iii) the Indenture provides that International Paper, as issuer of the
Convertible Junior
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Subordinated Debentures, shall pay for all, and the Issuer shall not be
obligated to pay, directly or indirectly, for any, costs and expenses of the
Issuer; and (iv) the Declaration further provides that the holders of Common
Securities and the Issuer Trustees shall not cause or permit the Issuer to,
among other things, engage in any activity that is not consistent with the
purposes of the Issuer.
If International Paper fails to make interest or other payments on the
Convertible Junior Subordinated Debentures when due, the Declaration provides a
mechanism whereby the holders of the Convertible Preferred Securities may (i)
appoint a Special Trustee and (ii) direct the Trustee to enforce its rights
under the Convertible Junior Subordinated Debentures. If the Trustee fails to
enforce its rights under the Convertible Junior Subordinated Debentures, a
holder of Convertible Junior Subordinated Debentures may, after a holder makes
written request to the Trustee to enforce such rights, institute a legal
proceeding directly against International Paper to enforce the Trustee's right
under the Convertible Junior Subordinated Debentures without first instituting
any legal proceeding against the Trustee or any other person or entity.
Payments of distributions and other payments due on the Convertible
Preferred Securities out of moneys held by the Issuer are guaranteed by
International Paper to the extent set forth under "Description of the
Guarantee". If International Paper fails to make payments under the Guarantee,
the Guarantee provides a mechanism whereby the holders of the Convertible
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Guarantee, a holder of
a Convertible Preferred Security may, after such holder makes written request to
the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding
directly against International Paper to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Issuer or any other
person or entity.
International Paper's obligations under the Declaration, the Guarantee, the
Indenture and the Convertible Junior Subordinated Debentures in the aggregate
provide a full and unconditional guarantee on a subordinated basis by
International Paper of payments due on the Convertible Preferred Securities.
DESCRIPTION OF INTERNATIONAL PAPER CAPITAL STOCK
The authorized capital stock of International Paper consists of (i)
400,000,000 shares of International Paper Common Stock, (ii) 400,000 shares of
cumulative $4 preferred stock, without par value (the International Paper $4
Preferred Stock) and (iii) 8,750,000 shares of serial preferred stock, $1.00 par
value per share (the "International Paper Serial Preferred Stock" and, together
with the International Paper $4 Preferred Stock, the "International Paper
Preferred Stock").
At July 31, 1995, after adjusting for the Stock Split, there were
outstanding (a) 254,578,206 shares of International Paper Common Stock (as well
as the same number of International Paper Common Share Purchase Rights (the
"Rights") to purchase International Paper Common Stock pursuant to the Rights
Agreement), (b) employee stock options to purchase an aggregate of approximately
8,679,116 shares of International Paper Common Stock and (c) 15,780 shares of
International Paper $4 Preferred Stock. In addition, approximately 5,824,800
shares of International Paper Common Stock were issued upon conversion of
International Paper's convertible subordinated debentures. See "Recent
Developments".
DESCRIPTION OF INTERNATIONAL PAPER COMMON STOCK
GENERAL. Subject to the rights of the holders of any shares of
International Paper Preferred Stock which may at the time be outstanding,
holders of International Paper Common Stock are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available therefor.
The holders of International Paper Common Stock are entitled to one vote per
share on all matters submitted to a vote of shareholders and do not have
cumulative voting rights. Holders of International Paper Common Stock are
entitled to receive, upon any liquidation of International
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<PAGE>
Paper, all remaining assets available for distribution to shareholders after
satisfaction of International Paper's liabilities and the preferential rights of
any preferred stock that may then be issued and outstanding. The outstanding
shares of International Paper Common Stock are, and the shares which may be
acquired upon conversion of the Convertible Preferred Securities will be, fully
paid and nonassessable. The holders of International Paper Common Stock have no
preemptive, conversion or redemption rights. The International Paper Common
Stock is listed on the New York Stock Exchange. The registrar and transfer agent
for the International Paper Common Stock is Chemical Bank.
CERTAIN PROVISIONS. International Paper's Restated Certificate of
Incorporation (the "International Paper Restated Certificate of Incorporation")
contains provisions which: (1) divide the Board of Directors into three classes
of as nearly equal size as possible, with Directors in each class being elected
for terms of three years; (2) require the affirmative vote of 80% of the
outstanding shares of voting stock to remove any Director except for cause; (3)
require the affirmative vote of (a) 80% of the outstanding shares of voting
stock and (b) a majority of the voting stock not owned by an Interested
Stockholder (an owner of 10% or more of voting power) to approve any Business
Combination (as such term is defined in the International Paper Restated
Certificate of Incorporation) with an Interested Stockholder unless (x) the
Business Combination shall have been approved by the Board of Directors at a
time when Disinterested Directors (those directors unaffiliated with an
Interested Stockholder who were either on the Board of Directors prior to the
time the Interested Stockholder became an Interested Stockholder or succeeded a
Disinterested Director and were recommended for a nomination or election by a
majority of the Disinterested Directors) constitute a majority of the entire
Board of Directors or (y) in the case of a Business Combination involving the
payment of consideration to holders of capital stock, certain conditions
concerning the adequacy of the consideration are met; (4) require the
affirmative vote of 80% of the outstanding shares of voting stock to amend or
repeal those provisions of the International Paper Restated Certificate of
Incorporation described in clauses (1) and (2) above; and (5) require the
affirmative vote of (x) 80% of the outstanding shares of voting stock and (y) a
majority of the voting stock not owned by an Interested Stockholder, to approve
any proposal made by such Interested Stockholder to amend or repeal those
provisions of International Paper's Restated Certificate of Incorporation
described in clause (3) above, unless such proposal is recommended by the Board
of Directors at a time when Disinterested Directors constitute a majority of the
entire Board of Directors.
The overall effect of these provisions may be to deter or discourage hostile
takeover attempts by making it more difficult for a person who has gained a
substantial equity interest in International Paper effectively to exercise
control.
DESCRIPTION OF INTERNATIONAL PAPER PREFERRED STOCK
The following summary contains a description of certain general terms of the
International Paper Preferred Stock. The description of certain provisions of
the International Paper Preferred Stock does not purport to be complete and is
subject to and qualified in its entirety by reference to the provisions of the
International Paper Restated Certificate of Incorporation, and the Certificate
of Designation (the "Certificate of Designation") relating to each particular
series of International Paper Preferred Stock.
GENERAL. Under the International Paper Restated Certificate of
Incorporation, the Board of Directors of International Paper is authorized,
without further stockholder action, to provide for the issuance of up to
8,750,000 shares of International Paper Serial Preferred Stock. The
International Paper Serial Preferred Stock may be issued in one or more series,
with such designations of titles; dividend rates; any redemption provisions;
special or relative rights in the event of liquidation, dissolution,
distribution or winding up of International Paper; any sinking fund provisions;
any conversion provisions; any voting rights thereof; and any other preferences,
privileges, powers, rights, qualifications, limitations and restrictions, as
shall be set forth as and when established by the Board
40
<PAGE>
of Directors of International Paper. The shares of any series of International
Paper Serial Preferred Stock will be, when issued, fully paid and nonassessable
and holders thereof will have no preemptive rights in connection therewith.
RANK. Any series of International Paper Preferred Stock will, with respect
to rights on liquidation, winding up and dissolution, rank (i) senior to all
classes of International Paper Common Stock and to all equity securities issued
by International Paper, the terms of which specifically provide that such equity
securities will rank junior to such series of International Paper Preferred
Stock (the "International Paper Junior Liquidation Securities"); (ii) on a
parity with all equity securities issued by International Paper, the terms of
which specifically provide that such equity securities will rank on a parity
with such series of International Paper Preferred Stock ("International Paper
Parity Liquidation Securities"), and (iii) junior to all equity securities
issued by International Paper, the terms of which specifically provide that such
equity securities will rank senior to such series of International Paper
Preferred Stock (the Senior Liquidation Securities). In addition, any series of
International Paper Preferred Stock will, with respect to dividend rights, rank
(i) senior to all equity securities issued by International Paper, the terms of
which specifically provide that such equity securities will rank junior to such
series of International Paper Preferred Stock and, to the extent provided in the
applicable Certificate of Designation, to International Paper Common Stock, (ii)
on a parity with all equity securities issued by International Paper, the terms
of which specifically provide that such equity securities will rank on a parity
with such series of International Paper Preferred Stock and, to the extent
provided in the applicable Certificate of Designation, to International Paper
Common Stock ("International Paper Parity Dividend Securities") and (iii) junior
to all equity securities issued by International Paper, the terms of which
specifically provide that such equity securities will rank senior to such series
of International Paper Preferred Stock. As used in any Certificate of
Designation for these purposes, the term "equity securities" will not include
debt securities convertible into or exchangeable for equity securities.
UNITED STATES TAXATION
GENERAL
The following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership, disposition and conversion
of Convertible Preferred Securities. Unless otherwise stated, this summary deals
only with Convertible Preferred Securities held as capital assets by holders who
purchase the Convertible Preferred Securities upon original issuance. It does
not deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or persons that will hold the
Convertible Preferred Securities as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. Dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Convertible Preferred Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Convertible Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Convertible Junior Subordinated
Debentures, Skadden, Arps, Slate, Meagher & Flom, special counsel to
International Paper and the Trust, rendered its opinion generally to the effect
that, under then current law and assuming full compliance with the terms of the
Convertible Junior Subordinated Debenture Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Convertible Junior Subordinated Debentures held by the Trust will
be classified for United States Federal income tax purposes as indebtedness of
International Paper.
41
<PAGE>
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Convertible Preferred Securities,
Skadden, Arps, Slate, Meagher & Flom, special counsel to International Paper and
the Trust, rendered its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Declaration and the
Convertible Junior Subordinated Debenture Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States Federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States Federal income tax purposes, each holder of
Convertible Preferred Securities generally will be considered the owner of an
undivided interest in the Convertible Junior Subordinated Debentures, and each
holder will be required to include in its gross income any original issue
discount ("OID") accrued with respect to its allocable share of those
Convertible Junior Subordinated Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because International Paper has the option, under the terms of the
Convertible Junior Subordinated Debentures, to defer payments of interest by
extending interest payment periods for up to 20 quarters, all of the stated
interest payments on the Convertible Junior Subordinated Debentures will be
treated as "original issue discount". Holders of debt instruments issued with
OID must include that discount in income on an economic accrual basis before the
receipt of cash attributable to the interest, regardless of their method of tax
accounting. Generally, all of a holder's taxable interest income with respect to
the Convertible Junior Subordinated Debentures will be accounted for as OID.
Actual payments and distributions of stated interest will not, however, be
separately reported as taxable income. The amount of OID that accrues in any
quarter will approximately equal the amount of the interest that accrues on the
Convertible Junior Subordinated Debentures in that quarter at the stated
interest rate. In the event that the interest payment period is extended,
holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period on an
economic accrual basis over the length of the extended interest payment period.
Because income on the Convertible Preferred Securities will constitute OID,
corporate holders of Convertible Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Convertible Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Convertible Preferred Securities other than a holder who
purchased the Convertible Preferred Securities upon original issuance may be
considered to have acquired their undivided interests in the Convertible Junior
Subordinated Debentures with market discount or acquisition premium as such
phrases are defined for United States Federal income tax purposes. Such holders
are advised to consult their tax advisors as to the income tax consequences of
the acquisition, ownership and disposition of the Convertible Preferred
Securities.
RECEIPT OF CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION
OF THE ISSUER
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Tax Event or Investment Company Event Redemption or
Distribution", Convertible Junior Subordinated Debentures may be distributed to
holders in exchange for the Convertible Preferred Securities and in liquidation
of the Trust. Under current law, such a distribution to holders, for United
States Federal income tax purposes, would be treated as a nontaxable event to
each holder, and each holder would receive an aggregate tax basis in the
Convertible Junior Subordinated Debentures equal to such holder's aggregate tax
basis in its Convertible Preferred Securities. A holder's holding period in the
Convertible Junior Subordinated Debentures so received in liquidation of the
Trust would include the period during which the Convertible Preferred Securities
were held by such holder. If, however, the related Special Event is a Tax Event
which results in the Trust being treated as an association taxable as a
corporation, the distribution would likely constitute a taxable event to holders
of the Convertible Preferred Securities.
42
<PAGE>
Under certain circumstances described herein (see "Description of the
Convertible Preferred Securities"), the Convertible Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Convertible Preferred Securities.
Under current law, such a redemption would, for United States Federal income tax
purposes, constitute a taxable disposition of the redeemed Convertible Preferred
Securities, and a holder would recognize gain or loss as if it sold such
redeemed Convertible Preferred Securities for cash. See "-- Disposition of
Convertible Preferred Securities."
DISPOSITION OF CONVERTIBLE PREFERRED SECURITIES
A holder that sells Convertible Preferred Securities will recognize gain or
loss equal to the difference between the amount realized on the sale of the
Convertible Preferred Securities and the holder's adjusted tax basis in such
Convertible Preferred Securities. A holder's adjusted tax basis in the
Convertible Preferred Securities generally will be its initial purchase price
increased by OID previously includible in such holder's gross income to the date
of disposition and decreased by payments received on the Convertible Preferred
Securities to the date of disposition. Such gain or loss will be a capital gain
or loss and will be a long-term capital gain or loss if the Convertible
Preferred Securities have been held for more than one year at the time of sale.
The Convertible Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Junior Subordinated Debentures. A holder who disposes of
or converts his Convertible Preferred Securities between record dates for
payments of distributions thereon will be required to include accrued but unpaid
interest on the Convertible Junior Subordinated Debentures through the date of
disposition in income as ordinary income, and to add such amount to his adjusted
tax basis in his PRO RATA share of the underlying Convertible Junior
Subordinated Debentures deemed disposed of. To the extent the selling price is
less than the holder's adjusted tax basis (which basis will include, in the form
of OID, all accrued but unpaid interest), a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes.
EXCHANGE OF CONVERTIBLE PREFERRED SECURITIES FOR INTERNATIONAL PAPER COMMON
STOCK
A Preferred Securityholder will not recognize gain or loss upon the
exchange, through the Conversion Agent, of Convertible Preferred Securities for
a proportionate share of the Convertible Junior Subordinated Debentures held by
the Issuer.
A Preferred Securityholder will not recognize income, gain or loss upon the
conversion, through the Conversion Agent, of Convertible Junior Subordinated
Debentures into International Paper Common Stock. A Preferred Securityholder
will, however, recognize gain upon the receipt of cash in lieu of a fractional
share of International Paper Common Stock equal to the amount of cash received
less the Preferred Securityholder's tax basis in such fractional share. A
Preferred Securityholder's tax basis in the International Paper Common Stock
received upon exchange and conversion should generally be equal to the Preferred
Securityholder's tax basis in the Convertible Preferred Securities delivered to
the Conversion Agent for exchange less the basis allocated to any fractional
share for which cash is received and a Preferred Securityholder's holding period
in the International Paper Common Stock received upon exchange and conversion
should generally begin on the date the Preferred Securityholder acquired the
Convertible Preferred Securities delivered to the Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Convertible Preferred Securities as having received a constructive
distribution from International Paper in the event the conversion ratio of the
Convertible Junior Subordinated Debentures were adjusted if (i) as a result of
such adjustment, the proportionate interest (measured by the quantum of
International Paper Common Stock into or for which the Convertible Junior
Subordinated Debentures are convertible or exchangeable) of the holders of the
Preferred Securities in the assets or earnings and profits of International
Paper were increased, and (ii) the adjustment was not made pursuant to a
43
<PAGE>
bona fide, reasonable antidilution formula. An adjustment in the conversion
ratio would not be considered made pursuant to such a formula if the adjustment
was made to compensate for certain taxable distributions with respect to the
International Paper Common Stock. Thus, under certain circumstances, a reduction
in the conversion price for the holders may result in deemed dividend income to
holders to the extent of the current or accumulated earnings and profits of
International Paper. Holders of the Convertible Preferred Securities would be
required to include their allocable share of such deemed dividend income in
gross income but will not receive any cash related thereto.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a nonresident fiduciary of a foreign estate or trust.
Under present United States Federal income tax law, (i) payments by the
Trust or any of its paying agents to any holder of a Convertible Preferred
Security who or which is a United States Alien Holder will not be subject to
withholding of United States Federal income tax; provided that, (a) the
beneficial owner of the Convertible Preferred Security does not actually or
constructively (including by virtue of its interest in the underlying
Convertible Junior Subordinated Debentures) own 10% or more of the total
combined voting power of all classes of stock of International Paper entitled to
vote, (b) the beneficial owner of the Convertible Preferred Security is not a
controlled foreign corporation that is related to International Paper through
stock ownership, and (c) either (A) the beneficial owner of the Convertible
Preferred Security certifies to the Trust or its agent, under penalties of
perjury, that it is not a United States holder and provides its name and address
or (B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution"), and holds the Convertible Preferred Security in
such capacity, that certifies to the Trust or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by it
or by a Financial Institution between it and the beneficial owner and furnishes
the Trust or its agent with a copy thereof; and (ii) a United States Alien
Holder of a Convertible Preferred Security will not be subject to withholding of
United States Federal income tax on any gain realized upon the sale or other
disposition of a Convertible Preferred Security.
If a United States Alien Holder is treated as receiving a deemed dividend as
a result of an adjustment of the conversion price of the Convertible Junior
Subordinated Debentures, as described above under "Adjustment of Conversion
Price", such deemed dividend will be subject to United States Federal
withholding tax at a 30% (or lower treaty) rate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Subject to the qualifications discussed below, income on the Convertible
Preferred Securities will be reported to holders on Forms 1099, which forms
should be mailed to holders of Preferred Securities by January 31 following each
calendar year.
The Trust will be obligated to report annually to Cede & Co., as holder of
record of the Convertible Preferred Securities, the OID related to the
Convertible Junior Subordinated Debentures that accrued during the year. The
Trust currently intends to report such information on Form 1099 prior to January
31 following each calendar year even though the Trust is not legally required to
report to record holders until April 15 following each calendar year. The
Placing Agents have indicated to the Trust that, to the extent that they hold
Convertible Preferred Securities as nominees for beneficial holders, they
currently expect to report to such beneficial holders on Forms 1099 by January
31 following each calendar year. Under current law, holders of Convertible
Preferred Securities who hold as nominees for beneficial holders will not have
any obligation to report information regarding the beneficial holders to the
Trust. The Trust, moreover, will not have any obligation to report to beneficial
holders who are not also record holders. Thus, beneficial holders of Convertible
Preferred
44
<PAGE>
Securities who hold their Convertible Preferred Securities through the Placing
Agents will receive Forms 1099 reflecting the income on their Convertible
Preferred Securities from such nominee holders rather than the Trust.
Payments made on, and proceeds from the sale of, the Convertible Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States Federal income tax,
provided the required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974 ("ERISA"), or Section 4975 of the Code
("Plans"), may purchase Convertible Preferred Securities, subject to the
investing fiduciary's determination that the investment in Convertible Preferred
Securities satisfies ERISA's fiduciary standards and other requirements
applicable to investments by the Plan.
In any case, International Paper and/or any of its affiliates may be
considered a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to certain plans (generally, Plans maintained or sponsored by, or
contributed to by, any such persons). The acquisition and ownership of
Convertible Preferred Securities by a Plan (or by an individual retirement
arrangement or other Plans described in Section 4975(e)(i) of the Code) with
respect to which International Paper or any of its affiliates is considered a
party in interest or a disqualified person, may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Convertible Preferred Securities are acquired pursuant to and in accordance with
an applicable exemption.
As a result, Plans with respect to which International Paper or any of its
affiliates is a party in interest or a disqualified person should not acquire
Convertible Preferred Securities. Any other Plans or other entities whose assets
include Plan assets subject to ERISA proposing to acquire Convertible Preferred
Securities should consult with their own ERISA counsel.
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<PAGE>
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust and
sold by CS First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc. and PaineWebber Incorporated (the
"Initial Purchasers"), in a transaction exempt from the registration
requirements of the Securities Act, to persons reasonably believed by such
Initial Purchasers to be "qualified institutional buyers" (as defined in Rule
144A under the Securities Act), to certain qualified institutional buyers acting
on behalf of institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act or outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. The Selling Holders may from time to time offer and sell
pursuant to this Prospectus any or all of the Convertible Preferred Securities,
any Convertible Junior Subordinated Debentures and International Paper Common
Stock issued upon conversion of the Convertible Preferred Securities. The term
Selling Holder includes the holders listed below and the beneficial owners of
the Convertible Preferred Securities and their transferees, pledgees, donees or
other successors.
The following table sets forth information with respect to the Selling
Holders and the respective number of Convertible Preferred Securities
beneficially owned by each Selling Holder that may be offered pursuant to this
Prospectus. Such information has been obtained from the Selling Holders and the
Property Trustee. CS First Boston Corporation, an affiliate of Credit Suisse
London Nominees Ltd., maintains ongoing business relationships with
International Paper and in connection therewith provides investment banking and
investment advisory services for which it receives customary fees. Brinson
Partners, Inc., an indirect wholly owned subsidiary of Swiss Bank Corporation
and an affiliate of SBC Capital Markets, Inc., provides investment management
services for certain pension plans of International Paper for which it receives
customary fees.
<TABLE>
<CAPTION>
NUMBER OF
CONVERTIBLE
PREFERRED
SELLING HOLDER SECURITIES
- --------------------------------------------------------------- -----------
<C><S> <C>
1. SBC CAPITAL MARKETS, INC. .................................. 290,000
2. THE TCW GROUP, INC. ........................................ 272,600
3. PRESIDENT AND FELLOWS OF HARVARD COLLEGE ................... 175,000
4. ICI AMERICAS ZENECA HOLDINGS PENSION ....................... 160,000
5. LUTHERAN BROTHERHOOD........................................ 125,000
6. PHOENIX INCOME AND GROWTH FUND ............................. 120,000
7. PAINE WEBBER GROWTH AND INCOME FUND, A SERIES OF PAINE
WEBBER AMERICA FUND........................................ 102,000
8. MORGAN STANLEY & CO., INC................................... 85,000
9. SELIGMAN INCOME FUND, INC................................... 80,000
10. SWISS BANK CORPORATION (LONDON OFFICE
NOMINEES) LIMITED.......................................... 60,000
11. MSS NOMINEES LTD............................................ 55,000
12. BAII ASSET MANAGEMENT LTD. HOLDING ON BEHALF OF CLIENTS..... 50,000
13. ISELIN CORPORATION.......................................... 50,000
14. NCB TRUST LIMITED BEAR...................................... 47,500
15. NORTHSTAR ADVANTAGE INCOME FUND............................. 40,000
16. NYKREDIT BANK A/S........................................... 40,000
17. BIKUBEN..................................................... 40,000
18. SELIGMAN COMMON STOCK FUND, INC............................. 40,000
19. HANOVER NOMINEES LTD........................................ 35,000
20. CONVERTIBLE FUND SERIES..................................... 32,500
21. CREDIT SUISSE LONDON NOMINEES LTD.
FOR THE ACCOUNT OF CUSTOMERS............................... 32,500
22. BT GLOBENET NOMINEES LTD.................................... 30,000
23. OCM CONVERTIBLE TRUST....................................... 26,700
24. CS FIRST BOSTON CORPORATION................................. 25,000
</TABLE>
46
<PAGE>
<TABLE>
<C><S> <C>
25. NATWEST DIMSDALES NOMINEE LTD............................... 25,000
26. TRUST COMPANY OF THE WEST................................... 22,900
27. TRUST COMPANY OF THE WEST AS TRUSTEE OF
THE TCW CONVERTIBLE STRATEGY FUND.......................... 20,200
28. GENERALE BANK............................................... 20,000
29. PHOENIX MUTUAL LIFE -- GENERAL ACCOUNT...................... 20,000
30. UNIBANK..................................................... 20,000
31. MINERVA NOMINEES LTD........................................ 20,000
32. NCB TRUST LIMITED........................................... 20,000
33. NATWEST CROMPTON NOMINEE LTD................................ 20,000
34. DELTA AIR LINES, INC. MASTER TRUST.......................... 17,000
35. BBL FRANCE.................................................. 15,500
36. CHAMPION WORLDWIDE HOLDINGS LTD............................. 15,000
37. TENDENCIA OVERSEAS FUND LTD................................. 15,000
38. MASSACHUSETTS PENSION RESERVES INVESTMENT MANAGEMENT
BOARD...................................................... 12,200
39. STATE STREET NOMINEES LTD................................... 12,000
40. TWC ASSET MANAGEMENT COMPANY................................ 11,300
41. VIDACOS NOMINEES LTD........................................ 10,000
42. SCHRODER NOMINEES LTD....................................... 10,000
43. ASSICURAZIONI GENERALI SPA.................................. 10,000
44. TCW ASSET MANAGEMENT COMPANY AS INVESTMENT ADVISER
TO THE TCW CONVERTIBLE VALUE LIMITED PARTNERSHIP........... 9,600
45. DAVIS CONVERTIBLE SECURITIES FUND........................... 9,200
46. BARCLAYS NOMINEES (GRACECHURCH) LTD......................... 8,400
47. TCW ASSET MANAGEMENT COMPANY................................ 8,200
48. NATWEST PARRS NOMINEE LTD................................... 7,500
49. TCW ASSET MANAGEMENT COMPANY AS INVESTMENT ADVISER
TO THE NORTH DAKOTA STATE INVESTMENT BOARD --
STATE LAND BOARD........................................... 7,200
50. MEES PIERSON NOMINEES (GUERNSEY) LTD........................ 6,500
51. STATE EMPLOYEES' RETIREMENT FUND OF THE STATE OF DELAWARE... 6,100
52. JASON & ARGO PARTNERS LTD................................... 5,000
53. MIRGLIP NOMINEES LTD........................................ 4,000
54. SE BANKEN FONDER AB......................................... 3,600
55. GROWTH AND INCOME PORTFOLIO, A SERIES OF PAINE WEBBER SERIES
TRUST...................................................... 3,000
56. SELIGMAN PORTFOLIOS, INC. -- INCOME PORTFOLIO............... 3,000
57. GALLUS NOMINEES LIMITED..................................... 2,500
58. CAZENOVE & CO............................................... 2,500
59. A/S BJORNSKYOV OG CO........................................ 2,000
60. JAMES CAPEL NOMINEES LTD.................................... 1,700
61. MISS VICTORIA MARGARET COATES............................... 1,650
62. CAMERON ASSET MANAGEMENT LIMITED............................ 1,650
63. INDEX II EQUITY INCOME PORTFOLIO............................ 1,000
64. ANY OTHER HOLDER OF CONVERTIBLE PREFERRED SECURITIES OR
FUTURE TRANSFEREE FROM ANY SUCH HOLDER..................... 6,575,800
-----------
Total................................................... 9,000,000
-----------
-----------
</TABLE>
None of the other Selling Holders has, or within the past three years has
had, any position, office or other material relationship with the Trust or the
Company or any of their predecessors or affiliates, except as noted above.
Because the Selling Holders may, pursuant to this Prospectus, offer all or some
portion of the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures or
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<PAGE>
the International Paper Common Stock issuable upon conversion of the Convertible
Preferred Securities, no estimate can be given as to the amount of the
Convertible Preferred Securities, the Convertible Junior Subordinated Debentures
or the International Paper Common Stock issuable upon conversion of the
Convertible Preferred Securities that will be held by the Selling Holders upon
termination of any such sales. In addition, the Selling Holders identified above
may have sold, transferred or otherwise disposed of all or a portion of their
Convertible Preferred Securities, since the date on which they provided the
information regarding their Convertible Preferred Securities, in transactions
exempt from the registration requirements of the Securities Act.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/ dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the Offered
Securities is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Offered Securities being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company and the Trust will be indemnified by the Selling Holders severally
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
48
<PAGE>
LEGAL MATTERS
The validity of the Convertible Preferred Securities, the Convertible Junior
Subordinated Debentures and the Guarantee, and certain United States federal
income taxation matters, will be passed upon for International Paper and the
Issuer by Skadden, Arps, Slate, Meagher & Flom, and the validity of any
International Paper Common Stock issuable upon conversion of such Convertible
Preferred Securities will be passed upon for International Paper and the Issuer
by James W. Guedry, Associate General Counsel of International Paper. Mr. Guedry
does not own a material or significant amount of the outstanding shares of
International Paper Common Stock. He participates in International Paper's Stock
Option Plan and in its Salaried Savings Plan, having an interest in a fund under
that plan which invests in the International Paper Common Stock.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving such reports.
49
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY INTERNATIONAL PAPER COMPANY OR INTERNATIONAL PAPER
CAPITAL TRUST OR ANY OF THEIR AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
INTERNATIONAL PAPER COMPANY OR INTERNATIONAL PAPER CAPITAL TRUST SINCE SUCH
DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........... 4
Incorporation of Certain
Documents by Reference........ 4
Risk Factors.................... 5
International Paper Capital
Trust......................... 8
The Company..................... 9
Recent Developments............. 11
Ratio of Earnings to Fixed
Charges....................... 11
Capitalization.................. 12
Accounting Treatment............ 12
Use of Proceeds................. 12
Description of the Convertible
Preferred Securities.......... 13
Description of the Guarantee.... 30
Description of the Convertible
Junior Subordinated
Debentures.................... 32
Effect of Obligations Under the
Convertible Junior
Subordinated Debentures and
the Guarantee................. 38
Description of International
Paper Capital Stock........... 39
United States Taxation.......... 41
ERISA Considerations............ 45
Selling Holders................. 46
Plan of Distribution............ 48
Legal Matters................... 49
Experts......................... 49
</TABLE>
INTERNATIONAL PAPER
CAPITAL TRUST
9,000,000
5 1/4% Convertible Preferred Securities
guaranteed to the extent
set forth herein by,
and convertible into
Common Stock of,
INTERNATIONAL PAPER
COMPANY
12345
PROSPECTUS
DATED NOVEMBER 14, 1995
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