<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14 OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant: / /
Filed by a party other than the Registrant: / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
INTERNATIONAL PAPER COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
[INTERNATIONAL PAPER LOGO]
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
JOHN T. DILLON
CHAIRMAN
April 27, 1999
Dear Fellow Shareholder:
This year's annual meeting will be held in Reid Hall, (the "Castle"),
Manhattanville College, 2900 Purchase Street, Purchase, New York. The meeting
will start at 8:00 a.m., on Thursday, May 27, 1999. You are cordially invited to
attend this meeting and we look forward to seeing you there.
The following Proxy Statement outlines the business to be conducted at the
meeting. It includes the election of seven directors; approval of amendments to
the Long-Term Incentive Compensation Plan; reaffirmation of performance goals in
that plan; approval of an amendment to the Restricted Stock Plan for
Non-Employee Directors; and ratification of the appointment of Arthur Andersen
LLP as the independent auditor for 1999.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, YOUR VOTE IS IMPORTANT. WE
URGE YOU TO VOTE BY DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD, OR IF
YOU PREFER, VOTING VIA THE TELEPHONE.
Attendance at the meeting is limited to shareholders of record as of the
close of business on April 7, 1999, or their duly appointed proxy holder (not to
exceed one proxy per shareholder), and to guests of management. If you or your
proxy holder plan to attend the meeting, please complete and return the enclosed
Request for Admittance card.
Thank you for your continued support.
Sincerely,
[/S/ JOHN T. DILLION]
John T. Dillon
<PAGE>
[INTERNATIONAL PAPER LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 27, 1999
8:00 A.M.
REID HALL (THE "CASTLE")
MANHATTANVILLE COLLEGE
2900 PURCHASE STREET
PURCHASE, NEW YORK
To the Owners of Common Stock of
International Paper Company:
The annual meeting of shareholders of International Paper Company will be held
Thursday, May 27, 1999, at 8:00 a.m. in Reid Hall, Manhattanville College, 2900
Purchase Street, Purchase, New York to:
1. Elect one class of directors: Samir G. Gibara, James A. Henderson, Jane C.
Pfeiffer, Jeremiah J. Sheehan and C. Wesley Smith, each for a term of three
years; elect one director, W. Craig McClelland, for a term of two years; and
elect one director, Robert D. Kennedy, for a term of one year.
2. Approve amendments to the Company's Long-Term Incentive Compensation Plan;
3. Reaffirm the performance goals used for performance awards under the
Long-Term Incentive Compensation Plan;
4. Approve an amendment to the Company's Restricted Stock Plan for Non-Employee
Directors;
5. Ratify the appointment of Arthur Andersen LLP as independent auditor for
1999; and
6. Transact such other business properly before the meeting or any
adjournments.
YOUR BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE FOR ITEMS 1, 2, 3, 4, AND 5.
Shareholders of record at the close of business on April 7, 1999, will be
entitled to vote at the meeting or any adjournments thereof.
By order of the Board of
Directors
JAMES W. GUEDRY
VICE PRESIDENT AND SECRETARY
April 27, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
General Information....................................................................................... 1
Corporate Governance...................................................................................... 3
Common Stock Ownership of Directors and Management........................................................ 6
Compensation of Directors................................................................................. 9
Matters To Be Considered at the Meeting................................................................... 11
Report of the Management Development and Compensation Committee
of the Board of Directors............................................................................... 17
Performance Graphs........................................................................................ 21
Additional Information Regarding Executive Compensation................................................... 23
Compensation............................................................................................ 23
Retirement Benefits..................................................................................... 27
Termination Agreements.................................................................................. 27
Appendix A................................................................................................ A-1
Appendix B................................................................................................ B-1
</TABLE>
<PAGE>
PROXY STATEMENT
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
(914) 397-1500
GENERAL INFORMATION
This Proxy Statement is furnished to you by the Board of Directors of
International Paper Company in connection with the solicitation of your proxy to
be voted at the annual meeting of shareholders to be held on May 27, 1999. You
are entitled to one vote for each share of common stock held of record at the
close of business on April 7, 1999. As of that date, there were 306,785,469
shares of common stock outstanding.
The annual report, including the audited financial statements of International
Paper for the fiscal year ended December 31, 1998, has been mailed to you with
this Proxy Statement. Read it carefully in conjunction with this Proxy Statement
before voting on any proposals since it contains details of the Company's
operations and other relevant disclosures.
PROXY PROCEDURES
VOTING BY TELEPHONE
You have a choice of voting by telephone or by mail. The telephone voting
procedure is simple and fast. Dial the 800 number on your proxy card and listen
for further directions. You must have a touch-tone phone in order to respond to
the questions. This vote will be counted immediately and there is no need to
send in your proxy card. You may revoke your proxy at any time before its
exercise by (1) subsequent telephone vote; (2) submitting a written revocation;
(3) submitting a new proxy; or (4) attending and voting at the annual meeting.
VOTING BY PROXY CARD
Shares eligible to be voted, and for which a properly-signed proxy is returned,
will be voted in accordance with the instructions specified on the proxy card;
if you do not mark any instructions, your shares will be voted in favor of
proposals 1, 2, 3, 4 and 5. If any other matters come before the meeting, your
proxy will be voted in accordance with the best judgment of the persons voting
them. As of the time this Proxy Statement was printed, management was not aware
of any other matters to be voted upon. You may revoke your proxy at any time
before its exercise by (1) submitting a written revocation; (2) submitting a new
proxy; (3) voting by telephone as described above; or (4) attending and voting
at the annual meeting.
Solicitation of proxies may be done by directors, officers and employees, as
well as by Georgeson & Company Inc. Payments to that firm as compensation are
estimated to be about $14,500 plus reimbursable expenses. This solicitation may
be carried out by mail, telephone, telecommunication, or personal interview. The
cost of any such solicitations will be borne by International Paper.
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WHO COUNTS THE VOTE AND IS IT CONFIDENTIAL?
The Company has a policy of confidentiality in the voting of shareholder
proxies. It uses the services of its registrar and transfer agent, ChaseMellon
Shareholder Services, L.L.C., as independent inspectors of election to receive
and tabulate the proxy vote. These representatives are the only persons who
process and have access to your proxy card and telephone votes.
This Proxy Statement and the form of Proxy were sent to shareholders commencing
April 27, 1999.
ADMITTANCE PROCEDURES AT MEETING
SHAREHOLDERS OF RECORD
If you are a shareholder of record as of the close of business on April 7, 1999
(or your duly appointed proxy holder), you are entitled to vote and attend the
meeting. Certain procedures have been adopted to insure that no inconvenience or
delays are caused to the Company's shareholders or their proxy holders when
entering the meeting.
If you plan to attend the meeting in person or appoint someone to attend as your
proxy (other than the proxies set out on the proxy card), please complete, sign
and return the enclosed Request for Admittance card promptly. An admittance card
can then be reserved for you or your proxy in advance of the meeting. If you are
appointing your own proxy, please include his or her name on the Request. These
admittance cards will be delivered to you or your proxy holder at the
shareholders' admittance counter at the meeting upon verification of
identification by you or your proxy holder.
If you are a record shareholder and do not have an admittance card reserved for
you at the meeting, you will be admitted upon verification of ownership at the
shareholders' admittance desk. If you have not appointed a proxy in advance or
have changed the appointed proxy on the Request for Admittance card, your duly
appointed proxy who attends the meeting in your place will be required to
present evidence of your signature on the proxy (a copy of your driver's license
or employment identification card or other identification with your signature).
This is to make sure that only valid proxies are admitted and voted.
SHAREHOLDERS THROUGH INTERMEDIARIES
Persons who own stock through brokers, trustees, plans or "street name" and not
directly through ownership of stock certificates are considered "beneficial
owners." Beneficial owners of record on April 7, 1999, or their duly appointed
proxy holder, can obtain admittance cards only at the shareholders' admittance
desk by presenting evidence of common stock ownership in the Company. This
evidence could be a proxy from the institution that is the record holder of the
stock or your most recent bank or brokerage firm account statement, along with
proper identification. If you are a beneficial shareholder who will appoint a
proxy to attend the meeting on your behalf, your duly appointed proxy will be
required to comply with the procedures described above in this paragraph, as
well as the admittance procedures described above for duly appointed proxies not
designated in advance on the Request for Admittance card.
2
<PAGE>
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Board has three classes of directors: Class I directors, of which there are
currently three, who were elected until the 2001 annual meeting and one new
director who was assigned to that class; Class II directors, of which there are
currently two, who were elected to serve until the 1999 annual meeting, and
three new directors who were assigned to that class; and Class III directors, of
which there are currently five, who were elected until the 2000 annual meeting
and one new director who was assigned to that class. Each class is elected for a
three-year term, unless they retire earlier. New directors are assigned to a
class until the first annual meeting after their selection.
Company policy on tenure of directors requires outside directors to retire from
the Board upon their 72nd birthday, whether or not the term for which they have
been elected has expired; generally, employee directors must retire when they
leave the Company.
Eight regular meetings and five special meetings of the Board of Directors were
held in 1998. In addition, there were 22 Committee meetings. Each director
attended at least 75% of the meetings of the Board and the Committees on which
he or she serves. All of the directors attended an average of 96% of such
meetings of the Board and the Committees on which they serve.
Record and beneficial ownership of current directors in equity securities of the
Company is shown in the table on page 7.
BOARD EFFECTIVENESS
The Board works to enhance its own effectiveness and to improve the Company's
corporate governance practices in a variety of ways, including:
- Conduct of an annual evaluation of Board structure and performance that
includes reviewing the Board activities against those set out in its
charter and making recommendations for changes or improvements in
practices or structure.
- Increased contact between outside directors and senior managers through
facility visits and work with corporate officers who serve as committee
executives.
- Nominating Committee review of incumbent directors prior to recommendation
for re-election emphasizing: directors' commitment to serving the Company,
directors' regular attendance at meetings and directors' sense of
commitment to stockholders, employees and other communities served by the
Company.
COMMITTEES OF THE BOARD
In order to fulfill its responsibilities, our Board delegates to its various
Committees the authority to consider certain matters and report to the Board
with appropriate recommendations. To enhance the effectiveness of the
Committees:
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- Each active Committee is chaired by a non-employee director.
- The chairmanship and membership of all of the Committees are rotated from
time to time to give the directors a broader knowledge of our Company's
affairs.
- Each Committee establishes its own agenda for the year, and conducts a
year-end evaluation of its performance by comparing the topics considered
at meetings with its charter as established by the Board.
- Oral reports of Committee activities are given at each Board meeting and
minutes of Committee meetings are sent to all of the directors.
AUDIT COMMITTEE
The Audit Committee of the Board assists the Board in carrying out its
responsibilities for monitoring management's accounting for the Company's
financial results and for the timeliness and adequacy of the reporting of those
results; it discusses and makes inquiry into the audits of the Company's books
made internally and by outside independent auditors, the Company's financial and
accounting policies, its internal controls and its financial reporting; it
reviews and makes a recommendation to the Board each year with respect to the
appointment of independent auditors for the following year; it informs the Board
of any significant accounting matters; and it reviews the performance of the
Committee.
Three meetings of the Committee were held in 1998.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee reviews Company policies
and programs for the development of management personnel; it makes
recommendations to the Board with respect to any proposals for compensation or
compensation adjustments of officers who are also directors of the Company; it
authorizes compensation or compensation adjustments for other officers of the
Company; it administers the Company's executive bonus and Long-Term Incentive
Compensation Plan; it reviews and endorses changes in Company employee
retirement and benefits plans; it reviews officer candidates and endorses
nominees for election as executive officers; it delegates to the Chief Executive
Officer the authority to act on compensation adjustments at certain levels; it
makes recommendations to the Board with respect to directors' compensation; it
reviews senior management succession planning; and it reviews the performance of
the Committee.
Six meetings of the Committee were held in 1998.
NOMINATING COMMITTEE
The Nominating Committee reviews the size and composition of the Board; it
reviews possible director candidates and director nominations properly presented
by shareholders; it recommends to the Board individuals suitable for election as
directors; it reviews and recommends annually to the full Board the slate of
nominees for election by the Company's shareholders; it reviews institutional
affiliations of directors and director candidates for possible conflicts; and it
reviews and recommends Board Committee assignments.
Four meetings of the Committee were held in 1998.
ENVIRONMENT, HEALTH AND TECHNOLOGY COMMITTEE
The Environment, Health and Technology Committee reviews environmental, safety,
4
<PAGE>
health and technological policies and programs throughout the Company; it
assures that they are appropriate to the short- and long-term objectives of the
Company in terms of industry leadership, compliance with federal and state laws
and regulations and social responsibility; it advises the Board of the
effectiveness of these policies and programs; and it reviews the performance of
the Committee.
Three meetings of the Committee were held in 1998.
OTHER COMMITTEES
Current membership on the above and on other regular Committees of the Board of
Directors is shown below:
COMMITTEE MEMBERSHIP**
<TABLE>
<CAPTION>
MANAGEMENT
ENVIRONMENT, DEVELOPMENT PUBLIC &
HEALTH & & LEGAL
DIRECTORS AUDIT FINANCE TECHNOLOGY NOMINATING COMPENSATION AFFAIRS EXECUTIVE
<S> <C> <C> <C> <C> <C> <C> <C>
Bijur, P.I. X X* X
Dillon, J.T. X X*
Eaton, R.J. X X*
Georges, J.A. X X X
Henderson, J.A. X
Kennedy, J.R. X X
McHenry, D.F. X X* X X
Noonan, P.F. X X X*
Pfeiffer, J.C. X* X X
Shoemate, C.R. X* X X X
Smith, C.W. X X
</TABLE>
* Chairman of Committee
** W.C. Butcher, who retired on October 25, 1998, served on the Audit, Finance,
Nominating, and Management Development and Compensation Committees. T.C.
Graham, who retired on January 26, 1999, served on the Environment, Health &
Technology Committee as Chairman, and on the Management Development and
Compensation, and Executive Committees. E.T. Pratt who retired on February
22, 1999, served on the Finance Committee as Chairman, the Nominating,
Management Development and Compensation, and Executive Committees.
RELATED TRANSACTION
On June 4, 1998, the Company closed on the donation of approximately 2,200 acres
of land along the Escatawpa River held by the Company's Moss Point mill in
Jackson County, Mississippi, to The Conservation Fund for later gift to the U.S.
Fish and Wildlife Service. The donation was appraised by outside real estate
consultants at $1,400,000. Mr. Noonan, a director of the Company, is Chairman of
the Board of The Conservation Fund.
5
<PAGE>
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS
In order to be considered for inclusion in next year's Proxy Statement,
shareholder proposals intended to be presented at the 2000 annual meeting must
be made in writing and received by the Secretary of the Company at the Company's
principal executive offices by the close of business on December 28, 1999.
Other shareholder business intended to be introduced at the 2000 annual meeting
must be made in accordance with Article I, Section 7 of the Company's By-laws.
Thus, shareholder proposals intended to be presented at the 2000 annual meeting,
but not included in the 2000 Proxy Statement, must be received by the Secretary
of the Company not earlier than January 8, 2000 nor later than February 8, 2000,
if the annual meeting is held on May 9, 2000, and must conform to the
requirements set out in the Company's By-laws.
Nominations by shareholders for directors must be made in accordance with
Article II, Section 9 of the Company's By-laws. Thus, shareholder nominations,
to be considered by the Nominating Committee for the 2000 election of directors
must be received by the Secretary of the Company not earlier than January 8,
2000, nor later than February 8, 2000, if the annual meeting is held on May 9,
2000, and must conform to the requirements set out in the Company's By-laws.
The Company's By-laws were amended on September 8, 1998, to provide that
shareholder nominations to the Board or notices of any business being brought by
a shareholder before the annual meeting must be received by the Corporate
Secretary not less than 90 nor more than 120 days prior to the shareholders'
meeting. The Company's By-laws were also amended on March 9, 1999, to change the
maximum length of time between a record date and the date of pertinent
shareholder action from 50 days to 60 days.
COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of March 31, 1999, the number of shares of and
options for Company common stock beneficially owned or otherwise claimed by each
current director, executive officers included in the Summary Compensation Table
on page 23, and by all directors and executive officers of the Company as a
group. The total beneficial owner-
ship of common stock of all directors and executive officers as a group
represents less than 1% of the outstanding stock. To the best knowledge of the
Company, no person or group beneficially owns more than 5% of the Company's
common stock outstanding, except as set forth below in the table beside the
respective shares owned.
6
<PAGE>
STOCK OWNERSHIP
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL SHARES STOCK UNITS STOCK OPTIONS
OR GROUP OWNED (1) % OWNED (2) OWNED (3)
- - -------------------------------------------------- ------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
P.I. Bijur........................................ 3,183 2,638
J.T. Dillon....................................... 353,973 28,968 395,737
R.J. Eaton........................................ 5,500 7,769
J.A. Georges...................................... 35,288 0 266,000
S. G. Gibara...................................... 116 250
J. A. Henderson................................... 1,175 275
J.R. Kennedy...................................... 106,029 3,979
R.D. Kennedy...................................... (4) (4) (4)
D.F. McHenry...................................... 8,014 11,352
W.C. McClelland................................... (4) (4) (4)
P.F. Noonan....................................... 4,150 5,678
J.C. Pfeiffer..................................... 7,734 5,853
J.J. Sheehan...................................... (4) (4) (4)
C.R. Shoemate..................................... 4,200 6,849
C.W. Smith........................................ 152,739 13,853 170,700
J.P. Melican...................................... 143,296 14,793 176,600
D.W. Oskin........................................ 170,233 0 149,100
M.J. Turk......................................... 135,111 5,206 124,000
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
All directors and executive officers as a group... 1,790,726 (.58%)
Bank trustee under Company and subsidiary employee
benefit plans (5)............................... 34,704,369 (11.3%)
Merrill Lynch, Pierce, Fenner & Smith Incor-
porated (6)..................................... 31,801,523 (10.3%)
Capital Research and Management
Company (7)..................................... 20,680,000 (6.7%)
Sanford C. Bernstein & Co. (8).................... 20,365,740 (6.6%)
Morgan Stanley Dean Witter & Co. (9).............. 15,491,079 (5.1%)
</TABLE>
FOOTNOTES TO COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
(1) Ownership shown includes securities over which the individual or Company has
or shares, directly or indirectly, voting or investment powers, including
certain relatives and ownership by trusts for the benefit of such relatives;
certain individuals may disclaim beneficial ownership of some of these
shares, but they are included for the purpose of computing the holdings and
the percentages of common stock owned.
(2) Ownership shown represents the non-voting stock-equivalent units owned by
the named individuals and group under the Nonfunded Deferred Compensation
Plan for Non-Employee Directors or the Unfunded Savings Plan.
(3) The above percentages do not include shares represented by stock options
granted executive officers under the Long-Term Incentive Compensation Plan.
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<PAGE>
(4) Messrs. R. D. Kennedy, McClelland and Sheehan are shareholders of Union Camp
Corporation, owning, as of February 28, 1999, 2,621, 50,622 and 1,340 shares
of that company. In addition, Messrs. Kennedy, McClelland and Sheehan have
outstanding options for 1,200, 454,055 and 1,200 Union Camp shares,
respectively; and Messrs. Kennedy and Sheehan have stock units equivalent to
3,065 and 71 shares of Union Camp stock, respectively. Following the merger
of Union Camp with the Company, those shares and stock unit equivalents will
be exchanged for Company shares at the exchange rate of between 1.627 and
1.4700 Company shares for each Union Camp share.
(5) As of December 31, 1998, State Street Bank & Trust Co. holds such shares as
the independent trustee in trust funds for employee savings, thrift, and
similar employee benefit plans of the Company and its subsidiaries ("Company
Trust Funds"). In addition, State Street Bank & Trust Co. is trustee for
various third party trusts and employee benefit plans and is an Investment
Advisor. As a result of its holdings, in all capacities, State Street Bank &
Trust Co. is the record holder of 34,704,369 shares of common stock of the
Company. The trustee disclaims beneficial ownership of all such shares
except 4,543,901 shares of which it has sole power to dispose or to direct
the disposition. The common stock held by the Company Trust Funds is
allocated to participants' accounts and such stock or the cash equivalent
will be distributed to participants upon termination of employment or
pursuant to withdrawal rights. The trustee votes the shares of common stock
held in the Company Trust Funds in accordance with the instructions of the
participants; shares for which no instructions are received are voted in the
Trustee's discretion.
(6) As of February 12, 1999, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") is a broker-dealer registered under Section 15 of the Act. MLPF&S
is a sponsor of various unit investment trusts ("UITs") which invest in
equity securities of the company. The UITs have the right to receive, or the
power to direct the receipt of dividends from or the proceeds from the sale
of, the securities reported herein.
(7) As of December 31, 1998, Capital Research and Management Company, an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940 holds such shares as a result of acting as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940.
(8) As of February 5, 1999, Sanford C. Bernstein & Co., Inc. has sole or shared
voting power over 14,178,687 of these shares and sole dispositive power over
all of them.
(9) As of February 2, 1999, Morgan Stanley Dean Witter & Co. is an Investment
Adviser registered under Section 203 of the Investment Advisers Act of 1940.
8
<PAGE>
COMPENSATION OF DIRECTORS
FEES AND DEFERRALS
The compensation of each non-employee director is a retainer fee of $36,000 per
year plus fees of $1,500 for each Board, Committee or other meeting attended.
Directors may elect to defer receipt of all or part of their remuneration until
a later date under a Deferred Compensation Plan, at which time the director will
be paid in cash equal to (1) the cash amount deferred plus interest at the
higher of 6% per annum or the yield of U.S. Treasury bills or (2) the value at
the time of payment of units equivalent to the value of Company common stock
credited to the director's account at the time of each deferral, plus dividend
equivalents. In addition, there is a compulsory portion to the Deferred
Compensation Plan. Under this, each non-employee director, 54 years or older, is
credited with 300 common stock equivalent units each year which remain in the
Plan until death, disability or retirement. The common stock units held in each
non-employee director's account are credited with dividend equivalents. Upon
retirement, the amounts are paid in cash. Employees of the Company who are also
directors receive no compensation for services as directors or for attendance at
Board or Committee meetings.
STOCK PLAN
Presently, under the Non-Employee Directors Restricted Stock Plan, awards of
2,100 shares of common stock are made upon the election or re-election of a
director to a full three-year term, and pro-rata awards are made upon the
appointment of a non-employee director to fill an unexpired term. Awards made in
1998 were 2,100 shares each for Class I directors. Directors receive dividend
payments represented by the shares awarded under the Restricted Stock Plan at
$0.25 per share per quarter.
OTHER
As part of its overall program to promote charitable giving to education and
assist corporate recruiting and research efforts, the Company has established a
directors' planned gift program funded by life insurance policies on all
directors. Upon the death of an individual director, the Company will donate $1
million over a ten-year period to one or more qualifying universities or
colleges recommended by the individual director, and the Company will be
reimbursed by life insurance proceeds. Individual directors derive no financial
benefit from this program since charitable deductions accrue solely to the
Company. The program does not result in any material cost to the Company.
Further, three of the non-employee directors of the Company served for three
months as directors of IP Forest Resources Company ("IPFR"), a wholly-owned
subsidiary which acted as the managing general partner of IP Timberlands, Ltd.,
a New York Stock Exchange-listed limited partnership. As such, each of the three
non-employee directors received a monthly retainer fee of $583.33 plus a fee of
$1,500 for each IPFR Board and Committee meeting attended. These fees were paid
by IPFR. The public limited partnership interests were redeemed in March 1998.
At that time, the three Company directors resigned from the IPFR board as it
ceased to be a public company. There were
9
<PAGE>
two meetings of the Board and one Committee meeting in 1998.
INDEMNIFICATION INSURANCE AND CONTRACTS
The Company provides liability insurance for the Company's directors and all
elected officers, as well as contractual arrangements with directors and certain
officers of the Company, agreeing to compensate them for costs and liabilities
incurred in actions brought against them while acting as directors or officers.
On June 15, 1998, the Company amended its policies with Federal Insurance
Company, National Union Insurance Company and Zurich-American Insurance Company
at a current annual period cost aggregating $600,000, such policies expiring on
June 15, 1999. No monies have been paid under such policies by the carrier or by
the Company under the contractual arrangements.
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<PAGE>
MATTERS TO BE CONSIDERED AT THE MEETING
1. ELECTION OF SEVEN DIRECTORS
At this meeting, two (2) directors are to be re-elected and three (3) directors
elected as Class II directors for three-year terms expiring in 2002; one (1)
director is to be elected as a Class I director for a two-year term expiring in
2001; and one (1) director is to be elected as a Class III director for a
one-year term expiring in 2000.
Each nominee is currently a director of the Company. Election requires the
affirmative vote by the holders of a plurality of outstanding common stock
voting at the annual meeting of shareholders. A plurality means that the seven
(7) nominees receiving the largest number of votes cast will be elected. Votes
which are withheld from any nominee, as well as broker non-votes, will not be
counted in such nominee's favor. Shareholders voting at the meeting may not vote
for more than the number of nominees listed in the Proxy Statement. Proxies
given to management to vote will be voted according to instructions given, but
only for nominees listed in the Proxy Statement. The term of the present Class
II directors expires at the adjournment of the 1999 annual meeting.
CLASS II DIRECTORS--TERM EXPIRING IN 2002
The five nominees for election at this meeting as Class II directors are Samir
G. Gibara, James A. Henderson, Jane C. Pfeiffer, Jeremiah J. Sheehan and C.
Wesley Smith and are identified below:
11
<PAGE>
[PHOTO] SAMIR G. GIBARA, 59, chairman of the board, chief
executive officer and president of The Goodyear Tire & Rubber
Company since 1996. Prior to that time he served in various
managerial posts and became vice president of finance and chief financial
officer in 1992. He was elected president and chief operating officer in 1995.
He is on the board of The Goodyear Tire and Rubber Company, and is a member of
the Business Roundtable.
Director since March 9, 1999
[PHOTO] JAMES A. HENDERSON, 64, chairman and chief executive
officer of Cummins Engine Company, Inc. He joined Cummins in
1964 and became executive vice president in 1971, president
and chief operating officer in 1977 and president and chief
executive officer in 1994. He was elected to his present position in 1995. He is
a director of Ameritech Corporation, Rohm and Haas Company, Ryerson Tull, Inc.
and Landmark Communications, Inc. He is also a member of The Business Roundtable
and The Business Council.
Director since February 1, 1999
[PHOTO] JANE C. PFEIFFER, 66, management consultant. She is a
director of Ashland, Inc., J.C. Penney Company, Inc., and The
Mutual Life Insurance Company of New York. She is a trustee of
The Conference Board, the University of Notre Dame and the
Overseas Development Council and a member of The Council on Foreign Relations.
Director since June 14, 1977
JEREMIAH J. SHEEHAN, 60, chairman of the board and chief
executive officer of Reynolds Metals Company since 1996. Prior
to that he was president and chief operating officer from 1994
until 1996. He is a director of Reynolds Metals Company,
Federal Reserve Bank of Richmond and Universal Corporation.
Director since May 4, 1999
[PHOTO] C. WESLEY SMITH, 59, executive vice
president--operating group of International Paper since 1998.
Prior thereto, he was executive vice president printing papers
from 1992 and president of International Paper Europe from
1989 to 1992.
Director since December 12, 1995
12
<PAGE>
CLASS I DIRECTOR--TERM EXPIRING IN 2001.
The one nominee for election at this meeting as a Class I director is W. Craig
McClelland and is identified below:
[PHOTO] W. CRAIG MCCLELLAND, 64, former chairman of the board
and chief executive officer of Union Camp Corporation until
April 1999. Previously he served as president and chief
operating officer from 1989 to 1994 and executive vice president from 1988. He
is a director of Allegheny Teledyne, Inc. and PNC Financial Corporation.
Director since May 4, 1999
CLASS III DIRECTOR--TERM EXPIRING IN 2000
The one nominee for election at this meeting as a Class III director is Robert
D. Kennedy and is identified below:
[PHOTO] ROBERT D. KENNEDY, 66, former chairman of the board
and chief executive officer of Union Carbide Corporation. He
is on the board of Union Carbide Corporation, Kmart
Corporation, LionOre Mining International Ltd., Sunoco Inc.,
and Chairman of UCAR International, Inc.
Director since May 4, 1999
DIRECTORS NOT UP FOR ELECTION
CLASS I DIRECTORS--TERM EXPIRING IN 2001
None of these directors are to be elected at the 1999 annual meeting, but were
elected until the 2001 annual meeting.
[PHOTO] PETER I. BIJUR, 56, chairman and chief executive
officer of Texaco Inc. He joined Texaco in 1966 progressing
through a series of positions and was elected senior vice
president in May of 1992. He became vice chairman of the board
in January 1996, and was elected to his current position in July 1996. He is
also a director of the American Petroleum Institute and a member of The Business
Council, The Business Roundtable, The Conference Board, the National Petroleum
Council, and the Council on Foreign Relations.
Director since July 8, 1997
[PHOTO] JOHN T. DILLON, 60, chairman of the board and chief
executive officer of International Paper since 1996. Prior to
that he was executive vice president-packaging from 1987 to
1995 when he assumed the position of president and chief
operating officer. He is also a director of Caterpillar Inc. He is chairman of
the board of The National Council on Economic Education and a member of the
Business Roundtable.
Director since March 1, 1991
[PHOTO] JOHN R. KENNEDY, 68, retired president and chief
executive officer of Federal Paper Board Company, Inc. from
1975 to 1996. He is a
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<PAGE>
director of DeVlieg Bullard, Inc., Chase Brass Industries,
Inc., Holnam, Inc., Pioneer Companies, Inc. and Spartech Corporation. He is
director and chairman of the board of Georgetown University, on the board of
governors of the United Nations Association of the United States of America, and
one of the directors for the Foreign Policy Association.
Director since March 12, 1996
CLASS III DIRECTORS--TERM EXPIRING IN 2000
None of these directors are to be elected at the 1999 annual meeting, but were
elected until the 2000 annual meeting.
[PHOTO] ROBERT J. EATON, 59, chairman of the board of
management of DaimlerChrysler AG. He joined Chrysler in 1992,
as vice chairman and chief operating officer and a member of
the board. Prior to joining Chrysler, his 29-year career with
General Motors included various management positions, the most recent being
president of General Motors Europe (1988 to 1992). He is a fellow of both the
Society of Automotive Engineers and the Engineering Society of Detroit and
chairman of the National Academy of Engineering. He is a member of The Business
Council and The Business Roundtable. He also is a member of the President's
Advisory Committee on Trade Policy and Negotiations and serves as a director of
The Economic Strategy Institute and the U.S./Japan Business Council.
Director since January 10, 1995
[PHOTO] JOHN A. GEORGES, 68, retired chairman and chief
executive officer of International Paper. He was elected chief
executive officer in 1984 and became chairman and chief
executive officer in 1985. He was senior managing director of
Windward Capital Partners, L.P. during 1996 and 1997. He is a director of AK
Steel Holding Corporation, Ryder Systems, Inc., and Warner-Lambert Company. He
is a member of The Business Council, The Trilateral Commission, and Bankers
Trust European Advisory Board. He is a trustee of the Public Policy Institute of
the Business Council of New York State and board member of the University of
Illinois Foundation.
Director since February 1, 1980
[PHOTO] DONALD F. MCHENRY, 62, Distinguished Professor of
Diplomacy at Georgetown University since 1981. He is president
of the IRC Group LLC and a director of AT&T, The Coca-Cola
Company, Bank of Boston Corporation, the First National Bank of Boston,
SmithKline Beecham plc, and the Institute for International Economics. He is a
trustee of The Brookings Institution, The Mayo Foundation, and Columbia
University; and chairman of the board of Africare.
Director since April 14, 1981
[PHOTO] PATRICK F. NOONAN, 56, chairman of the board of The
Conservation Fund (a nonprofit organization dedicated to
conserving America's land
14
<PAGE>
and water resources) and previously, also its chief executive
officer since 1985. Prior to that he was president of The Nature Conservancy. He
is a trustee of The National Geographic Society. He is also a director of
Ashland, Inc., the Fund for Government Investors, Saul Centers REIT, and the
American Gas Association Index Fund. He is a member of the Board of Visitors of
Duke University School of the Environment.
Director since December 14, 1993
[PHOTO] CHARLES R. SHOEMATE, 59, chairman, president and
chief executive officer of Bestfoods. He was elected president
and a member of its board of directors in 1988, chief
executive officer in August 1990 and chairman in September
1990. He joined Bestfoods, formerly CPC International, in 1962 and progressed
through a variety of positions in manufacturing, finance and business
management. He is a director of CIGNA Corporation, Texaco, Inc., and the Grocery
Manufacturers of America, Inc. He is a member of the Business Roundtable and
chairman of The Conference Board.
Director since November 1, 1994
2. APPROVAL OF AMENDMENTS TO THE LONG-TERM INCENTIVE COMPENSATION PLAN
The Long-Term Incentive Compensation Plan was approved by shareholders in 1989
and amended by them in 1994 (the "Plan"). The Plan is administered by the
Management Development and Compensation Committee of the Board (the "Committee")
which is composed solely of non-employee directors. It provides for
performance-related incentives to executive personnel in the form of stock
options, performance awards and restrictive stock awards. The Board of Directors
believes that the Plan has promoted the Company's interests and those of
shareholders by providing opportunities to attract, retain, and motivate key
employees through these awards and that the Company should continue to utilize
such awards as part of a competitive compensation program and as a means of
encouraging its executives to own stock in the Company.
In 1994, we reserved an aggregate of the following for issuance under the Plan
(adjusted for the two-for-one stock split in 1995):
- 10,000,000 shares newly authorized for use
- 4,600,000 shares carried forward from previously authorized amounts
- shares forfeited, exchanged as not delivered under the Plan
- shares purchased in the open market with stock option exercise proceeds
During the last five years, partially through acquisitions, the number of
employees eligible to participate in the Plan has increased. In addition, with
the merger of Union Camp
15
<PAGE>
Corporation, the Company will expand its employee base to nearly 100,000 from
80,000. Accordingly, the number of shares originally reserved will not be
sufficient for the Plan. There are presently 3,700,000 shares left for Plan use
under the 14,600,000 shares specifically authorized in 1994. The proposed
amendment to the Plan would increase that number by authorizing an additional
25,500,000 under the Plan. Of this total, the Plan is also being amended so that
no more than 3,000,000 shares could be issued as restricted stock. The
amendments should have no effect on the administration, operation or
distributions under the Plan, other than providing the Company with additional
shares for use under it.
We are asking shareholders to approve these amendments, as described above. We
need the affirmative vote of a majority of the shares voting on this proposal in
order to do so. Abstentions and broker non-votes will not be counted as being
voted on this proposal.
The language of the Plan showing the amended language is attached as Appendix A.
Shareholders should read this Appendix for the exact language of the changes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
3. RE-AFFIRMATION OF PERFORMANCE GOALS
Under Section 162(m) of the Internal Revenue Code of 1986, the Company cannot
deduct certain compensation in excess of $1 million paid to the named executive
officers. However, certain performance-based compensation is not subject to this
limitation if among other things, the material terms of such compensation,
including the maximum amounts payable to any individual and performance goals to
be used, are approved by shareholders.
In 1994, shareholders approved the amended Long-Term Incentive Compensation Plan
to satisfy the above requirements for full deductibility of compensation paid
under the performance share award component of that Plan. The amended Plan
provides that the performance goals include any one or more of the following
measurements of performance, including:
- earnings per share
- return on equity
- return on assets
- growth in earnings
- growth in sales revenue
- shareholder returns.
These can be measured in comparison with the performance of a group of peer
companies selected by the Committee or based on the Company's results. The
Committee must establish the applicable performance goals within the time period
required for the compensation to qualify as performance-based under Section
162(m). In addition, the ability of the Committee to adjust the earned
performance share awards, if such adjustments are offset by reductions in other
awards made under other Company plans, must also be eliminated for qualification
of this compensation under Section 162(m). Steps will be taken to accomplish
this before the next performance share awards are made in late 1999.
The tax code requires that shareholders re-affirm these goals every five years.
Proposal 3 seeks shareholder re-affirmation of the existing performance goals,
which will carry these standards through the next five years of the Plan. We
need the affirmative vote of a majority of the shares voting on this proposal in
order to re-affirm their existing goals. Abstentions and broker non-votes will
not be counted as having voted on this proposal.
16
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
4.APPROVAL OF AMENDMENT TO THE RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
The Restricted Stock Plan for Non-Employee Directors was approved by
shareholders in 1988 and amended by them in 1992 (the "Stock Plan"). Under the
Stock Plan, awards of 2,100 shares of common stock are made upon the election or
reelection of a director to a full three-year term, and pro-rata awards are made
upon the appointment of a non-employee director to fill an unexpired term.
The Stock Plan was adopted to provide a part of directors' compensation in
Company stock. Upon adoption in 1988, the Stock Plan provided for 100,000 shares
to be issued under it (adjusted for the two-for-one stock split in 1995). Over
the past eleven years, approximately 87,000 shares have been issued under the
Stock Plan.
The Company believes it is in the best interest of shareholders to more closely
align directors' interests with those of the Company's shareholders by
increasing the percentage of directors' compensation paid in Company stock.
Accordingly, all increases in such compensation since 1993 have been in stock.
The proposed amendment to the Stock Plan would increase the original 100,000
shares to 250,000. We are asking shareholders to approve this amendment. We need
the affirmative vote of a majority of the shares voting on this proposal in
order to do so. Abstentions and broker non-votes will not be counted as being
voted on this proposal.
The amendment should have no effect on the administration, operation or
distribution under the Stock Plan, other than providing the Company with
additional shares for use under it. The language of the Stock Plan showing the
amended language is attached as Appendix B. Shareholders should read this
Appendix for the exact language of the change.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
5. RATIFICATION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITOR
Arthur Andersen LLP has been our independent public accountant for many years.
The Audit Committee and the Board considered the qualifications of Arthur
Andersen LLP and have appointed it as independent auditor of the consolidated
financial statements of the Company for 1999. The Committee reviewed its
performance in prior years, as well as its reputation for integrity and
competence in the fields of accounting and auditing. The Committee has expressed
its satisfaction with Arthur Andersen LLP in all of these respects. The
Committee's review also included inquiry concerning litigation involving Arthur
Andersen LLP and the existence of any investigations by the Securities and
Exchange Commission into the financial reporting practices of the companies
audited by it. In this respect, the Committee concluded that the ability of
Arthur Andersen LLP to perform services for the Company is in no way adversely
affected by any such investigation or litigation. A representative of Arthur
Andersen LLP will be present at the annual meeting to respond to appropriate
questions and to make a statement if he or she desires.
We are asking shareholders to ratify the Board's appointment of Arthur Andersen
17
<PAGE>
LLP as independent auditor for 1999. We need the affirmative vote of a majority
of the shares voting on this proposal in order to ratify the appointment.
Abstentions and broker non-votes will not be counted as having voted on this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITOR FOR 1999.
REPORT OF THE MANAGEMENT DEVELOPMENT
AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
As of December 31, 1998, the Management Development and Compensation Committee
(the "Committee") consisted of six outside directors: Peter I. Bijur, Robert J.
Eaton, Thomas C. Graham, Donald F. McHenry, Edmund T. Pratt, Jr. and Charles R.
Shoemate. Mr. Willard C. Butcher, Mr. Thomas C. Graham and Mr. Edmund T. Pratt,
Jr. served on the Committee during 1998 and retired on October 25, 1998, January
26, 1999 and February 22, 1999, respectively. Mr. Eaton is chairman. The
Committee met six times in 1998 with a 97% attendance record. The chairman and
chief executive officer of the Company was not present during any discussion of
his compensation. Effective February 1, 1999, James A. Henderson was appointed
as an outside director, bringing the Committee to five members.
GENERAL
Total compensation received by the named executive officers consists of salary,
cash bonus, stock options and restricted stock. The total compensation has been
designed to attract the most qualified talent, motivate them to reach their
highest level of achievement, reward sustained superior performance and retain
those senior managers whose competencies are prerequisite to shareholder value
appreciating over the long term. The cash bonus and long-term incentives
introduce considerable risk in the total executive compensation package, since
the value of these components may vary significantly from year to year based on
Company performance, individual performance and Company stock price.
The Committee periodically reviews each component of the Company's executive
compensation program to ensure that pay levels and incentive opportunities are
competitive and that incentive opportunities are linked to Company performance.
The Committee relates total compensation levels for the Company's executives to
the compensation paid at a select group of comparator companies. The Committee
reviews and approves the selection of companies used for compensation
comparisons. International Paper also uses independent compensation consulting
firms to advise the Committee. In 1998, the comprehensive pay study of
incentive-eligible positions originally conducted in 1997, was updated and
expanded, and included a cross section of 39 manufacturing companies. The 39
manufacturing companies included in the pay study are in industries that are
close in size ($22 billion average revenue) and manufacturing complexity to
International Paper and compete directly with International Paper for executive
talent. The Company's compensation levels for each component of pay were
18
<PAGE>
compared to the median of the comparator group's competitive pay.
The Company's Management Incentive Plan (MIP) was amended in 1998 and directly
links payment of an annual cash bonus to the achievement of (1) the Company's
return on investment versus budget; (2) the Company's return on investment
compared to Peer Paper Group's (eight companies which comprise the Peer Line of
the Performance Graphs on pages 21 and 22); and (3) predetermined targets of
qualitative nonfinancial performance factors, such as customer focus, people
development, safety and environment and quality. The Plan was amended to
increase emphasis on the Company's return on investment compared to the Peer
Paper Group's while maintaining significant focus on the Company's return on
investment versus budget. Performance in 1998 against financial targets was
above threshold but did not achieve 100% of goal; similarly, performance
compared to nonfinancial targets was above threshold but did not achieve 100% of
the goals for 1998. Accordingly, the bonus awards as set out on pages 23 and 24
were earned in 1998.
The Company's Long-Term Incentive Compensation Plan and amendments, which were
approved by the shareholders in 1989 and 1994, respectively, provide for awards
of stock options and restricted stock in the form of performance shares which
are made in amounts which the Committee determines to be competitive based on
the study described above. Stock options are granted at or above fair market
value at the time of the award and are restricted for four years. Contingent
awards of performance shares are made in December of the year preceding a
five-year Award Period. At the end of the five-year Award Period, the number of
shares earned is determined by financial performance which the Committee
measures by comparing the Company's and Peer Paper Group's and weighing equally,
the five-year average return on equity and earnings per share. If the threshold
level of performance is not attained, no shares are earned. Above the threshold,
the contingent award is reduced if the target goal is not met or supplemented if
the target goal is exceeded. Adjustments in the number of shares earned can be
made by the Committee with any such adjustments offset by reductions in other
awards made under the Company's Long-Term Incentive Compensation Plan or other
Company bonus awards. Payouts of earned performance shares are made in Company
stock at the end of the five-year Award Period. One half of the shares earned is
mandatorily deferred for an additional three years, and payout is subject to the
executive's continued employment throughout that period.
From time to time executive continuity awards are made with long-term vesting
requirements which are designed to encourage retention of a small number of
senior executives designated by the Committee. The size of an award, and any
adjustments, is determined by the Committee to reflect an executive's level of
responsibility and individual performance. As provided by the Company's
Long-Term Incentive Compensation Plan, a continuity award may consist of
restricted stock or a tandem grant of restricted stock together with a related
non-qualified stock option which is granted at fair market value and restricted
until a specified age. If the stock option is exercised, then the related
restricted shares are canceled; if any portion of the stock option is not
exercised by the date the continuity award vests, then the less valuable
component of the tandem award is canceled.
The Committee has considered the provisions of the Omnibus Budget Reconciliation
Act of 1993 which limit deductibility of compensation paid to named executive
officers which exceeds $1 million. The Committee endorsed
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<PAGE>
amendments to the Company's Long-Term Incentive Compensation Plan in 1994 to
make certain sections of the Plan compatible with those provisions, while
maintaining the Committee's flexibility in the Company's Management Incentive
Plan to exercise business judgment in determining awards to take account of
business conditions or the performance of individual executives. In 1998, the
Committee recognized that a portion of Mr. Dillon's total current compensation
was above $1 million, which means that that portion does not qualify under those
provisions and will not be tax deductible by the Company.
THE 1998 EXECUTIVE OFFICERS' COMPENSATION
The Committee approved merit salary increases for all named executive officers
based on competitiveness of the executives' pay. Such salary increases were made
to reflect the individual performance of named executive officers including Mr.
Dillon's. In April 1998, Mr. Dillon's salary was increased to $990,000, which is
below the median base salary level for CEO's in the group of surveyed companies
referred to above. Salaries paid to the named officers in 1998, were
competitively positioned from below to slightly above the median of the survey
companies.
MIP awards for the named executive officers in 1998 were determined by the
Committee after review of Company and personal performance compared to
predetermined 1998 financial and nonfinancial goals. All named executive
officers' MIP awards decreased compared to 1997.
The performance share guidelines described above were used by the Committee to
determine contingent performance share awards in December 1998 to the named
executive officers for the 1999-2003 Award Period. Payout of earned shares in
1998 for the 1993-1997 Award Period was determined by the Committee in
accordance with the guidelines and adjustment process described above. The
pretax values of Mr. Dillon's performance share awards in 1998 were: $1,467,900
in contingent restricted stock for the 1999-2003 Award Period (the actual payout
of this award will not be determined until 2004); $480,177 in deferred
restricted stock for the 1993-1997 Award Period; and $480,177 in earned shares
for the 1993-1997 Award Period. The shares earned for the 1993-1997 Award Period
reflect Company performance and adjustments resulting in cancellation of stock
options valued at approximately 41% of such performance share awards.
Payout of earned shares in 1999 for the 1994-1998 Award Period was determined by
the Committee in accordance with the guidelines and adjustment process described
above. The pretax values of the payouts of Mr. Dillon's performance share award
for the 1994-1998 Award Period were $421,051 in deferred restricted stock and
$421,051 in earned shares. These shares reflect Company performance and
adjustments to stock options valued at approximately 49% of such performance
share awards.
The Committee granted stock options in 1998 based on earlier described
competitive surveys of senior managers' total compensation packages, without
consideration of the amount of stock options already held by named executive
officers. Mr. Dillon's 1998 stock option award was 85,000 shares; his 1997 stock
option award was 104,000 shares reflecting his promotion to chief executive
officer; and his 1996 stock option award was 26,000 shares.
In 1998, no named executive officers were granted continuity awards.
20
<PAGE>
THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
Peter I. Bijur
Robert J. Eaton, chairman
James A. Henderson
Donald F. McHenry
Charles R. Shoemate
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer or other employee of the Company served as a member of the
Committee. No Company executive officer or employee served as a member of the
compensation committee on any company board where an executive officer of such
company is a member of the Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors among others, to file reports of ownership and
changes in ownership of such securities with the Securities Exchange Commission
and the New York Stock Exchange. Copies of these reports must also be furnished
to the Company. Based solely upon a review of the copies of the forms filed
under Section 16(a) and furnished to the Company, or written representations
from reporting persons, the Company believes that all filing requirements
applicable to its executive officers and directors were complied with during
1998, except that John A. Georges, a director, inadvertently failed to file a
report reflecting his gifts of stock to three universities in December 1997, but
made a late filing of such report immediately upon discovery of the oversight.
21
<PAGE>
PERFORMANCE GRAPHS
The following charts compare a $100 investment in International Paper stock with
a similar investment in a peer group of eight key competitor companies and the
S&P 500. The charts portray total nominal return, 1993-1998 and 1988-1998
assuming reinvestment of dividends. The Company has presented information
pertaining to total shareholder return over two different time periods since all
holders of the common stock did not acquire their investment in International
Paper on the same date. The Company believes a presentation in this format more
accurately reflects the financial return provided to the holders of its common
stock which may not be evident if only one time period was highlighted.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<S> <C> <C> <C>
5 YEARS ENDED DECEMBER 31, 1998*
Dollars
International Paper S&P 500 Index Peer Group**
1993 100 100 100
1994 114 101 103
1995 117 139 112
1996 129 171 121
1997 140 228 131
1998 149 294 138
</TABLE>
Assumes $100 invested on December 31, 1993.
* Total return assumes reinvestment of dividends.
** Includes Boise Cascade, Champion, Georgia Pacific, Mead, Smurfit-Stone
Container (includes only Stone Container prior to 11/19/98), Union Camp,
Westvaco and Weyerhaeuser.
21
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN*
<S> <C> <C> <C>
Dollars
International Paper S&P 500 Index Peer Group**
1988 100 100 100
1989 126 132 110
1990 123 127 89
1991 167 166 121
1992 161 179 135
1993 168 197 153
1994 191 200 158
1995 197 274 172
1996 216 338 186
1997 235 450 201
1998 250 579 212
</TABLE>
Assumes $100 invested on December 31, 1988.
* Total return assumes reinvestment of dividends.
** Includes Boise Cascade, Champion, Georgia Pacific, Mead, Smurfit-Stone
Container (includes only Stone Container prior to 11/19/98), Union Camp,
Westvaco and Weyerhaeuser.
22
<PAGE>
ADDITIONAL INFORMATION
REGARDING EXECUTIVE COMPENSATION
COMPENSATION
The compensation of the Company's executive officers is approved by the
Committee except for the compensation of the officer-directors. Their
compensation is first recommended by the Committee and then approved by the
Board of Directors.
The following tables set forth information with respect to the five most highly
compensated executive officers of the Company for the years 1996-1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION CONTINGENT AWARDS
---------------------------------- ---------------------
(a) (b) (c) (d) (e) (f) (g) (h)
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY BONUS COMPENSATION AWARD OPTIONS COMPENSATION
NAME AND POSITION YEAR ($) (1) ($) (2) ($) (3) ($) (4) (#) (5) ($) (6)
<S> <C> <C> <C> <C> <C> <C> <C>
John T. Dillon as 1998 $ 967,500 $ 775,000 $ 0 $1,467,900 160,000 $ 246,264
Chief Executive Officer 1997 $ 862,500 $ 850,000 $ 0 $1,421,001 160,300 $ 153,497
1996 $ 712,500 $ 0 $ 0 $3,400,911 26,000 $ 172,397
C. Wesley Smith as 1998 $ 502,083 $ 260,000 $ 0 $ 356,927 25,000 $ 155,637
Executive Vice President 1997 $ 465,000 $ 310,000 $ 0 $ 345,539 72,900 $ 97,052
1996 $ 429,667 $ 0 $ 0 $ 340,423 25,000 $ 114,086
James P. Melican as 1998 $ 510,000 $ 235,000 $ 0 $ 326,608 22,000 $ 109,824
Executive Vice President 1997 $ 493,333 $ 275,000 $ 0 $ 316,204 96,600 $ 93,834
1996 $ 471,667 $ 0 $ 0 $ 311,518 15,400 $ 111,882
David W. Oskin as 1998 $ 447,917 $ 240,000 $ 0 $ 326,608 50,800 $ 54,616
Executive Vice President 1997 $ 422,917 $ 275,000 $ 490,491 $ 316,204 57,500 $ 51,328
1996 $ 397,917 $ 0 $ 0 $ 745,974 50,800 $ 143,199
Milan J. Turk as 1998 $ 375,000 $ 205,000 $ 0 $ 298,823 17,000 $ 82,371
Executive Vice President 1997 $ 355,000 $ 250,000 $ 0 $ 289,301 74,200 $ 58,088
1996 $ 332,083 $ 0 $ 0 $1,137,962 12,000 $ 68,842
</TABLE>
(1) Salary paid in 1998 including amounts deferred pursuant to Section 401(K) of
the Internal Revenue Code or pursuant to unfunded deferral arrangements.
(2) Management Incentive Plan awards paid in 1999 and 1998 attributable to 1998
and 1997 respectively, including amounts deferred pursuant to Section 401(K)
of the Internal Revenue Code or pursuant to deferral arrangements reported
in the year earned. No awards were paid for 1996.
(3) Includes reimbursement plus tax gross-up for interest paid by Mr. Oskin on a
third party loan undertaken in connection with an expatriate assignment from
1993 to 1995 with an affiliate, later a subsidiary.
23
<PAGE>
(4) Represents (a) 100% of the value of gross target restricted performance
shares contingently awarded in 1998 for the 1999-2003 Award Period, in 1997
for the 1998-2002 Award Period, and in 1996 for the 1997-2001 Award Period
which are earned if the target goal is met for an Award Period. The awards
are reduced if the goal is not met, or entirely forfeited if a predetermined
threshold goal is not met. 150% of the value of the target restricted
performance shares are earned if the target goal is exceeded by a
predetermined percentage; (b) 100% of the value of incremental target awards
for prior periods made upon promotion, subject to the same contingencies;
and (c) the value of continuity awards of $840,000 in 1996 for Mr. Dillon;
$336,000 in 1996 for Mr. Oskin; and $648,000 in 1996 for Mr. Turk. The
number and dollar value of restricted stock holdings at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
RESTRICTED
SHARES DOLLAR VALUE
<S> <C> <C>
Mr. Dillon......................................... 261,880 $ 11,735,498
Mr. Smith.......................................... 100,474 4,502,491
Mr. Melican........................................ 98,188 4,400,050
Mr. Oskin.......................................... 96,356 4,317,953
Mr. Turk........................................... 93,083 4,171,282
</TABLE>
------------------------
These numbers include the restricted stock portion of the tandem awards of
restricted stock/options made to the respective individuals under continuity
awards. Dividends are paid on restricted shares.
(5) Includes replacement options if applicable. These figures do not include the
tandem option awards made as part of the continuity awards, insofar as the
awards are characterized as restricted stock awards. Such tandem options
were for 100,000 shares for Mr. Dillon in 1996; 40,000 shares for Mr. Oskin
in 1996; and 80,000 shares for Mr. Turk in 1996.
(6) 1998 totals represent Company contributions to the Salaried Savings Plan and
Unfunded Savings Plan, cost of group life, premium payments grossed up for
taxes for the Executive Supplemental Insurance Plan (ESIP), accruals for
ESIP lump-sum dividend payments and reimbursement for relocation as follows:
<TABLE>
<CAPTION>
DILLON SMITH MELICAN OSKIN TURK
<S> <C> <C> <C> <C> <C>
SSP/USP............... $ 87,240 $ 38,980 $ 37,680 $ 7,680 $ 30,001
Group Life............ 26,465 13,065 13,350 6,399 16,938
ESIP.................. 111,713 48,639 38,471 31,165 35,432
ESIP Accruals......... 20,846 17,221 20,323 9,372 0
Relocation............ 0 37,732 0 0 0
</TABLE>
24
<PAGE>
The table below sets out information on the option grants made in 1998 to the
named executive officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN 1998
INDIVIDUAL GRANTS
(a) (b) (c) (d) (e) (f)
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE OR GRANT DATE
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION VALUE
NAME AND POSITION (#) (1) IN 1998 ($/SH) DATE ($) (2)
<S> <C> <C> <C> <C> <C>
John T. Dillon as 16,000(4) 0.47% $ 55.1880 01/12/03 $ 175,370
Chief Executive Officer 16,000(4) 0.47% $ 55.1880 01/11/04 $ 175,370
17,000(4) 0.49% $ 55.1880 01/10/05 $ 186,330
26,000(4) 0.76% $ 55.1880 01/09/06 $ 284,976
42,579(3) 1.24% $ 41.9380 01/13/08 $ 493,716
42,421(3) 1.23% $ 51.0000 04/14/08 $ 598,174
C. Wesley Smith as 7,179(3) 0.21% $ 41.9380 01/13/08 $ 83,243
Executive Vice President 17,821(3) 0.52% $ 51.0000 04/14/08 $ 251,292
James P. Melican as 5,245(3) 0.15% $ 41.9380 01/13/08 $ 60,817
Executive Vice President 16,755(3) 0.49% $ 51.0000 04/14/08 $ 236,261
David W. Oskin as 9,600(4) 0.28% $ 51.8130 01/09/00 $ 86,460
Executive Vice President 9,600(4) 0.28% $ 51.8130 01/08/01 $ 98,787
9,600(4) 0.28% $ 51.8130 01/11/04 $ 98,787
3,328(3) 0.10% $ 41.9380 01/13/08 $ 38,589
18,672(3) 0.54% $ 51.0000 04/14/08 $ 263,292
Milan J. Turk as 2,552(3) 0.07% $ 41.9380 01/13/08 $ 29,591
Executive Vice President 14,448(3) 0.42% $ 51.0000 04/14/08 $ 203,730
</TABLE>
(1) Each option granted may be replaced upon exercise. This means that a new
option is granted for the same number of shares as is exercised, with the
then current market value becoming the new exercise price. The replacement
option does not extend the term of the original option. Options may not be
replaced more than three times. Original options are indicated by "(3)" and
replacement options by "(4)". These numbers do not include any options
granted as part of the tandem awards of restricted stock/options made as
continuity awards in 1998. The restricted stock is reported as part of the
total holdings of the respective individuals under footnote 3 to the Summary
Compensation Table.
(2) Grant date value is based on Black-Scholes option pricing model adapted for
use in valuing stock options. The real value of the options in this table
depends upon the actual performance of the Company's stock during the
applicable period and upon when they are exercised. The Company believes
that no model accurately predicts the future price of International Paper's
stock or places an accurate present value on stock options. The grant date
values were determined based upon the following assumptions:
<TABLE>
<CAPTION>
ORIGINAL (3) REPLACEMENT (4)
------------- -----------------
<S> <C> <C>
Expected volatility.............................................. 31.09% 31.09%
Risk-free rate of return......................................... 5.25% 5.51%
Dividend yield................................................... 2.19% 2.17%
Expected term (years)............................................ 4.37 2.12
</TABLE>
25
<PAGE>
The table below sets out the information on options exercised and options
outstanding:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION VALUES
(a) (b) (c) (d) (e) (f) (g)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT
SHARES VALUE REALIZED($) OPTIONS AT 12/31/98(#)(5) 12/31/98($)(5)
ACQUIRED ON ---------------------- ------------------------- -------------------------
EXERCISE AGGREGATE ANNUALIZED RESTRICTED UNRESTRICTED RESTRICTED
NAME AND POSITION (#)(1) (1) (2) UNRESTRICTED (3) (4) (3)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
John T. Dillon as 87,300 $1,199,944 $431,329 88,300 234,737 $ 0 $364,672
Chief Executive Officer
C. Wesley Smith as 0 $ 0 $ 0 58,800 90,900 $127,450 $291,733
Executive Vice President
James P. Melican as 0 $ 0 $ 0 81,700 82,500 $123,200 $268,011
Executive Vice President
David W. Oskin as 28,800 $ 379,844 $145,397 56,600 79,100 $ 34,800 $242,312
Executive Vice President
Milan J. Turk as 0 $ 0 $ 0 42,000 65,000 $156,275 $ 40,275
Executive Vice President
</TABLE>
(1) All of Mr. Dillon's exercises were made by stock "swaps". Mr. Dillon used
69,569 of his own shares to exercise and pay taxes on these 87,300
options, resulting in a net increase in his Company ownership of 17,731
shares.
(2) Represents the aggregate incremental value realized divided by the number
of years the option was held prior to exercise.
(3) All options are exercisable under the plan upon grant; however, columns
(e) and (g) indicate the number and value of options, the underlying
shares of which, while exercisable, cannot be sold or are otherwise
restricted.
(4) Total value of options (market value minus exercise price) based on fair
market value of Company stock of $44.8125, as of December 31, 1998.
(5) Options granted as part of the tandem awards of restricted stock/options
made as continuity awards are not included.
26
<PAGE>
RETIREMENT BENEFITS
"Pensionable Remuneration" means salary, cash bonus and compensation deferred
under the Unfunded Savings Plan or awards deferred under the MIP.
The following table shows the total estimated annual pension benefits payable
under the Company's qualified and supplementary retirement plans upon retirement
at age 65, calculated on a straight life annuity basis and reduced by a Social
Security offset:
<TABLE>
<CAPTION>
CREDITABLE YEARS OF SERVICE
PENSIONABLE ---------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 100,000 $ 124,766 $ 187,149 $ 191,948 $ 191,948 $ 192,348 $ 225,748
$ 600,000 $ 150,000 $ 189,766 $ 284,649 $ 291,948 $ 291,948 $ 292,548 $ 342,648
$ 800,000 $ 200,000 $ 254,766 $ 382,149 $ 391,948 $ 391,948 $ 392,748 $ 459,548
$1,000,000 $ 250,000 $ 319,766 $ 479,649 $ 491,948 $ 491,948 $ 492,948 $ 576,448
$1,500,000 $ 375,000 $ 482,266 $ 723,399 $ 741,948 $ 741,948 $ 743,448 $ 868,698
$2,000,000 $ 500,000 $ 644,766 $ 967,149 $ 991,948 $ 991,948 $ 993,948 $1,160,948
</TABLE>
Retirement benefits are payable under one or more of the following plans: a
qualified plan covering all salaried employees which provides pension benefits
based on final average earnings; a supplementary plan which provides a make-up
of qualified plan benefits limited by the imposition of statutory tax code
limitations; and a supplementary plan covering designated senior managers which
provides supplemental benefits to the qualified plan. At December 31, 1998, the
number of creditable years of service and the pensionable remuneration for the
named officers were:
<TABLE>
<CAPTION>
NAME YEARS REMUNERATION
- - ------------------------------- --------- -------------
<S> <C> <C>
Mr. Dillon..................... 31.92 $ 1,742,500
Mr. Smith...................... 18.33 $ 775,000
Mr. Melican.................... 14.92 $ 768,333
Mr. Oskin...................... 23.25 $ 697,917
Mr. Turk....................... 8.67 $ 605,000
</TABLE>
Matching the creditable years with the table above will indicate annual pension
benefits.
------------------------
TERMINATION AGREEMENTS
The Company has agreements with members of the executive officer group,
providing for payments and other benefits if there is a change of control of the
Company and the officer's employment is terminated (i) by the Company or its
successor, other than for cause, disability or retirement, or (ii) by the
officer if the chief executive officer of the Company ceases to hold that
position for reasons other than cause, retirement or disability, or if the
officer determines that by reason of adverse changes in, among other things, the
officer's authority, compensation, duties, office location or responsibilities,
the officer is unable to perform the duties and responsibilities of the position
the officer held immediately prior to the change in control. These agreements
provide that if the officer's employment terminates under the circumstances
described above, the officer will receive: (a) continuation of medical and
dental insurance coverage until age 65 or eligibility to join a comparable plan
sponsored by another employer; (b) retiree medical coverage comparable to the
Company's pre-change
27
<PAGE>
of control retiree medical plan; (c) a lump-sum payment equal to (i) his annual
salary at termination together with his most recent short-term annual incentive
compensation payment during the year preceding termination, multiplied by the
smaller of the number "three" or the number of years between the termination
date and the date he reaches age 65 and (ii) an amount necessary to offset any
special federal excise tax on all payments received under the termination
agreement.
In addition to these provisions, Mr. Dillon's agreement can be triggered by a
voluntary termination at any time within 18 months of the change in control. The
agreement provides him with the above benefits as well as (a) payment of vested
benefits under the pension plan which entitlement shall include payments made
under the agreement which constitute "compensation" under the pension plan; (b)
a lump-sum payment equal to the difference between (i) the actuarial value on
termination date of accrued vested pension benefits and (ii) the actuarial value
on termination date of what accrued pension benefits would have been if the
period and payments set out in (c)(i) and (c)(ii) below were recognized under
the pension plan; (c) a lump-sum payment equal to (i) his annual salary at
termination, (ii) the average of his short-term incentive compensation award for
three years preceding termination and (iii) the value of his average earned
award under the Performance Share Award Plan (PSA) for three years preceding
termination, multiplied by the number "four"; (d) a lump-sum payment equal to
the value of any deferred incentive compensation or PSA awards and unvested
Company matching contributions under the Salaried Savings Plan; (e) stock
options equal to the average number of options awarded during the three years
preceding termination, multiplied by the number "four", plus the extension of
each option held until the end of the normal term of such option if he had not
left the Company.
The Board requires unanimous approval at a meeting of the Management Development
and Compensation Committee, composed solely of non-employee directors, and
majority approval by the Board before any termination agreement such as those
described above is amended or entered into. The potential cost of satisfying the
payments called for under the above-described termination agreements, prior to
tax "gross up", if there had been a change in control and all of the members of
the executive officer group described in the Summary Compensation Table had been
terminated on December 31, 1998, would have been approximately $33,000,000.
In addition to the foregoing, the Long-Term Incentive Compensation Plan contains
provisions that release restrictions from stock awards and stock options for all
members of the group if there is a change of control of the Company. Also, the
Supplemental Retirement Plan for Senior Managers provides that if a change of
control of the Company occurs, pension benefits will vest immediately and the
minimum benefit will be increased from 25% to 50% of pensionable remuneration.
The Company has authorized a grantor trust under Sections 671 through 677 of the
Code in connection with the Company's benefit plans and termination agreements.
Under the grantor trust, the trustee will pay the beneficiaries of the trust the
amounts to which they are entitled under such plans and agreements subject to
claims of the Company's creditors.
28
<PAGE>
APPENDIX A
INTERNATIONAL PAPER COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN
The International Paper Company Long-Term Incentive Compensation Plan is
hereby amended to delete the words and phrases indicated by brackets, e.g.,
[omit] and to add the words and phrases indicated by italics, e.g. ADD.
1. PURPOSE AND EFFECTIVE DATE
This plan shall be known as the International Paper Company Long-Term
Incentive Compensation Plan (the "Plan"). The purpose of this Plan is to provide
incentive for senior management officers and employees of the Company and its
subsidiaries (the "Company") to improve the performance of the Company on a
long-term basis, and to attract and retain in the employ of the Company persons
of outstanding competence. The terms "subsidiary" and "subsidiaries" as used
herein shall mean corporations which are owned or controlled by International
Paper Company, directly or indirectly.
The effective date of [this] THE Plan is January 1, 1989. [Subject to
approval of this Plan by a majority of shareholders of the Company entitled to
vote on the matter at the 1994 annual meeting of shareholders certain amendments
to the Plan will also be effective.] The Plan WAS AMENDED IN 1994 BY A VOTE OF
SHAREHOLDERS.[supersedes and replaces the International Paper Company
Performance Share Plan and the International Paper Company Stock Option Plan
which were approved by the shareholders in 1983 (the "1983 Plans"). No further
contingent awards or grants of options will be made under the 1983 Plans, and
outstanding contingent awards and deferred awards under the 1983 Plans and
earlier plans will be converted to comparable awards under the provisions of
this Plan with the consent of the award holders.] SUBJECT TO THE APPROVAL OF
THIS PLAN AS AMENDED HEREBY BY A MAJORITY OF SHAREHOLDERS OF THE COMPANY
ENTITLED TO VOTE ON THE MATTER AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS,
CERTAIN CHANGES TO THE PLAN WILL ALSO BE EFFECTIVE.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a committee (the "Committee") which
shall be composed of members of the Board of Directors of the Company and which
shall be constituted so as to permit the Plan to comply with the provisions of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("1934 Act")
(or any successor rule) and Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Committee is authorized to administer and interpret
the Plan, to authorize, change, and waive the restrictions and conditions
imposed on awards and stock options under the Plan, and to adopt such rules and
regulations for carrying out the Plan as it may deem appropriate. Decisions of
the Committee on all matters relating to the Plan shall be in the Committee's
sole discretion and shall be conclusive and binding on all parties, including
the Company, the shareholders and the participants.
(b) No member of the Committee or any employee acting on its behalf shall
incur any liability for any action or failure to act in connection with this
Plan. The Company shall indemnify each member of the Committee and any employee
acting on its behalf against any and all claims, losses, damages, expenses and
liabilities arising from any action or failure to act.
A-1
<PAGE>
3. PARTICIPANTS
(a) Participation in this Plan shall be limited to senior managers and other
key employees of the Company as determined by the Committee. Awards of stock and
stock appreciation rights and grants of stock options may be made to such
employees and for such respective numbers of Shares, as the Committee in its
absolute discretion shall determine (all such individuals to whom awards and
options shall be granted being herein called "participants").
(b) Members of the Board of Directors who are also employees of the Company
shall be eligible to participate in the Plan. However, members of the Board of
Directors who are not also employees of the Company shall be ineligible for
awards under this Plan. Notwithstanding the foregoing, any members of the Board
of Directors who are also retired employees of the Company shall be entitled to
the portions of their awards which are earned or vested pursuant to the
provisions of the Plan.
(c) A person who is compensated on the basis of a fee or retainer, as
distinguished from salary, shall not be eligible for participation in the Plan.
(d) Participation in this Plan, or receipt of an award or option under this
Plan, shall not give a participant any right to a subsequent award or option,
nor any right to continued employment by the Company for any period, nor shall
the granting of an award or option give the Company any right to continued
services of the participant for any period. Likewise, participation in the Plan
will not in any way affect the Company's right to terminate the employment of
the participant at any time with or without cause.
4. DEFINITIONS
(a) "Stock" or "Share" shall mean a share of the common stock of $1.00 par
value of International Paper Company.
(b) "Performance Shares" shall mean Shares contingently awarded with respect
to an Award Period and issued with the restriction that the holder may not sell,
transfer, pledge, or assign such Shares, and with such other restrictions as the
Committee in its sole discretion may determine (including, without limitation,
restrictions with respect to forfeiture of the Shares and with respect to
reinvestment of dividends in additional restricted Shares), which restrictions
may lapse separately or in combination at such time or times (in installments or
otherwise) as the Committee may determine.
(c) "Stock Appreciation Right" or "SAR" shall mean a right included in an
award under this Plan to receive upon exercise of the SAR a payment equal to the
amount of the appreciation in the fair market value of a Share over the exercise
price which is set forth in the SAR provided that the exercise price is not less
than the fair market value of a Share on the date the SAR is granted. Payment
upon exercise of an SAR may be in the form of cash, or restricted stock, or
unrestricted stock, or a combination, as determined by the Committee in its sole
discretion. SARs may be awarded separately or in combination with other awards
and stock options under this Plan pursuant to terms and conditions contained in
an award agreement as determined by the Committee.
(d) "Change of Control of the Company" shall mean a change in control of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the 1934 Act; provided that,
without limitation, such a change in control shall
A-2
<PAGE>
be deemed to have occurred if (i) any "person" as such term is used in Sections
13(d) and 14(d)(2) of the 1934 Act (other than employee benefit plans sponsored
by the Company) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company, cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election, by
the Company's shareholders of each new director was approved by a vote of at
least two-thirds of the directors still in office who were directors at the
beginning of the period.
5. STOCK AVAILABLE FOR THE PLAN
An aggregate of [five million] TWENTY-FIVE MILLION FIVE-HUNDRED THOUSAND
(25,500,000) Shares shall be available under the Plan as amended by the
shareholders at the 199[4]9 Annual Meeting for delivery pursuant to the future
awards, and options granted pursuant to the Plan, together with any Shares
previously authorized by shareholders under [the 1983 Plans or] the Plan, AS
PREVIOUSLY AMENDED which are not yet issued to, or are reacquired from,
participants in [the 1983 Plans or] the Plan AS PREVIOUSLY AMENDED. Such Shares
shall be either previously unissued Shares or reacquired Shares. Shares covered
by awards which are not earned, or which are settled in cash, or which are
forfeited or terminated for any reason, and options which expire unexercised or
which are exchanged for other awards, shall again be available for other awards
and stock options under the Plan. Shares received by the Company in connection
with the exercise of stock options by delivery of other Shares, and received in
connection with payment of withholding taxes, shall again be available for
delivery under the Plan. Shares reacquired by the Company on the open market
using the cash proceeds received by the Company from the exercise of stock
options granted under the Plan AS PREVIOUSLY AMENDED [and the 1983 Plans] shall
be available for awards and options up to the number of Shares issued upon
option exercises which generated such proceeds, provided any such exercise
occurred on or after January 1, 1989. Notwithstanding the foregoing, the maximum
number of Shares available for delivery pursuant to future awards, options and
SARs to executive officers of the Company who, at the time of grant, are subject
to the provisions of Section 16 of the 1934 Act shall not exceed 14,600,000
Shares, subject to the adjustments permitted by Section 6 of the Plan.
Notwithstanding any other provision of this Plan, subject, however, to the
adjustments permitted by Section 6 of the Plan, the aggregate number of Shares
that can be covered by future stock options or SARs granted to any individual in
any period of three consecutive fiscal years shall be 1,800,000 AND THE
AGGREGATE NUMBER OF RESTRICTED SHARES ISSUED UNDER THIS PLAN AFTER THE 1999
ANNUAL MEETING OF SHAREHOLDERS MAY NOT EXCEED 3,000,000 SHARES.
6. CHANGES IN STOCK AND EXERCISE PRICE OF STOCK OPTIONS AND SARS
In the event of any stock dividend, split-up, reclassification or other
analogous change in capitalization or any distribution (other than regular cash
dividends) to holders of the Company's common stock, the Committee shall make
such adjustments, if any, as it deems to be equitable in the exercise price of
outstanding options and SARs, and in the number of Performance Shares awarded
and earned, and in the number of Shares covered by any outstanding stock options
and SARs, granted under this Plan, and in the aggregate number of Shares covered
by this Plan.
A-3
<PAGE>
7. TIME OF GRANTING AWARDS AND STOCK OPTIONS
Nothing contained in this Plan, or in any resolution adopted or to be
adopted by the Board of Directors or the shareholders of the Company, shall
constitute the granting of an award or stock option under this Plan. The
granting of an award or stock option pursuant to the Plan shall take place only
when authorized by the Committee.
8. DEATH OR DISABILITY OF A PARTICIPANT
In the event of the death of a participant, a stock option or an SAR may be
exercised within one year of the participant's death by the participant's
designated beneficiary or beneficiaries (or if no beneficiary has been
designated or survives the participant, by the person or persons who have
acquired the rights of the participant by will or under the laws of descent and
distribution). If a participant becomes disabled, the participant may exercise a
stock option or an SAR within one year after the date of the disability.
For purposes of this Plan, the term "disabled" shall refer to the condition
of total disability defined in the Company's long-term disability plan.
A participant may file with the Committee a designation of a beneficiary or
beneficiaries on a form approved by the Committee, which designation may be
changed or revoked by the participant's sole action, provided that the change or
revocation is filed with the Committee on a form approved by it. In case of the
death of the participant, before termination of employment or after retirement
or disability, any portions of the participant's award to which the
participant's designated beneficiary or estate is entitled under the Plan and
the award agreement, shall be paid to the beneficiary or beneficiaries so
designated or, if no beneficiary has been designated or survives such
participant, shall be delivered as directed by the executor or administrator of
the participant's estate.
9. RETIREMENT OF HOLDER OF STOCK OPTION OR SAR
If a participant retires under a Company pension plan, the participant may
exercise a stock option or an SAR within its remaining term unless otherwise
provided in the award agreement. Retirement under any of the Company's pension
plans shall cause incentive stock options to be treated for federal income tax
purposes as non-qualified stock options on a date which is three months after
the date of retirement. For purposes of this section, retirement shall be given
the meaning used under the Company's pension plan for salaried employees.
10. NON-TRANSFERABILITY OF AWARDS
No award, stock option or SAR under this Plan, and no rights or interests
therein, shall be assignable or transferable by a participant (or legal
representative), except at death by will or by the laws of descent and
distribution unless otherwise permitted by the Committee and by law and, in the
case of incentive stock options, to the extent consistent with Section 422 of
the Code.
11. MODIFICATION OF THE PLAN
The Board of Directors, without further approval of the shareholders, may at
any time amend the Plan to take into account and comply with any changes in
applicable securities or federal income tax laws and regulations, or other
applicable laws and regulations, including without limitation, any modifications
to Rule 16b-3 under the 1934 Act or Section 162(m) of the
A-4
<PAGE>
Code (or any successor rule, provision or regulation), terminate or modify or
suspend (and if suspended, may reinstate) any or all of the provisions of this
Plan, except that no modification of this Plan shall without the approval of the
Company's shareholders increase the total number of Shares for which awards,
stock options and SARs may be granted under the Plan (except pursuant to Section
6).
RESTRICTED PERFORMANCE SHARE AWARDS
12. TERMS AND CONDITIONS OF AWARDS OF PERFORMANCE SHARES
(a) Each award of Performance Shares under this Plan shall be contingently
awarded with respect to a period of consecutive calendar years as determined by
the Committee (herein called an "Award Period") and shall be made from
reacquired Shares. [Outstanding contingent awards and deferred awards under the
1983 Performance Share Plan shall be converted to comparable awards under this
Plan with the consent of the award holders.] The first complete Award Period
under this Plan [shall begin] BEGAN with the year 1989. A new Award Period shall
commence at the beginning of each calendar year.
(b) The Performance Shares awarded under this Plan will be earned by a
participant on the basis of the Company's financial performance over the Award
Period for which it was awarded, on the basis of pre-established performance
goals determined by the Committee in its sole discretion. The Performance
measurement criteria used for Performance Shares shall be limited to one or more
of: earnings per share, return on stockholders equity, return on assets, growth
in earnings, growth in sales revenue, and shareholder returns. Such criteria may
be measured based on the Company's results or on the Company's performance as
measured against a group of peer companies selected by the Committee. In
applying such criteria, earnings may be calculated based on the exclusion of
discontinued operations and extraordinary items. Adjustments in the number of
shares earned can be made by the Committee with any such adjustments offset by
reductions in other awards made under the Company's Long-Term Incentive
Compensation Plan or other Company bonus awards. Subject to the adjustments
permitted by Section 6 of the Plan, the maximum number of Performance Shares
that can be earned for any one individual for any future Award Period
[commencing after the effective date of the amendment to the Plan] is 100,000.
Subject to such maximum number of Shares, the amount, if any, that may be earned
by a participant receiving Performance Shares may vary in accordance with the
level of achievement of the performance goal or goals established by the
Committee.
(c) A participant's rights with respect to all unearned Performance Shares
shall terminate at the end of each Award Period.
(d) The number of Shares determined by the Committee to have been earned
with respect to any Award Period shall be final, conclusive and binding upon all
parties, including the Company, the shareholders and the participants.
(e) All dividend equivalents credited on Performance Shares during an Award
Period shall be reinvested in additional Performance Shares (which shall be
allocated to the same Award Period, and shall be subject to being earned by the
participant on the same basis as the original award).
(f) All dividends paid on earned restricted Shares under this part of the
Plan shall be paid in cash.
A-5
<PAGE>
(g) As a condition of any award of Performance Shares under this Plan, each
participant shall enter into an award agreement authorized by the Committee. The
Committee may in its sole discretion, include additional conditions and
restrictions in the award agreement entered into under this Plan. Settlements in
Shares may be subject to forfeiture and other contingencies as the Committee may
determine.
(h) At the discretion of the Committee, SARs may be awarded separately or in
combination with other awards or grants under this portion of the Plan.
(i) In the event a Change of Control of the Company occurs, then
(i) all restrictions shall be immediately removed with respect to all
earned Performance Shares and
(ii) a pro rata portion of each outstanding Award that would have been
earned were Company performance to reach the goals established by the
Committee for each uncompleted Award Period shall be deemed earned (based on
the number of months of the total Award Period which have been completed
prior to the Change of Control), and all restrictions shall be immediately
removed with respect to that number of shares; the remaining portion of each
Award shall remain outstanding as Performance Shares subject to the
provisions of this Plan and the participant's award agreements.
STOCK OPTION AWARDS
13. TERMS AND CONDITIONS OF STOCK OPTIONS
(a) The Committee shall have the sole authority to grant stock options under
this Plan. Such grants may consist of non-qualified stock options, or Incentive
Stock Options, or any combination thereof, as the Committee shall decide from
time to time. The aggregate fair market value (determined at the time the option
is granted) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by an individual during a calendar year shall not
exceed $100,000 as determined under Section 422A of the Internal Revenue Code or
comparable legislation. The maximum number of Shares for which stock options can
be awarded to any one individual over any consecutive three-year period
commencing on the effective date of the amendment to the Plan is 1,800,000
Shares.
(b) The term of each option granted under the Plan shall be set by the
Committee, but in no event shall an Incentive Stock Option be exercised after
ten years following the date of its grant under this Plan.
(c) The exercise price of each option granted under the Plan shall be no
less than the fair market value of the underlying Stock at the time the option
is granted as determined by the Committee.
(d) Prior to the exercise of the option and delivery of the Stock
represented thereby, the participant shall have no rights to any dividends nor
be entitled to any voting rights on any Stock represented by outstanding
options.
(e) As a condition of any grant of a stock option under this Plan, each
participant shall enter into an award agreement authorized by the Committee. The
Committee may, in its sole discretion, include additional conditions and
restrictions in the award agreement entered into under this Plan.
A-6
<PAGE>
(f) At the discretion of the Committee, SARs may be awarded separately or in
combination with other awards or grants under this part of the Plan.
14. EXERCISE OF STOCK OPTIONS
(a) Each stock option granted under this Plan shall be exercisable as
provided in accordance with the document evidencing the option by full payment
of the option price in cash or at the discretion of the Committee in Stock owned
by the participant (including Performance Shares and other restricted Shares
awarded under this Plan). Unless otherwise provided herein, a participant may
exercise a stock option only if he or she is an employee of the Company and has
continuously been an employee of the Company since the date the option was
granted.
(b) If a stock option under the 1983 Plan or this Plan is exercised by a
participant, then, at the discretion of the Committee, the participant may
receive a replacement option under this part of the Plan to purchase a number of
Shares equal to the number of Shares which the participant purchased on the
exercise of the option, with an exercise price equal to the current fair market
value, and with a term extending to the expiration date of the original stock
option. If a stock option is exercised by delivery of restricted Shares, then
the participant shall receive an equal number of identically restricted Shares;
the remaining option exercise Shares shall contain any applicable restrictions
which are set forth in the participant's award agreement and shall otherwise be
unrestricted.
(c) In the event a Change of Control of the Company occurs, all stock
options granted under this part of the Plan shall be immediately exercisable,
and all restrictions on Shares issued under this plan pursuant to the exercise
of stock option shall be immediately removed.
EXECUTIVE CONTINUITY AWARDS
15. TERMS AND CONDITIONS OF EXECUTIVE CONTINUITY AWARDS
(a) Executive continuity awards may be made from time to time under this
Plan at the discretion of the Committee, in such amounts and upon such terms and
conditions as are established by the Committee under this portion of the Plan.
(b) An executive continuity award shall consist of a stock option or grant
of restricted Shares, or a tandem grant of restricted Shares together with a
related non-qualified stock option (options to be granted in accordance with the
provisions of sections 13-14 of this Plan) to purchase a specified number of
Shares, in such amounts as may be determined by the Committee. All dividends
paid on the restricted Shares shall be reinvested in additional shares of
restricted Shares (subject to the same restrictions, terms and conditions). Upon
attainment of age 65, (or death or the executive's becoming disabled as such
condition is determined in the sole discretion of the Committee, if earlier) or
upon a Change of Control of the Company (as limited under subsection (g) below),
the restrictions on the award will be removed, and the award will vest in the
following manner:
(i) If the current realizable gain on a tandem stock option is greater
than the current market value of the related restricted Shares (including
re-invested dividends), then all such shares of restricted Shares shall be
canceled and the term of the stock option shall continue for the term set
forth in the award agreement.
A-7
<PAGE>
(ii) If the current market value of the restricted Shares (including
re-invested dividends) is greater than the current realizable gain on any
related tandem stock option, then the option shall be canceled and the
restrictions shall be removed from all of the related restricted Shares.
(c) If a stock option granted under this portion of the Plan is exercised
prior to the executive's attainment of a pre-determined age, the related shares
of restricted Shares shall be canceled, and the additional Shares issued upon
the exercise of the stock option shall be restricted and subject to either
forfeiture or repurchase by the Company at the option exercise price for a
period ranging up to 12 years from the date of the grant of the option, or
longer, as determined by the Committee and set forth in the award agreement.
(d) A stock option granted under this portion of the Plan shall be
exercisable as provided in accordance with the document evidencing the option by
full payment of the option price in cash or, at the discretion of the Committee,
in Stock owned by the participant (including Performance Shares awarded under
this Plan). At the discretion of the Committee, the participant may receive a
replacement stock option to purchase a number of shares equal to the number of
shares purchased by the participant in exercising the option, with an exercise
price equal to the current market value, and with a term extending to the
expiration date of the original stock option. If an option is exercised by
delivery of restricted Shares, then the participant shall receive an equal
number of identically restricted Shares; the remaining option exercise Shares
shall be subject to the Company's right to impose restrictions on such Shares as
described in subsection (c) above.
(e) As a condition of any executive continuity award under this Plan, each
participant shall enter into an award agreement authorized by the Committee. The
Committee may, in its sole discretion, include additional conditions and
restrictions in the award agreement.
(f) At the discretion of the Committee, SARs may be awarded separately or in
combination with other awards or grants under this portion of the Plan.
(g) In the event a Change of Control of the Company occurs, all restrictions
shall be immediately removed with respect to the exercise of stock options under
this part of the Plan and with respect to Shares issued upon the exercise of any
stock option. A Change of Control, for these purposes, shall not include a
transaction initiated by management such as a management led buyout or
recapitalization except where such transaction (i) is in response to the
acquisition of 10% or more of the Company's stock or the announcement of a
tender offer for 20% or more of the Company's stock (other than by employee
benefit plans sponsored by the Company); or (ii) is approved by the Board in
accordance with the standards set forth in Section 717 of the New York Business
Corporation Law or any successor provision.
MISCELLANEOUS
16. PRIOR AWARDS
Awards of stock options and Performance Shares made under the Plan prior to
the amendments approved by shareholders at the 1994 annual meeting [shall
continue] CONTINUED to be subject to the terms of the Plan and the instruments
evidencing such awards prior to such amendments becoming effective.
A-8
<PAGE>
17. TAX WITHHOLDING
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of Shares, a sufficient
amount to cover withholding of any federal, state, local or foreign jurisdiction
taxes required by law, or to take such other action as may be necessary to
satisfy any such withholding obligations. The Committee may permit or require
Shares to be used to satisfy required tax withholding and such Shares shall be
valued at the fair market value as of the settlement date of the applicable
award.
A-9
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
APPENDIX B
AMENDMENT NO. 2
TO
INTERNATIONAL PAPER COMPANY
RESTRICTED STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
(EFFECTIVE MAY 27, 1999)
The International Paper Company Restricted Stock Plan for Non-Employee
Directors is hereby amended to delete the words and phrases indicated by
brackets, e.g., [omit] and to add the words and phrases indicated by italics,
e.g. ADD.
1. PURPOSE AND EFFECTIVE DATE PLAN
This plan shall be known as the International Paper Company Restricted Stock
Plan for Non-Employee Directors. The purpose of this plan is to enable
International Paper Company ("International Paper") to attract and retain
persons of outstanding competence to serve as directors of International Paper
by paying such persons a portion of their compensation in restricted common
stock of International Paper pursuant to the terms of this plan. The plan [shall
become] BECAME effective as of January 1, 1988, [subject to approval of
shareholders of International Paper] WAS AMENDED MAY 12, 1992, and each
amendment FURTHER thereto shall become effective as of the effective date set
forth in such amendment.
2. STOCK AVAILABLE FOR THE PLAN
An aggregate of [100,000] 250,000 shares of $1.00 par value common stock of
International Paper shall be available for delivery pursuant to the provisions
of this plan. Such shares shall be either previously unissued shares or
reacquired shares. Any restricted shares awarded under this plan with respect to
which the restrictions are not removed in accordance with the service
requirements of the plan, or which become forfeited for any reason, shall not be
available for other restricted awards under the plan and shall become treasury
stock of the Company.
3. ELIGIBILITY FOR PARTICIPATING IN PLAN
Participation in this plan is limited to persons who serve as directors of
International Paper and who are not "employees" of International Paper (or its
subsidiaries) within the meaning of the Employee Retirement Income Security Act
of 1974. An employee-director who retires from employment with International
Paper (and its subsidiaries) shall become eligible to participate in this plan
and shall be entitled to receive an award of restricted stock at the time of
re-election as a non-employee director.
4. AWARDS OF RESTRICTED COMMON STOCK UNDER THE PLAN
Upon the approval of this Amendment No. [1] 2 awards of restricted common
stock of International Paper will be made to each director effective as of the
date of the annual meeting at which a participant is elected as a director
commencing in 1992. Such awards will consist of 2100* restricted shares for a
full three-year term of directorship. A participant who would serve a partial
term of directorship for his or her particular Class due to retirement, or who
is elected by the Board to fill a vacancy between annual meetings or elected at
an annual meeting to fill less
B-1
<PAGE>
than a three-year term of directorship, shall receive a number of shares
representing a pro rata portion of the number of restricted shares awarded to
non-employee directors elected at the most recent annual meeting to serve for a
full three-year term. Each award of restricted shares under this plan shall be
immediately registered in the name of the participant but shall be expressly
subject to all of the restrictions, the service provisions, and all of the other
terms and conditions set forth in Section 5 of this plan.
* As of May 13, 1997 award increased from 1800.
5. RESTRICTIONS, REMOVAL OF RESTRICTIONS, AND TERMS AND CONDITIONS OF AWARDS OF
RESTRICTED SHARES
(a) Participants shall have the right to receive all dividends and other
distributions made with respect to restricted shares registered in his or
her name, and shall have the right to vote or execute proxies with respect
to such registered restricted shares (other than the awards of restricted
shares made prior to the date of shareowners approval which shall have such
right only upon such approval of the plan or amendment affecting such
awards), unless and until such shares are forfeited pursuant to the
provisions of this plan. All certificates of shares shall be endorsed with a
legend referring to the restrictions imposed by this plan. Possession of the
certificates of shares shall be retained by the Treasurer of International
Paper until the provisions of the plan relating to removal of the
restrictions have been satisfied.
(b) Shares of restricted stock may not be sold, assigned, pledged or otherwise
transferred by the participant unless and until all of the restrictions
imposed by this plan have been removed pursuant to the provisions of this
plan, and a new certificate of shares has been issued by International Paper
which does not contain the legend of restrictions.
(c) None of the shares of restricted stock awarded under this plan shall become
free of restrictions and non-forfeitable until the termination of the
participant's service as a director of International Paper. Such shares
shall become non-forfeitable at the earlier of:
(i) the participant's death or disability;
(ii) mandatory retirement at the end of the term during which the
participant reaches mandatory retirement age; or
(iii) resignation or failure to stand for re-election with the consent of
the Board (which shall mean approval by at least 80% of the
directors voting, with the affected director abstaining), or any
failure to be re-elected after being duly nominated. In the event of
a resignation with consent during a term, the number of shares with
respect to which the restrictions will be removed will be a pro rata
portion of shares originally awarded determined by dividing the
period of the director's term served to the effective date of
resignation by the original term for which the director was elected
or appointed.
Termination of service as a director for any other reason, including,
without limitation, any involuntary termination effected by Board action, shall
result in forfeiture of the restricted shares.
(d) In the event of a "change of control" of International Paper (as defined
below), the Board may accelerate the removal of all restrictions relating to
all or an equal portion of the outstanding restricted shares. Termination of
Board service resulting from a change of
B-2
<PAGE>
control will result in immediate lapse of the forfeiture provisions relating
to all of the affected director's restricted shares. In any situation
involving acceleration of the removal of restrictions relating to the
awarded shares upon a change of control, the Board may elect to repurchase
such shares at the then fair market price instead of releasing the shares to
the participant owning such shares. For purposes of this plan, a "change in
control" of International Paper shall mean a change in control of a nature
that would be required to be reported in response to Item 1(a) of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"); provided that, without limitation, such a change in control shall be
deemed to have occurred if (a) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act other than company benefit
plans) except a transaction that is approved by the Board in accordance with
the standards set forth in section 7-17 of the New York Business Corporation
Law or any successor provision is or becomes the beneficial owner, directly
or indirectly, of securities of International Paper representing 20% or more
of the combined voting power of International Paper's then outstanding
securities, or (b) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of
International Paper cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election, by shareholders
of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
(e) All shares with respect to which the restrictions are not removed in
accordance with the provisions of this plan shall be forfeited and shall
revert to the Treasury of International Paper.
(f) All awarded shares shall remain subject to the plan's restrictions
prohibiting sales or transfer of such shares during the period of time while
the participant continues to serve as a director of International Paper, and
during the period of six (6) months from the date of grant which is required
by SEC Rule 16b-3(c)(1), and all certificates of shares shall be endorsed
with a legend referring to such restriction. In addition, the issuance or
delivery of any shares may be postponed for such period as may be required
to comply with any applicable requirements of any national securities
exchange or any requirements under any other law of regulation applicable to
the issuance or delivery of such shares, and International Paper shall not
be obligated to issue or deliver any such shares if the issuance or delivery
thereof shall constitute a violation of any provision of any law of any
regulation of any governmental authority or any national securities
exchange.
6. AMENDMENT OR TERMINATION OF PLAN
International Paper reserves the right to amend, modify or terminate this
plan at any time by action of its Board of Directors, provided (a) no amendment
shall be made more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder; and (b) that such action shall not adversely
affect any participant's rights under the provisions of this plan with respect
to awards of restricted stock which were made prior to such action, provided
further that no modification of this plan shall be made which shall increase the
aggregate number of shares available for award under this plan without the
approval of the shareholders of International Paper.
B-3
<PAGE>
7. ADMINISTRATION OF PLAN
This plan shall be administered by the Vice President-Human Resources of
International Paper. All decisions which are made by the Administrator with
respect to interpretation of the terms of the plan, with respect to the
restrictions, terms and conditions of the restricted shares, and with respect to
any questions or disputes arising under this plan, shall be final and binding on
International Paper and the participants (and their heirs or beneficiaries).
8. CHANGES IN STOCK AND ADJUSTMENT OF NUMBER UNDER THE PLAN
In the event of any stock dividend, split-up, reclassification or other
analogous change in capitalization or any distribution (other than regular cash
dividends) to holders of International Paper's common stock, the number of
shares awarded and earned under this Plan, and the aggregate number of shares
covered by this Plan shall be adjusted by the administrator to take account of
such change.
9. DESIGNATION OF BENEFICIARY
A participant may file with the Administrator a designation of beneficiary
or beneficiaries on a form approved by the Administrator (which designation may
be changed or revoked by the participant's sole action) to receive distribution
of all or a designated portion of the participant's restricted stock account
under this Plan upon the death of the participant. If no beneficiary has been
designated or survives the participant, then the account shall be distributed as
directed by the executor or administrator of the participant's estate.
B-4
<PAGE>
[LOGO]
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
Printed on Hammermill Papers, Accent Opaque 50 lbs.
Hammermill Papers is a division of International Paper.
<PAGE>
- - --------------------------------------------------------------------------------
[LOGO OF INTERNATIONAL PAPER]
TO PARTICIPANTS IN THE SALARIED SAVINGS PLAN, THE RETIREMENT SAVINGS PLAN,
AND THE HOURLY SAVINGS PLAN OF INTERNATIONAL PAPER COMPANY:
As a participant in the Plan(s), with full shares of the Company's common
stock allocated to your account as of December 31, 1998, you may instruct the
Trustee how to vote such shares at the Annual Meeting of Shareholders to be
held May 27, 1999. The 1998 Annual Report and the Board of Directors proxy
statement are enclosed.
Your instructions to the Trustee will be held in strict confidence and will
be made available only to the inspectors of election, none of whom is an
employee of the Company. Under the terms of the Plan(s), you have the right
to give voting instructions for all shares allocated to your account, whether
or not you have a vested interest in those shares. Please use the voting
instruction card on the reverse to give your instructions.
Any shares held by the Trustee for which it has not received voting
instructions by May 21, 1999, will be voted by the Trustee in its discretion
consistent with its fiduciary duties. Any shares held by the Trustee for
which it has been instructed to sign the Board of Directors proxy, with no
additional instructions to the contrary indicated, will be voted as follows:
FOR Item 1, the election of Class I, II and III Directors, FOR Item 2, FOR
Item 3, FOR Item 4, and FOR Item 5.
STATE STREET BANK & TRUST CO.
Trustee
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
OR
2. Call toll free 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
PLEASE VOTE
<PAGE>
<TABLE>
<S> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
To State Street Bank & Trust Co., Trustee of the Salaried Savings Plan, Retirement Savings Plan, Please mark
and Hourly Savings Plan of International Paper: I understand that the Board of Directors proxy your votes as /X/
referred to on the reverse authorizes the proxy holders to vote "FOR" or "WITHHOLD AUTHORITY" indicated in
on the election of Class I, II and III Directors; and to vote "FOR", "AGAINST" or "ABSTAIN" on this example
Items 2, 3, 4, and 5 in their discretion on any other business that may properly come before the
meeting.
FOR ALL
FOR WITHHOLD EXCEPT
The Board recommends a vote "FOR" / / / / / / FOR AGAINST ABSTAIN
Item 1-Election of the following The Board recommends a vote "FOR" Item 2- / / / / / /
nominees as Directors: Approval of amendments to the Company's
Long Term Incentive Compensation Plan
Class II (3-year term) Class I (2-year term) FOR AGAINST ABSTAIN
01 Samir G. Gibara 6 W. Craig McClelland The Board recommends a vote "FOR" Item 3 / / / / / /
02 James A. Henderson Class III (1-year term) Reaffirmation of the performance goals
03 Jane C. Pfeiffer 07 Robert D. Kennedy used for performance awards under the
04 Jeremiah J. Sheehan Company's Long Term Incentive
05 C. Wesley Smith --------------------------------- Compensation Plan
Except Nominee(s) written above
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 4- / / / / / /
Approval of amendment to the Company's
Restricted Stock Plan for Non-Employee
Directors.
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 5- / / / / / /
Appointment of Independent Auditors
- - -----------------------------------------------------------------------------------------------------------------------------------
**PLEASE RETURN YOUR PROXY OR IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW**
- - -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEE AUTHORIZATION
I hereby authorize State Street Bank & Trust Co.,
as Trustee under the Salaried Savings Plan, the
Retirement Savings Plan and the Hourly Savings Plan
to vote the shares of Common Stock held for my account
under said Plan(s) at the Annual Meeting in accordance
with the instructions given above. State Street Bank &
Trust Co., Trustee, has appointed ChaseMellon
Shareholder Services L.L.C. as Agent to tally the votes.
Signature(s) ______________________________________________________________________ Date ______________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- - -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
VOTE BY TELEPHONE
QUICK EASY IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
- - - You will be asked to enter a Control Number which is located in the box in
the lower right hand corner of this form.
- - --------------------------------------------------------------------------------
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS:
PRESS 1.
- - --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- - --------------------------------------------------------------------------------
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0.
YOU WILL HEAR THESE INSTRUCTIONS:
- - --------------------------------------------------------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. withhold FOR AN INDIVIDUAL nominee, press 0
and listen to the instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 4: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 5: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- - --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF YOU VOTED BY PHONE.
- - --------------------------------------------------------------------------------
CALL TOLL FREE ON A TOUCH TONE TELEPHONE ANYTIME
1-800-840-1208
There is NO CHARGE to you for this call.
<PAGE>
- - --------------------------------------------------------------------------------
[LOGO OF INTERNATIONAL PAPER]
TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577
- - ---------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
FOR ITEM 1, THE ELECTION OF FIVE CLASS II DIRECTORS, THE ELECTION OF ONE
CLASS I DIRECTOR AND THE ELECTION OF ONE CLASS III DIRECTOR, FOR ITEM 2, FOR
ITEM 3, FOR ITEM 4, AND FOR ITEM 5 UNLESS OTHERWISE DIRECTED.
The undersigned hereby appoints John T. Dillon and C. Wesley Smith, jointly
or individually, proxies with power of substitution to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders on May
27, 1999 or adjournment thereof. The proxies are instructed as indicated on
the reverse side. This proxy revokes all prior proxies given by the
undersigned.
Please sign on the reverse side exactly as name or names appear there. If
stock is held in name of joint holders, each should sign. If you are signing
as trustee, executor, etc., please so indicate.
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
OR
2. Call toll free 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
PLEASE VOTE
<PAGE>
<TABLE>
<S> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Please mark
The Board recommends a vote "FOR" proposals 1, 2, 3, 4, and 5 your votes as /X/
indicated in
this example
FOR ALL
FOR WITHHOLD EXCEPT
The Board recommends a vote "FOR" / / / / / / FOR AGAINST ABSTAIN
Item 1-Election of the following The Board recommends a vote "FOR" Item 2- / / / / / /
nominees as Directors: Approval of amendments to the Company's
Long Term Incentive Compensation Plan
Class II (3-year term) Class I (2-year term) FOR AGAINST ABSTAIN
01 Samir G. Gibara 6 W. Craig McClelland The Board recommends a vote "FOR" Item 3 / / / / / /
02 James A. Henderson Class III (1-year term) Reaffirmation of the performance goals
03 Jane C. Pfeiffer 07 Robert D. Kennedy used for performance awards under the
04 Jeremiah J. Sheehan Company's Long Term Incentive
05 C. Wesley Smith --------------------------------- Compensation Plan
Except Nominee(s) written above
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 4- / / / / / /
Approval of amendment to the Company's
Restricted Stock Plan for Non-Employee
Directors.
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 5- / / / / / /
Appointment of Independent Auditors
- - -----------------------------------------------------------------------------------------------------------------------------------
**PLEASE RETURN YOUR PROXY OR IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW**
- - -----------------------------------------------------------------------------------------------------------------------------------
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
Signature(s) ______________________________________________________________________ Date ______________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- - -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
VOTE BY TELEPHONE
QUICK EASY IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
- - - You will be asked to enter a Control Number which is located in the box in
the lower right hand corner of this form.
- - --------------------------------------------------------------------------------
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS:
PRESS 1.
- - --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- - --------------------------------------------------------------------------------
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0.
YOU WILL HEAR THESE INSTRUCTIONS:
- - --------------------------------------------------------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. withhold FOR AN INDIVIDUAL nominee, press 0
and listen to the instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 4: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 5: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
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PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF YOU VOTED BY PHONE.
- - --------------------------------------------------------------------------------
CALL TOLL FREE ON A TOUCH TONE TELEPHONE ANYTIME
1-800-840-1208
There is NO CHARGE to you for this call.
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[LOGO]
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
FOR ITEM 1 THE ELECTION OF FIVE CLASS II DIRECTORS, THE ELECTION OF ONE CLASS I
DIRECTOR AND THE ELECTION OF ONE CLASS III DIRECTOR, FOR ITEM 2, FOR ITEM 3, FOR
ITEM 4, AND FOR ITEM 5 IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED.
The undersigned appoints JOHN T. DILLON and C. WESLEY SMITH, jointly or
individually, proxies with the power of substitution to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders on May 27,
1999 or adjournments thereof.
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<S> <C> <C>
THE BOARD RECOMMENDS A VOTE FOR AGAINST ABSTAIN THE BOARD RECOMMENDS A VOTE "FOR" ITEM 2.--Approval of
"FOR" ITEM 1.--Election of the X X X amendments to the Company's Long Term Incentive Compensation
following nominees as Plan.
Directors:
FOR AGAINST ABSTAIN
X X X
CLASS II (3-YEAR TERM) CLASS I (2-YEAR TERM) THE BOARD RECOMMENDS A VOTE "FOR" ITEM 3.--Reaffirmation of
Samir G. Gibara W. Craig McClelland the performance goals used for performance awards under the
James A. Henderson CLASS III (1-YEAR TERM) Company's Long Term Incentive Compensation Plan.
Jane C. Pfeiffer Robert D. Kennedy
Jeremiah J. Sheehan FOR AGAINST ABSTAIN
C. Wesley Smith X X X
THE BOARD RECOMMENDS A VOTE "FOR" ITEM 4.--Approval of
amendment to the Company's Restricted Stock Plan for
Non-Employee Directors.
FOR AGAINST ABSTAIN
X X X
THE BOARD RECOMMENDS A VOTE "FOR" ITEM 5.--Appointment of
independent auditors.
FOR AGAINST ABSTAIN
X X X
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<S> <C> <C>
Withhold for Nominees written above
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PLEASE VOTE AND SIGN YOUR NAME(S) ON THE REVERSE SIDE.
<PAGE>
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears on this card. If stock is held in name
of joint holders, each should sign. If you are signing as a trustee, executor,
etc., please so indicate.
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<S> <C>
DATED: , 1999
Please mark, sign, date and mail the card promptly in the postage Signature
prepaid return envelope provided. Signature if held jointly
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