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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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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 Section240.14a-11(c) or
Section240.14a-12
</TABLE>
___________________________INTERNATIONAL PAPER COMPANY__________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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/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:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(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):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / 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:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[INTERNATIONAL PAPER LOGO]
TWO MANHATTANVILLE ROAD
PURCHASE, NEW YORK 10577
JOHN T. DILLON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
March 24, 2000
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 8:30 a.m., on Tuesday, May 9, 2000. 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; and ratification of the appointment
of Arthur Andersen LLP as the Company's independent auditor for 2000.
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 TELEPHONE OR THE INTERNET.
Attendance at the meeting is limited to shareholders of record as of the
close of business on March 17, 2000, or their duly appointed proxy holders (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]
<PAGE>
[INTERNATIONAL PAPER LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Owners of Common Stock of
International Paper Company:
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Time:......................... 8:30 a.m.
Tuesday, May 9, 2000
Place:........................ Reid Hall "The Castle"
Manhattanville College
2900 Purchase Street
Purchase, New York 10577
Items of Business:............ (1) Elect one class of directors for a term of three years:
Robert J. Eaton, John R. Kennedy, Donald F. McHenry,
Patrick F. Noonan, and Charles R. Shoemate; elect one
director for a term of one year: James A. Henderson; and
elect one director for a term of two years: Robert D.
Kennedy
(2) Approve an amendment to the Company's Long-Term
Incentive Compensation Plan;
(3) Ratify the appointment of Arthur Andersen LLP as the
Company's independent auditor for 2000; and
(4) Transact such other business properly brought before the
meeting or any adjournment.
Record Date................... Holders of International Paper Common Stock of record at the
close of business on March 17, 2000, are entitled to vote at
the meeting.
</TABLE>
Your Board of Directors urges shareholders to vote FOR items 1, 2, and 3.
By order of the Board of
Directors,
JAMES W. GUEDRY
VICE PRESIDENT AND SECRETARY
March 24, 2000
<PAGE>
TABLE OF CONTENTS
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PAGE
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<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....................... 21
Performance Graph........................................... 25
Additional Information Regarding Executive Compensation..... 26
Compensation.............................................. 26
Retirement Benefits....................................... 30
Termination Agreements.................................... 31
Appendix.................................................... A-1
</TABLE>
i
<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 9, 2000. You
are entitled to one vote for each share of common stock held of record at the
close of business on March 17, 2000. As of that date, there were 413,825,796
shares of common stock outstanding.
The annual report, including the audited financial statements of International
Paper for the fiscal year ended December 31, 1999, 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
You have a choice of voting by telephone, Internet or mail.
VOTING BY TELEPHONE
The telephone voting procedure is simple and fast. Dial the 800 number on your
proxy card or voting instruction form and listen for further directions. You
must have a touch-tone phone and an 800 number on your proxy card 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 or Internet vote; (2) submitting a
written revocation; (3) submitting a new proxy; or (4) attending and voting at
the annual meeting.
VOTING BY INTERNET
Voting by Internet is easy and quick. Read your voting instruction form and
follow the directions. You will need to have and enter your control number
located in the gray shaded box on the bottom right side of your proxy card or
voting instruction form. You may revoke your proxy at any time before its
exercise by (1) subsequent Internet or telephone vote; (2) submitting a new
proxy; (3) submitting a written revocation; 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, and 3. 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,
1
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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 or Internet as
described above; or (4) attending and voting at the annual meeting.
Solicitation of proxies may be done by directors, officers and employees of the
Company, as well as by Georgeson Shareholder Communications, Inc. Payments to
that firm as compensation are estimated to be about $15,000 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.
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, telephone, or Internet vote.
This Proxy Statement and the form of proxy were first sent to shareholders
commencing March 27, 2000.
ADMITTANCE PROCEDURES AT THE MEETING
SHAREHOLDERS OF RECORD
If you are a shareholder of record as of the close of business on March 17,
2000, you (or your duly appointed proxy holder) are entitled to vote and attend
the meeting. Certain procedures have been adopted to ensure 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. The
admittance card will be delivered to you or your proxy holder at the
shareholders' admittance counter at the meeting upon verification of
identification of you or your proxy holder.
If you are a record shareholder but 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." If you are a beneficial owner, a Request for Admittance card is not
enclosed with this proxy package. Beneficial owners of record on March 17, 2000,
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
2
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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.
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Board is comprised three classes of directors: Class I directors, of which
there are currently four, who were elected to serve until the 2001 annual
meeting; Class II directors, of which there are currently five, who were elected
to serve until the 2002 annual meeting; and Class III directors, of which there
are currently five, who were elected to serve until the 2000 annual meeting.
Each class is elected for a three-year term unless they resign or retire
earlier. New directors elected by the Board are assigned to a class until the
first annual meeting after their election by the Board.
Company policy on tenure of directors requires current outside directors to
retire from the Board upon their 72nd birthday, whether or not the term for
which they have been elected has expired. Employee directors must retire when
they leave the Company. Outside directors elected for the first time after
July 13, 1999 must retire from the Board upon their 70th birthday.
Eight regular meetings and three special meetings of the Board of Directors were
held in 1999. In addition, there were 24 Committee meetings. Each director
attended at least 75% of the meetings of the Board and the Committees on which
he or she serves.
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. This
includes reviewing the Board's activities against those set out in its charter
and then 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.
- - Governance Committee review of incumbent directors prior to recommendation for
re-election. The review emphasizes 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.
- - Improving and updating the Corporate Governance Guidelines relating to the
Board's governance of the Company, as needed.
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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:
- - 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.
- - 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.
- - Reviews and makes a recommendation to the Board each year with respect to the
appointment of independent auditors for the following year.
- - Informs the Board of any significant accounting matters.
- - Reviews the performance of the Committee.
Four meetings of the Committee were held in 1999.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee:
- - Reviews Company policies and programs for the development of management
personnel.
- - Makes recommendations to the Board with respect to any proposals for
compensation adjustments of officers who are also directors of the Company.
- - Reviews and evaluates the performance of the chief executive officer on an
annual basis.
- - Authorizes compensation or compensation adjustments for other officers of the
Company.
- - Administers the Company's executive bonus and Long-Term Incentive Compensation
Plan.
- - Reviews and endorses changes in Company employee retirement and benefits
plans.
- - Reviews officer candidates and endorses nominees for election as executive
officers.
- - Delegates to the chief executive officer the authority to act on compensation
adjustments at certain levels.
- - Makes recommendations to the Board with respect to directors' compensation.
- - Reviews senior management succession planning.
- - Reviews the performance of the Committee.
Eight meetings of the Committee were held in 1999.
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GOVERNANCE COMMITTEE
The Governance Committee:
- - Reviews the size and composition of the Board.
- - Reviews possible director candidates and director nominations properly
presented by shareholders.
- - Recommends to the Board individuals suitable for election as directors.
- - Reviews and recommends annually to the full Board a slate of nominees for
election by the Company's shareholders.
- - Reviews institutional affiliations of directors and director candidates for
possible conflicts.
- - Reviews and recommends Board Committee assignments.
- - Reviews the performance of the Committee.
Three meetings of the Committee were held in 1999.
ENVIRONMENT, HEALTH AND TECHNOLOGY COMMITTEE
The Environment, Health and Technology Committee:
- - Reviews environmental, safety, health and technological policies and programs
throughout the Company.
- - 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.
- - Advises the Board of the effectiveness of these policies and programs.
- - Reviews the performance of the Committee.
OTHER COMMITTEES
Current membership on the above and on other regular Committees of the Board of
Directors is shown below:
COMMITTEE MEMBERSHIP
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MANAGEMENT
ENVIRONMENT, DEVELOPMENT PUBLIC &
HEALTH & & LEGAL
DIRECTORS AUDIT FINANCE TECHNOLOGY GOVERNANCE COMPENSATION AFFAIRS EXECUTIVE
Bijur, P.I. X X* X
Dillon, J.T. X X*
Eaton, R.J. X X*
Gibara, S.G. X X
Henderson, J.A. X X
Kennedy, J.R. X X
Kennedy, R.D. X X
McClelland, W.C. X X
McHenry, D.F. X X* X X
Noonan, P.F. X X*
Pfeiffer, J.C. X* X X
Sheehan, J.J. X X
Shoemate, C.R. X* X X X
Smith, C.W. X X
</TABLE>
* Chairman of the Committee
5
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RELATED TRANSACTION
In September 1999, the Company donated an easement of approximately 950 acres on
the Wolf River in Harrison County, Mississippi, jointly to The Conservation Fund
and The Wolf River Conservation Society, Inc. The donation was appraised by
outside real estate consultants at $2,100,000. Mr. Noonan, a director of the
Company, is Chairman of the Board of The Conservation Fund.
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 2001 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 or before November 27,
2000.
Other shareholder business intended to be introduced at the 2001 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 2001 annual meeting,
but not included in the 2001 Proxy Statement, must be received by the Secretary
of the Company not earlier than January 8, 2001 nor later than February 8, 2001,
if the annual meeting is held on May 8, 2001, 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, the shareholder nominations to be considered by the Governance
Committee for the 2001 election of directors must be received by the Secretary
of the Company not earlier than January 8, 2001 nor later than February 8, 2001,
if the annual meeting is held on May 8, 2001, and must conform to the
requirements set out in the Company's By-laws.
COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows, as of March 17, 2000, the number of shares of and
options for Company common stock beneficially owned or otherwise claimed by each
current director, executive officer included in the Summary Compensation Table
on page 26, and by all directors and executive officers of the Company as a
group. The total beneficial ownership 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 as of December 31, 1999, 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.
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STOCK OWNERSHIP
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SHARES STOCK STOCK
NAME OF INDIVIDUAL OWNED UNITS OPTIONS
OR GROUP (1) OWNED (2) OWNED (3)
---------------------------------------------------- ------- ---------- --------
P.I. Bijur.......................................... 3,783 4,624
J.T. Dillon......................................... 222,121 31,406 631,737
R.J. Eaton.......................................... 7,800 9,675
S.G. Gibara......................................... 3,116 269
J.A. Henderson...................................... 4,175 1,455
J.R. Kennedy........................................ 56,629 5,365
R.D. Kennedy........................................ 9,475 202 1,200
D.F. McHenry........................................ 8,325 12,032
W.C. McClelland..................................... 46,146 0 607,717
P.F. Noonan......................................... 4,450 6,961
J.C. Pfeiffer....................................... 10,734 6,941
J.J. Sheehan........................................ 5,096 1,033 1,200
C.R. Shoemate....................................... 4,500 8,814
C.W. Smith.......................................... 108,604 14,831 205,100
J.P. Melican........................................ 117,379 15,762 196,300
D.W. Oskin.......................................... 133,500 0 176,500
M.M. Parrs.......................................... 89,892 3,128 113,800
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES
OWNED (1) %
---------- -----
All directors and executive officers as a group........... 835,725 0.002
Bank trustee under Company and subsidiary employee benefit
plans (4)............................................... 33,447,156 8.1
Sanford C. Bernstein & Co. Inc (5)........................ 28,443,958 6.9
Capital Research and Management Company (6)............... 25,947,860 6.3
</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. These numbers do not include shares
represented by stock options granted executive officers under the Long-Term
Incentive Compensation Plan.
(2) Ownership shown represents the non-voting stock-equivalent units owned by
the named individuals under the Nonfunded Deferred Compensation Plan for
Non-Employee Directors or the Unfunded Savings Plan.
(3) The above numbers do not include the tandem option awards made as part of
these executives' continuity awards insofar as the awards are characterized
as shares of stock.
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(4) As of December 31, 1999, State Street Bank & Trust Co. held 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 a registered investment
advisor. As a result of its holdings, in all capacities, State Street
Bank & Trust Co. is the record holder of 33,447,156 shares of common stock
of the Company. The trustee disclaims beneficial ownership of all such
shares except 7,841,095 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.
(5) As of December 31, 1999, Sanford C. Bernstein & Co., Inc. had sole or shared
voting power over 15,454,742 of shares and sole dispositive power over all
of them.
(6) As of December 31, 1999, Capital Research and Management Company, an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, held 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
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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 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 and
directors receiving retirement benefits from the Company receive no compensation
for services as directors or for attendance at Board or Committee meetings.
STOCK PLAN
In 1999, awards under the Non-Employee Directors Restricted Stock Plan were
increased from 2,100 to 3,000 shares of common stock to be made upon the
election or re-election of a director to a full three-year term. Pro-rata awards
are made upon the appointment of a non-employee director to fill an unexpired
term. Awards made in 1999 were 3,000 shares each for Class II director, and each
other director received a pro-rata portion of the 900 share increase in the
award according to the director's Class. Newly elected directors received a
pro-rata portion of an award reflecting the less-than-one-year service prior to
the 1999 annual meeting. Accordingly, each non-employee director received the
following restricted shares of common stock:
<TABLE>
<S> <C>
Peter I. Bijur....................... 600
Robert J. Eaton...................... 300
Samir G. Gibara...................... 3,116
James A. Henderson................... 3,175
John R. Kennedy...................... 600
Robert D. Kennedy.................... 1,000
W. Craig McClelland.................. 2,000
Donald F. McHenry.................... 300
Patrick F. Noonan.................... 300
Jane C. Pfeiffer..................... 3,000
Jeremiah J. Sheehan.................. 3,000
Charles R. Shoemate.................. 300
</TABLE>
Directors received 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
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Company 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.
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. Under these, we agree to compensate them for costs and
liabilities incurred in actions brought against them while acting as directors
or officers.
On June 15, 1999, the Company renewed 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, 2000. No monies have been paid under such policies by the carrier or by
the Company under the contractual arrangements.
10
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MATTERS TO BE CONSIDERED AT THE MEETING
1. ELECTION OF SEVEN DIRECTORS
At this meeting, four (4) directors are to be re-elected and one (1) director is
to be elected as Class III directors; one (1) director is to be elected as a
Class II director for a two-year term expiring in 2002; and one (1) director is
to be elected as a Class I director for a one-year term expiring in 2001.
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
that 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 terms of the present
Class III directors expire at the adjournment of the 2000 annual meeting.
CLASS III DIRECTORS--TERM EXPIRING IN 2003
The five (5) nominees for election at this meeting as Class III directors are
Robert J. Eaton, John R. Kennedy, Donald F. McHenry, Patrick F. Noonan and
Charles R. Shoemate and are identified below:
[PHOTO]
ROBERT J. EATON, 60, chairman of the board of management of
Daimler-Chrysler AG from 1999 through March 31, 2000, and
chairman of Chrysler from 1993 to 1998. 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 Roundtable and the Business Council.
Director since January 10, 1995
[PHOTO]
JOHN R. KENNEDY, 69, retired president and chief executive
officer of Federal Paper Board Company, Inc. from 1975 to
1996. He is a director of DeVlieg Bullard, Inc. Chase Brass
Industries, Inc., Holnam, Inc., Pioneer Companies, Inc., Spartech Corporation,
and Modis Professional Services. 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 of the
Foreign Policy Association.
Director since March 12, 1996
11
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[PHOTO]
DONALD F. MCHENRY, 63, 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, Fleet
Boston Financial, the First National Bank of Boston,
SmithKline Beecham plc, and the Institute for International Economics. He is a
trustee of Columbia University and chairman of the board of Africare.
Director since April 14, 1981
[PHOTO]
PATRICK F. NOONAN, 57, chairman of the board of The
Conservation Fund (a nonprofit organization dedicated to
conserving America's land and water resources) since 1985. 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, 60, 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 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
CLASS I DIRECTOR--TERM EXPIRING IN 2001
The one nominee for election at this meeting as a Class I director is James A.
Henderson and is identified below:
[PHOTO]
JAMES A. HENDERSON, 65, former chairman and chief executive
officer of Cummins Engine Company, Inc. until December 1999.
He had been in that position since 1995. He is a director of
SBC Communications Inc., Rohm and Haas Company, Ryerson
Tull, Inc., and Landmark Communications, Inc. He is also a member of The
Business Council.
Director since February 1, 1999
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CLASS II DIRECTOR--TERM EXPIRING IN 2002
The one nominee for election at this meeting as a Class II director is Robert D.
Kennedy and is identified below:
[PHOTO]
ROBERT D. KENNEDY, 67, former chairman of the board and chief
executive officer of Union Carbide Corporation from 1986 to
1995. He was retired from 1995 until March 1998 when he became
chairman of UCAR International, Inc. until September 1999. He
is on the board of Union Carbide Corporation, Kmart Corporation, Lion Ore Mining
International Ltd., Sunoco Inc., and Chase Industries. He is also on the
Advisory Board of The Blackstone Group and RFE Investment Partners.
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 2000 annual meeting, but were
elected until the 2001 annual meeting.
[PHOTO]
PETER I. BIJUR, 57, chairman and chief executive officer of
Texaco Inc. He joined Texaco in 1966 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 chairman of the American Petroleum Institute and the
Business Council of New York State, Inc. He is a member of The Business Council,
The Business Roundtable, the National Petroleum Council, and the Council on
Foreign Relations and serves on the Board of Trustees of The Conference Board,
Middlebury College, and Mount Sinai New York Medical Center.
Director since July 8, 1997
[PHOTO]
JOHN T. DILLON, 61, chairman of the board and chief executive
officer of International Paper since 1996. Prior to that he
was president and chief operating officer in 1995. He is also
a director of Caterpillar Inc. He is chairman of the board of
The National Council on Economic Education, a member of The Business Roundtable,
and the Advisory Committee for Trade Policies and Negotiation and chairman of
The American Forest and Paper Association.
Director since March 1, 1991
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[PHOTO]
W. CRAIG MCCLELLAND, 65, 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. He is a director of Allegheny
Technologies Inc., Water Pik Technologies, Inc. and PNC Financial Corp. and
serves as co-chairman of the Global Advisory Council, an affiliate of The
Conference Board.
Director since May 4, 1999
CLASS II DIRECTORS--TERM EXPIRING IN 2002
None of these directors are to be elected at the 2000 annual meeting, but were
elected to serve until the 2002 annual meeting.
[PHOTO]
SAMIR G. GIBARA, 60, chairman of the board, chief executive
officer and president of The Goodyear Tire and 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 a member of The Business Roundtable.
Director since March 9, 1999
[PHOTO]
JANE C. PFEIFFER, 67, management consultant. She is a director
of Ashland, Inc., J.C. Penney Company, Inc., and The MONY
Group. She is a trustee of The Conference Board, the
University of Notre Dame, and the Overseas Development
Council, and a member of The Council on Foreign Relations.
Director since June 14, 1977
[PHOTO]
JEREMIAH J. SHEEHAN, 61, 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, 60, executive vice president--operating group
of International Paper since 1998. Prior to that, he was
executive vice president-printing papers from 1992 until 1998.
Director since December 12, 1995
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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 and 1999 (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 management personnel in the form of stock
options, performance awards and other restricted 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. Further, the Board believes that the Company
should continue to utilize awards under it as part of a competitive compensation
program and as a means of encouraging its employees to own stock in the Company.
Towards that end, the Company has expanded the awarding of options as incentives
to most employees at the managerial level.
EXPLANATION OF PLAN CHANGES
Upon a review of the Plan, it was decided that changes were needed to more
closely align it with the Company's objectives of improving return on
investment. Accordingly, changes to the Plan are recommended by the Board to
(1) ensure that the Company's improvement of return on investment is added as
another measurement for determining awards under the Performance Share portion
of the Plan, (2) to remove certain language from the Plan in order to allow the
awards made under the Performance Share portion of the Plan to be tax deductible
by the Company and (3) make certain clarifications in Plan language.
We are asking shareholders to approve these amendments, as more fully described
below. 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.
SPECIFIC CHANGES
The number of shares of stock available under the Plan, approved in 1999, is NOT
being changed.
The Performance Share portion of the Plan (see "Performance Share Awards" below)
is being amended to set forth an additional measurement criterion, return on
investment, which may be used by the Committee in presetting the goals for
determining the number of Performance Shares earned by participants during an
Award Period. "Return on investment" means the financial return of the Company
determined by dividing "earnings" by "assets." In this division, "earnings" mean
the Company's net earnings plus after-tax interest and minority interest expense
and "assets"mean an average of total assets minus accounts payable and accrual
liabilities.
In addition, the specific ability to adjust the number of Performance Shares
awarded, if offset by reductions in other awards under the Plan, is being
eliminated in order to allow deductions by the Company for federal
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<PAGE>
income tax purposes of the Performance Share compensation paid under the Plan.
The Plan is also being changed to specifically establish "continuity awards" as
a separate class of awards, different from the Executive Continuity Award. The
Executive Continuity Awards are awarded to senior executives by the Committee
and are limited to tandem awards of restricted stock and stock options.
Basically, there will be no change to these awards. The new "continuity awards"
would be awards of restricted stock, designed to reward certain employees and
motivate them to achieve goals set by the Committee or its delegate.
Additional changes have been made to clarify the ability of the Committee to
delegate its authority in making awards to non-elected officers of the Company.
Also, while already stated in Section 6 of the Plan, the amended Plan makes it
clearer that all of the Shares authorized to be awarded under the Plan may be
adjusted for changes in the Company's stock, such as stock dividends, stock
splits, reclassifications, and other analogous changes in capitalization.
PLAN DESCRIPTION--GENERAL
Participation in the Plan of elected officers is determined solely by the
Committee; participation by others is determined by the chief executive officer,
as the Committee's delegate, and is limited to senior managers of the Company
and its subsidiaries and to persons at the managerial level for options. As of
January 15, 2000, approximately 4,000 employees participated in the stock option
portion of the Plan; approximately 100 employees normally participate in the
Performance Share portion of the Plan; and fewer than 15 employees participate
in the Continuity Award portion of the Plan. The number should not be affected
by the proposed amendments to the Plan. Although all unearned Performance Share
awards were cancelled under the Plan, it is anticipated that under the amended
Plan, new awards will be made in December 2000 to approximately 150 employees.
The Board of Directors may amend the Plan to take into account or comply with
any changes in applicable securities or tax laws and regulations, and may
otherwise modify, terminate or suspend all or portions of the Plan, without
shareholder approval, except that no modification shall increase the total
number of shares for which awards and stock options may be granted under the
Plan without shareholder approval.
STOCK OPTION AWARDS
The stock option features of the Plan are essentially unchanged. Stock options
may be in the form of Incentive Stock Options (within the meaning of
Section 422 of the Code) or options which do not qualify for favorable federal
tax treatment ("nonqualified stock options") or combinations of both. The
Committee determines the elected officer recipients of stock options, the number
of shares covered by these awards, and the other terms and conditions of the
options, except that the exercise price cannot be less than the fair market
value of a share of the Company's common stock at the time of award grant; the
Committee, or the chief executive officer as its delegate, determines all of the
above items for stock options for other employees. No option may extend beyond
ten years from the date of grant except that, for a limited number of options
granted outside the U.S., the option term may extend beyond ten years due to
local legal and tax regulations.
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<PAGE>
Restrictions on the exercise of the option and on the stock acquired under an
option are contained in stock option award agreements. Such award agreements for
options granted after January 1, 2000 provide that if the option is exercised
within two years of the date of grant, the Company will have the right to
repurchase the acquired stock at the exercise price for the balance of the
two-year period; for options granted prior to January 1, 2000, the restricted
period is four years; for options granted outside the U.S., vesting schedules
and procedures may vary. These restrictions lapse upon a change of control of
the Company, or upon death, regular retirement under the Company's Pension Plan,
or permanent disability.
Options may be exercised by payment of the option price in cash or, at the
discretion of the Committee, by delivering stock of the Company. At the
discretion of the Committee, a plan participant who exercises any option may
receive a replacement option for the same number of shares that the participant
purchases in exercising the original option. The exercise price of the
replacement option will be equal to the current fair market value at the time
the replacement option is issued, and the term of the replacement option will be
the same as the remaining balance of the term of the original option.
PERFORMANCE SHARE AWARDS
Performance Share Awards have been granted to senior management in the past, but
all unearned awards were cancelled in July 1999. These contingent awards were in
the form of shares of restricted stock ("Performance Shares"). The awards were
earned by participants over a specified award period commencing with the year of
award ("Award Period"). It is anticipated that, when new awards are made, the
length of the Award Period will be three years.
During an Award Period, the participant is the beneficial owner of the
Performance Shares and is entitled to vote the shares. Certificates are issued
in the participant's name with restrictive legends and are retained by the
Company. Dividends are reinvested in additional shares of restricted stock. A
new Performance Share Award can be made each year, with a new Award Period
commencing at the beginning of each calendar year.
Performance Share Awards will be earned over the Award Period as determined by
the Committee. This determination is presently based on 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 or
shareholder returns. These can be measured in comparison to the performance of a
group of peer companies selected by the Committee or based on the Company's
results. In applying any of these criteria, the Committee may calculate earnings
excluding discontinued operations and extraordinary items. The Plan is being
amended to add return on investment as a possible additional measurement. At the
end of an Award Period, the Committee measures the degree to which the
established performance goals have been met. The contingent award is reduced if
the goal is not met, or supplemented if the goal is exceeded. At such time,
restrictions are removed on the award so earned.
In the event of a participant's death, disability, or retirement with 20 years
of service, at age 61; with 10 years of service, at age 62; or with 5 years of
service, at age 65, the restrictions may be removed on a portion of the
outstanding Performance Shares equal to the pro rata portion of each award that
would
17
<PAGE>
have been earned if Company performance reached the established goals for those
Award Periods.
In the event of a "change of control" of the Company, all restrictions will be
removed on earned awards and on a pro rata portion of the contingent awards for
each uncompleted award period based on the number of months completed prior to
the change of control. As used in this Proxy Statement and in the Plan, a change
of control is defined as the acquisition by any person (other than Company
employee-benefit plans) of beneficial ownership of 20% or more of the Company's
outstanding stock, or a change of more than 50% of the members of the Board over
a period of two years or less (except for changes approved by two-thirds of the
directors who were in office at the beginning of the period).
The maximum number of Performance Shares that can be earned by any individual
for any one Award Period is 100,000 shares.
CONTINUITY AWARDS
Continuity Awards presently may consist of a contingent grant of restricted
stock, a non-qualified stock option, or a tandem grant of restricted stock
together with a related non-qualified stock option, in such amount and upon such
terms and conditions as determined by the Committee. The amended Plan will
provide specifically for two types of Continuity Awards, an "executive
continuity award" and a regular "continuity award." The executive continuity
awards will consist solely of a tandem award as described below; a regular
continuity award will consist of restricted stock. The Committee or its delegate
will determine the recipients and terms of this type of restricted stock award.
Under the Plan, at the discretion of the Committee, stock appreciation rights
may be awarded separately or in combination with other awards or grants.
Generally, the amendments to the Plan do not change the operation of the
executive continuity award provisions of the Plan. Under these provisions, the
participant is entitled to vote the restricted shares included in the award.
Dividends are reinvested in additional shares of restricted stock, subject to
the same restrictions, terms, and conditions. Upon attainment of an age
determined by the Committee, or the permanent disability or death of the
executive, or upon a change of control of the Company, the restrictions on the
award are removed and the award will vest in the following manner: (a) if the
current realizable gain on the tandem stock option is greater than the current
fair market value of the related shares of restricted stock (including
reinvested dividends), then all such shares of restricted stock will be
cancelled and the stock option will continue for its remaining term; (b) if the
current fair market value of the shares of restricted stock (including
reinvested dividends) is greater than the current realizable gain on the related
tandem stock option, then the option will be cancelled and the restrictions will
be removed from all of the related shares of restricted stock. If the tandem
option is exercised prior to an age determined by the Committee, then the
related shares of restricted stock will be cancelled, and the additional shares
issued upon the exercise of the option will be restricted and subject to
forfeiture or repurchase by the Company at the option exercise price for a
period ranging up to twelve years, or longer, from the date of the award as set
forth in the award agreement. If there is a change of control of the Company,
all restrictions on the executive continuity award will be removed.
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<PAGE>
PLAN BENEFITS
Because all determinations regarding the selection of participants and the size
of each award made to a participant will be made in the future, it is impossible
to determine at this time the benefits or amounts that any person or persons
will receive in the future (except that they will not exceed the maximums set
forth in the Plan).
The exercise price of each option will not be less than the fair market value of
the underlying stock at the time the option is granted. The option may be
exercised by full payment of the option price in cash or, at the discretion of
the Committee, by delivering stock of the Company. At the discretion of the
Committee, a participant who exercises an option may receive a replacement
option for the same number of shares that the participant purchases in
exercising the original option. The exercise price of the replacement option
will be equal to the fair market value at the time the replacement option is
issued, and the term of the replacement option will be the same as the remaining
balance of the term of the original option. Shares received upon exercise of an
option will be subject to the restrictions included in the award agreement.
Information regarding past awards made under the Plan to persons named in the
Summary Compensation Table is provided elsewhere in this Proxy Statement as part
of the disclosure of the executive compensation program for management. The
following summarizes the awards made in 1999 under the Plan (or 1998 for the
Performance Shares) to all current executive officers of the Company, and all
other employees, including non-elected officers:
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER OF SHARES
COVERED
BY AWARDS
---------------------
ALL
EXECUTIVE ALL OTHER
OFFICERS EMPLOYEES
--------- ---------
Stock Options (1)........................................... 531,517 3,990,110
Performance Shares (2)...................................... 81,199 239,609
Continuity Award Shares (3)................................. 8,000 63,900
</TABLE>
(1) Includes replacement options granted in 1999. These figures do not include
the tandem option awards made as part of the Continuity Awards of
stock/options, insofar as these are characterized as Continuity Award
Shares.
(2) Includes the total number of shares contingently awarded in 1998 under the
Plan to be earned over five years by participants. No such awards were made
in 1999 and these awards were cancelled in July, 1999.
(3) Includes the total number of shares contingently awarded in 1999 under the
Plan as Continuity Awards of stock/options, to be fully vested upon reaching
certain ages unless the options are exercised. Tandem options equal to five
times the number of shares constitute the option portion of these awards.
APPROVAL OF ITEM NO. 2 REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF RECORD OF
A MAJORITY OF OUTSTANDING SHARES OF COMMON STOCK ENTITLED TO VOTE. ABSTENTIONS
AND BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING VOTED FOR THE ITEM NO. 2 AND,
ACCORDINGLY, WILL HAVE THE EFFECT OF A VOTE AGAINST ITEM NO. 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
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VOTE FOR ADOPTION OF THE AMENDED LONG-TERM INCENTIVE COMPENSATION PLAN AS SET
FORTH IN APPENDIX A.
3. 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 2000.
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
LLP as independent auditor for 2000. 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 2000.
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REPORT OF THE MANAGEMENT DEVELOPMENT
AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
As of December 31, 1999, the Management Development and Compensation Committee
(the "Committee") consisted of six outside directors: Peter I. Bijur, Robert J.
Eaton, James A. Henderson, Robert D. Kennedy, Donald F. McHenry, and Charles R.
Shoemate. Mr. Eaton is chairman. The Committee met seven times in 1999 with a
92% attendance record. The chairman and chief executive officer of the Company
was not present during any discussion of his compensation.
GENERAL
Total compensation received by the named executive officers consists of salary,
cash bonus, stock options, and restricted stock. The 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. In 1999, the Committee determined that the comparator group of 39
companies should be reduced to 15 manufacturing-based companies only.
International Paper also uses independent compensation consulting firms to
advise the Committee. In 1999, the comprehensive pay study of senior management
positions originally conducted in 1997, was updated. The 15 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 compared to the
average of the comparator group's competitive pay.
The Company's Management Incentive Plan (MIP) was amended by the Board in 1999
for the 2000 plan year. The qualitative nonfinancial performance factors, such
as customer focus, people development, safety and environment and quality were
eliminated as measurements in determining MIP awards. The amended MIP now
directly links payment of an annual cash bonus to the achievement of (1) the
Company's return on investment compared to Peer Paper Group's average return
(seven companies which comprise the Peer Line of the Performance Graphs on page
25;
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<PAGE>
and (2) the Company's return on investment compared to budget. Performance in
1999 against financial targets was below threshold when we compare the Company's
return on investment to the Peer Paper Group's return on investment, and
exceeded 100% of goal when we compare the Company's return on investment to
budget. Accordingly, the bonus awards as set out on pages 26 and 27 were earned
for 1999, and, in the aggregate, were paid below target.
The Company's Long-Term Incentive Compensation Plan approved by the shareholders
in 1989 and amended in 1994 and 1999, provides for awards of stock options and
restricted stock in the form of performance shares which are made in amounts
which the Committee determines to be competitive based on the study described
above. Under that Plan, stock options were granted at or above fair market value
at the time of the award and were restricted for four years. In addition, under
that Plan, contingent awards of performance shares were traditionally 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 was determined by financial
performance which the Committee measured by comparing the Company's and Peer
Paper Group's and weighing equally, the five-year average return on equity and
earnings per share.
The Committee approved the implementation of a Transitional Performance Unit
Plan for an interim period (July 1, 1999 through December 29, 2000), pending
shareholder approval of the amendments to the Company's Long-Term Incentive
Compensation Plan to be implemented commencing January 1, 2000. Accordingly, the
Committee canceled unearned performance share awards under the Company's
pre-amended Plan, and in consideration for such cancellation, lifted the
restrictions on awards that were previously earned, but had been further
restricted for an additional three years. The Committee granted contingent
awards under the Transitional Performance Unit Plan to provide incentive to
senior managers to achieve additional return on investment during the interim
period stated above. These one-time awards are expressed as performance units
and are earned in full or in part, based on the level of achievement of return
on investment improvement as determined by the Committee.
In addition, to facilitate a successful, expedient and cost-effective
integration of Union Camp Corporation into International Paper, the Committee
approved the Savings and Synergy Incentive Plan. Under it, the Committee granted
contingent awards to key senior managers as an incentive to achieve stated
annual savings and specific conditions over the 18-month award period, May 1,
1999 to November 1, 2000. These one-time awards are expressed as stock units and
are earned in full or in part, based upon the Committee's determination of the
level of achievement of the plan's stated objectives.
The Committee also approved a separate Chief Executive Officer Performance
Incentive Plan and granted contingent awards of restricted stock units and
nonqualified stock options to the Company's Chief Executive Officer. These
awards will be earned based on his (1) successfully initiating and accomplishing
the acquisition of Union Camp Corporation and (2) achieving specified savings to
the Company. The awards will be earned in full or in part, based upon the
Committee's determination of the level of achievement of the plan's stated
objectives.
From time to time executive continuity awards are made with long-term vesting
requirements which are designed to
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<PAGE>
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
terminates, then the less valuable component of the tandem award is canceled.
THE 1999 EXECUTIVE OFFICERS' COMPENSATION
The Committee approved merit salary increases for all named executive officers
based on competitiveness of the executives' pay and personal performance. In
April 1999, Mr. Dillon's salary was increased to $1,050,000, which is
approximately the average base salary level for CEO's in the group of surveyed
companies referred to above. Salaries paid to the named officers in 1999, were
competitively positioned from below to slightly above the average of the survey
companies.
MIP awards for the named executive officers for 1999 were determined by the
Committee after review of Company compared to predetermined 1999 financial goals
and in consideration of individual contributions. All named executive officers'
MIP awards increased compared to 1998.
The Committee lifted restrictions on earned, mandatorily deferred performance
share awards under the Company's restricted stock plan, and granted contingent
awards under the Company's Transitional Performance Unit Plan to named
executives as described above. The one-time transitional awards will be earned
in full or in part, based on the level of achievement of ROI improvement as
determined by the Committee. The actual payout of these awards will not be
determined until December 2000.
As described above, the Committee granted one-time contingent awards under the
Company's Savings and Synergy Incentive Plan to four of the named executives.
These one-time awards will be earned in full or in part, based on the
achievement of the plan's stated objectives as determined by the Committee. The
actual payout of these awards will not be determined until November 2000. In
addition, the Committee granted 150,000 fully vested stock options to
Mr. Dillon under the Chief Executive Officer Performance Incentive Plan for
successfully accomplishing the acquisition of Union Camp Corporation. A
contingent award of 50,000 restricted stock units was granted and will be earned
in full or in part as of October 31, 2000, based upon the level of achievement
of the integration savings objective as determined by the Committee.
The Committee granted stock options for 1999 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 1999 stock option award was 85,000; his 1998 stock option
award was 85,000; and his 1997 stock option award was 104,000 shares reflecting
his promotion to chief executive officer.
In 1999, no named executive officers were granted continuity awards.
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<PAGE>
The Committee has considered the provisions of the Omnibus Budget Reconciliation
Act of 1993 which limit deductibility of compensation paid to named executive
officers which exceeds $1 million. The Committee endorsed amendments to the
Company's Long-Term Incentive Compensation Plan in 1994 to make certain sections
of the Plan compatible with those provisions, while maintaining the Committee's
flexibility in the Company's Management Incentive Plan to exercise business
judgment in determining awards to take account of business conditions or the
performance of individual executives. In 1999, 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 MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
Peter I. Bijur
Robert J. Eaton, chairman
James A. Henderson
Robert D. Kennedy
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 or as a member of the compensation committee on the board of any
company where an executive officer of such company is a member of the Committee.
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, to file reports of ownership and changes in
ownership of Company stock 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 1999.
24
<PAGE>
PERFORMANCE GRAPH
The following chart compares 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 return, 1994-1999, assuming reinvestment of
dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
FIVE YEARS ENDED DECEMBER 31, 1999*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
International Paper 100 103 113 123 131 168
S&P 500 Index 100 138 169 225 290 351
Peer Group** 100 110 119 128 130 196
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
International Paper 100 103 113 123 131 168
S&P 500 Index 100 138 169 225 290 351
Peer Group** 100 110 119 128 130 196
</TABLE>
Assumes $100 invested on December 31, 1994.
* Total return assumes reinvestment of dividends.
** Includes Boise Cascade, Champion, Georgia Pacific, Mead,
Smurfit-Stone Container (includes only Stone Container prior to
11/19/98), Westvaco and Weyerhaeuser.
25
<PAGE>
ADDITIONAL INFORMATION
REGARDING EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is approved by the
Committee except for the compensation of the officer-directors. Their
compensation is first recommended by the Committee and then approved by the
Board of Directors.
The following tables set forth information with respect to the five most highly
compensated executive officers of the Company for the years 1997 - 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION CONTINGENT AWARDS
------------------------------------ ---------------------
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
SALARY BONUS COMPENSATION AWARD OPTIONS COMPENSATION
NAME AND POSITION YEAR ($) (1) ($) (2) ($) (3) ($) (4) (#) (5) ($) (6)
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
John T. Dillon as 1999 $1,035,000 $875,000 $ 0 $ 0 254,000 $ 226,952
<S> <C> <C> <C> <C> <C> <C> <C>
Chief Executive Officer 1998 $ 967,500 $775,000 $ 0 $1,467,900 160,000 $246,264
1997 $ 862,500 $850,000 $ 0 $1,421,001 160,300 $153,497
C. Wesley Smith as 1999 $ 527,917 $300,000 $ 0 $ 0 64,400 $114,070
Executive Vice President 1998 $ 502,083 $260,000 $ 0 $ 356,927 25,000 $155,637
1997 $ 465,000 $310,000 $ 0 $ 345,539 72,900 $ 97,052
James P. Melican as 1999 $ 528,333 $250,000 $ 0 $ 0 75,900 $101,166
Executive Vice President 1998 $ 510,000 $235,000 $ 0 $ 326,608 22,000 $109,824
1997 $ 493,333 $275,000 $ 0 $ 316,204 96,600 $ 93,834
David W. Oskin as 1999 $ 472,917 $300,000 $ 0 $ 0 62,800 $ 51,653
Executive Vice President 1998 $ 447,917 $240,000 $ 0 $ 326,608 50,800 $ 54,616
1997 $ 422,917 $275,000 $490,491 $ 316,204 57,500 $ 51,328
Marianne M. Parrs as 1999 $ 404,167 $240,000 $ 0 $ 0 20,200 $ 66,996
Executive Vice President 1998 $ 360,417 $215,000 $ 0 $ 298,823 20,200 $ 61,793
1997 $ 304,000 $225,000 $ 0 $1,889,301 33,600 $ 18,973
</TABLE>
(1) Salary paid in 1999 including amounts deferred.
(2) Management Incentive Plan awards paid in 2000 attributable to 1999,
including amounts deferred.
(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 a subsidiary.
(4) Represents (a) 100% of the value of gross target restricted performance
shares contingently awarded in 1998 for the 1999-2003 Award Period, and in
1997 for the 1998-2002 Award Period which are earned if the target goal is
met for an Award Period. No restricted performance shares were awarded in
1999. The awards were reduced if the goal was not met, or entirely forfeited
if the threshold goal was not met. Up to 15% of the value of the target
restricted performance shares were earned if the target goal was exceeded by
varying percentages; (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
26
<PAGE>
continuity awards of $1,600,000 in 1997 for Mrs. Parrs. The number and
dollar value of restricted stock holdings at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
RESTRICTED DOLLAR
STOCK VALUE
---------- ----------
<S> <C> <C>
John T. Dillon......................................... 111,375 $6,285,727
C. Wesley Smith........................................ 55,358 3,124,267
James P. Melican....................................... 64,178 3,622,046
David W. Oskin......................................... 55,519 3,133,354
Marianne M. Parrs...................................... 45,927 2,592,005
</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 these
awards are characterized as restricted stock awards. Such tandem options
were for 200,000 shares for Mrs. Parrs in 1997.
(6) 1999 totals represent (a) Company contributions to the Salaried Savings Plan
and Unfunded Savings Plan, (b) cost of group life insurance, (c) premium
payments grossed up for taxes for the Executive Supplemental Insurance Plan
(ESIP) and (d) accruals for ESIP lump-sum dividend payments as follows (the
letters correspond to the above items):
<TABLE>
<CAPTION>
(a) (b) (c) (d)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
John T. Dillon.......................... $86,880 $22,088 $97,138 $20,846
C. Wesley Smith......................... $37,820 $18,042 $40,987 $17,221
James P. Melican........................ $36,640 $ 9,950 $34,253 $20,323
David W. Oskin.......................... $ 7,680 $ 5,121 $29,480 $ 9,372
Marianne M. Parrs....................... $29,720 $ 8,321 $28,955 $ 0
</TABLE>
27
<PAGE>
The table below sets out information on the option grants made in 1999 to the
named executive officers:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OPTION GRANTS IN 1999
<CAPTION>
INDIVIDUAL GRANTS
(A) (B) (C) (D) (E) (F)
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE
GRANTED TO EMPLOYEES PRICE EXPIRATION GRANT DATE VALUE
NAME AND POSITION (#) (1) IN 1999 ($/SH) DATE ($) (2)
<S> <C> <C> <C> <C> <C>
John T. Dillon as 19,000(4) 0.42 $52.6250 01/29/07 $ 208,156
Chief Executive Officer 85,000(3) 1.88 $46.0000 01/12/09 $2,143,440
150,000(3) 3.32 $50.0000 06/08/09 $1,117,444
C. Wesley Smith as 8,600(4) 0.19 $54.3130 01/09/00 $ 16,763
Executive Vice President 25,000(3) 0.55 $46.0000 01/12/09 $ 174,326
15,400(4) 0.34 $54.3750 01/11/04 $ 174,326
15,400(4) 0.34 $54.3750 01/10/05 $ 328,660
James P. Melican as 22,000(3) 0.49 $46.0000 01/12/09 $ 185,547
Executive Vice President 15,400(4) 0.34 $57.8750 01/11/04 $ 185,547
15,400(4) 0.34 $57.8750 01/10/05 $ 185,547
15,400(4) 0.34 $57.8750 01/09/06 $ 92,773
7,700(4) 0.17 $57.8750 01/29/07 $ 289,221
David W. Oskin as 22,000(3) 0.49 $46.0000 01/12/09 $ 113,088
Executive Vice President 9,600(4) 0.21 $52.5000 01/09/00 $ 133,028
12,000(4) 0.27 $53.2500 01/10/05 $ 106,423
9,600(4) 0.21 $53.2500 01/12/03 $ 106,423
9,600(4) 0.21 $53.2500 01/14/02 $ 289,221
Marianne M. Parrs 3,200(4) 0.07 $52.6250 01/09/00 $ 10,118
as Executive Vice President 17,000(3) 0.38 $46.0000 01/12/09 $ 223,489
</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)".
(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> <C>
Expected stock price volatility.................. 33.00% 33.00%
Risk-free rate of return......................... 4.78% 5.47%
Dividend yield................................... 2.08% 2.05%
Expected option term (years)..................... 4.39 2.09
</TABLE>
28
<PAGE>
The table below sets out the information on options exercised and options
outstanding:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
AGGREGATED OPTION EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION VALUES
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
VALUE REALIZED ($) 12/31/99(#)(4) 12/31/99 ($) (4)
SHARES ----------------------- ------------------------- -------------------------
ACQUIRED
ON EXERCISE AGGREGATE ANNUALIZED UNRESTRICTED RESTRICTED
NAME AND POSITION (#) (1) (1) (2) UNRESTRICTED RESTRICTED (3) (3)
John T. Dillon 19,000 $ 220,875 $ 78,603 245,737 300,000 $ 1,063,825 $2,992,997
<S> <C> <C> <C> <C> <C> <C> <C>
as Chief Executive
Officer
C. Wesley Smith 43,400 $ 526,094 $108,315 70,200 100,500 $ 128,000 $1,228,653
as Executive Vice
President
James P. Melican 53,900 $1,037,575 $273,232 87,500 89,100 $ 17,719 $ 695,158
as Executive Vice
President
David W. Oskin 40,800 $ 376,500 $127,804 60,000 89,100 $ 226,050 $1,065,191
as Executive Vice
President
Marianne M. Parrs 3,200 $ 34,738 $ 7,986 20,000 70,000 $ 203,475 $ 853,130
as Executive Vice
President
</TABLE>
(1) All of Mr. Dillon's and Mr. Melican's exercises were made by stock
"swaps". Mr. Dillon used 16,347 of his own shares to exercise and pay
taxes on these 19,000 options, resulting in a net increase in his Company
ownership of 2,653 shares. Mr. Melican used 40,747 of his own shares to
exercise and pay taxes on these 53,900 options, resulting in a net
increase in his Company ownership of 13,153.
(2) Represents the aggregate incremental value realized divided by the number
of years the option was held prior to exercise.
(3) Total value of options (market value minus exercise price) based on fair
market value of Company stock $56.4375, as of December 31, 1999.
(4) Options granted as part of the tandem awards of restricted stock/options
made as continuity awards are not included.
29
<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>
<S> <C> <C> <C> <C> <C>
CREDITABLE YEARS OF SERVICE
PENSIONABLE ------------------------------------------------------
REMUNERATION 15 20 25 30 35
$ 400,000 $186,968 $191,762 $191,762 $192,162 $ 225,562
$ 600,000 $284,468 $291,762 $291,762 $292,362 $ 342,462
$ 800,000 $381,968 $391,762 $391,762 $392,562 $ 459,362
$1,000,000 $479,468 $491,762 $491,762 $492,762 $ 576,262
$1,500,000 $723,218 $741,762 $741,762 $743,262 $ 868,512
$2,000,000 $966,968 $991,762 $991,762 $993,762 $1,160,762
</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, 1999, the
number of creditable years of service and pensionable remuneration for the named
officers was:
<TABLE>
<CAPTION>
NAME YEARS REMUNERATION
- ---- -------- ------------
<S> <C> <C>
Mr. Dillon............... 32.92 $1,910,000
Mr. Smith................ 19.33 $ 827,917
Mr. Melican.............. 15.92 $ 778,333
Mr. Oskin................ 24.25 $ 772,917
Mrs. Parrs............... 25.25 $ 644,167
</TABLE>
Matching the creditable years with the table above will indicate annual pension
benefits.
30
<PAGE>
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. In addition to the change in control, the officer's employment would
need to be 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
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. Under such circumstances, 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 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
31
<PAGE>
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 if he had not left the Company.
The Board requires unanimous approval at a meeting of the Management Development
and Compensation Committee, 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,
1999, would have been approximately $41,000,000.
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 Section 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.
32
<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 the Plan is January 1, 1989. The Plan was amended in
1994 AND 1999 by a vote of shareholders. Subject to the approval of this
AMENDMENT [Plan as amended hereby] by a majority of shareholders of the Company
entitled to vote on the matter at the 2000 [1999] annual meeting of
shareholders, certain changes to the Plan will also be effective AS OF
JANUARY 1, 2000.
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, TO DELEGATE THE GRANTING OF
AWARDS HEREUNDER, and to adopt such rules and regulations for carrying out the
Plan as it may deem appropriate. Decisions of the Committee OR ITS DELEGATES 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.
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 OR ITS DELEGATES.
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 OR ITS DELEGATES, in THEIR [its] absolute discretion
A-1
<PAGE>
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 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
A-2
<PAGE>
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
SUBJECT TO THE ADJUSTMENTS PERMITTED BY SECTION 6 OF THE PLAN, an aggregate
of twenty-five million five-hundred thousand (25,500,000) Shares shall be
available under the Plan as amended by the shareholders at the 1999 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 Plan, as previously amended, which are not yet issued to, or are
reacquired from, participants in 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 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.
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 OR ITS DELEGATES.
A-3
<PAGE>
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 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).
A-4
<PAGE>
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. The first complete Award Period under this Plan 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 INVESTMENT,
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 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.
(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.
A-5
<PAGE>
(i) In the event a Change of Control of the Company occurs, then
(A) all restrictions shall be immediately removed with respect to all
earned Performance Shares and
(B) 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 AND ITS DELEGATES 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, SUBJECT TO THE ADJUSTMENTS PERMITTED
BY SECTION 6 OF THE PLAN.
(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.
(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
A-6
<PAGE>
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) or such
other age as is determined in the sole discretion of the Committee, or upon a
Change of Control of the Company (as limited under subsection (h) 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.
(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 AN AGE DETERMINED BY THE COMMITTEE [age
65], the related shares of restricted Shares shall be canceled, and the
additional Shares issued upon the exercise of the
A-7
<PAGE>
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.
16. TERMS AND CONDITIONS OF OTHER CONTINUITY AWARDS
(A) AWARDS OF RESTRICTED STOCK, HEREINAFTER CALLED "CONTINUITY AWARDS" MAY
BE MADE FROM TIME TO TIME UNDER THE PLAN AT THE DISCRETION OF THE COMMITTEE OR
ITS DELEGATES, IN SUCH AMOUNTS AND UPON SUCH TERMS AND CONDITIONS AS ARE
ESTABLISHED BY THE COMMITTEE OR ITS DELEGATES UNDER THIS PORTION OF THE PLAN.
ALL DIVIDENDS PAID ON THE RESTRICTED SHARES SHALL BE REINVESTED IN ADDITIONAL
SHARES OF RESTRICTED SHARES (SUBJECT TO THE SAME RESTRICTIONS, TERMS AND
CONDITIONS.)
(B) AS A CONDITION OF ANY SUCH CONTINUITY AWARD UNDER THIS PLAN, EACH
PARTICIPANT SHALL ENTER INTO AN AWARD AGREEMENT AUTHORIZED BY THE COMMITTEE OR
ITS DELEGATES. THE COMMITTEE OR ITS DELEGATES, IN THEIR SOLE DISCRETION, MAY
INCLUDE ADDITIONAL CONDITIONS OR RESTRICTIONS IN THE AWARD AGREEMENT.
(C) IN THE EVENT A CHANGE OF CONTROL OF THE COMPANY OCCURS, ALL RESTRICTIONS
SHALL BE IMMEDIATELY REMOVED WITH RESPECT TO SHARES ISSUED AS A CONTINUITY
AWARD. 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
A-8
<PAGE>
ACCORDANCE WITH THE STANDARDS SET FORTH IN SECTION 717 OF THE NEW YORK BUSINESS
CORPORATION LAW OR ANY SUCCESSOR PROVISION.
MISCELLANEOUS
17. 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 continued to
be subject to the terms of the Plan and the instruments evidencing such awards
prior to such amendments becoming effective.
18. 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>
[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>
INTERNATIONAL [LOGO] 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 III DIRECTORS, THE ELECTION OF ONE CLASS
I DIRECTOR AND THE ELECTION OF ONE CLASS II DIRECTOR, FOR ITEM 2, AND FOR ITEM
3, 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 9,
2000 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 THREE 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.
OR
3. Vote via the Internet: http://www.eproxy.com/ip
PLEASE VOTE
<PAGE>
- --------------------------------------------------------------------------------
Please mark |X|
The Board of Directors Recommends a vote "FOR" proposals 1, 2, your votes as
and 3. indicated in
this example
FOR ALL
FOR WITHHOLD EXCEPT
The Board recommends a vote "FOR" |_| |_| |_|
Item 1-Election of the following
nominees as Directors:
Class III (3-year term) Class I (1-year term)
01 Robert J. Eaton 06 James A. Henderson
02 John R. Kennedy
03 Donald F. McHenry Class II (2-year term)
04 Patrick F. Noonan 07 Robert D. Kennedy
05 Charles R. Shoemate
-------------------------------
Except Nominee(s) written above
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 2 - |_| |_| |_|
Approval of amendments to the Company's
Long Term Incentive Compensation Plan
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 3 - |_| |_| |_|
Appointment of Independent Auditors
- --------------------------------------------------------------------------------
**PLEASE RETURN YOUR PROXY OR IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
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 ^
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE
- --------------------------------------------------------------------------------
CALL TOLL FREE ON A TOUCH-TONE TELEPHONE ANYTIME
1-800-840-1208
THERE IS NO CHARGE TO YOU FOR THIS CALL.
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.
o 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. To 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.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
VOTE VIA THE INTERNET
- --------------------------------------------------------------------------------
http://www.eproxy.com/ip
Your Internet vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy cards. You must enter
your control number listed below. Follow the simple instructions.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD
IF YOU VOTED BY PHONE OR VIA THE INTERNET.
- --------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL [LOGO] 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, 1999, you may instruct the Trustee
how to vote such shares at the Annual Meeting of Shareholders to be held May 9,
2000. The 1999 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 4, 2000, 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
one Class I, one Class II and five Class III Directors, FOR Item 2, and FOR Item
3.
STATE STREET BANK & TRUST CO.
Trustee
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE 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.
OR
3. Vote via the Internet: http://www.eproxy.com/ipplans
PLEASE VOTE
<PAGE>
- --------------------------------------------------------------------------------
To State Street Bank & Trust Co., Trustee of the Salaried Please mark |X|
Savings Plan, Retirement Savings Plan, and Hourly Savings Plan your votes as
of International Paper: I understand that the Board of indicated in
Directors proxy referred to on the reverse authorizes the this example
proxy holders to vote "FOR" or "WITHHOLD AUTHORITY" on the
election of Class I, II and III Directors; and to vote "FOR",
"AGAINST" or "ABSTAIN" on Items 2 and 3 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" |_| |_| |_|
Item 1-Election of the following
nominees as Directors:
Class III (3-year term) Class I (1-year term)
01 Robert J. Eaton 06 James A. Henderson
02 John R. Kennedy
03 Donald F. McHenry Class II (2-year term)
04 Patrick F. Noonan 07 Robert D. Kennedy
05 Charles R. Shoemate
-------------------------------
Except Nominee(s) written above
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 2 - |_| |_| |_|
Approval of amendments to the Company's
Long Term Incentive Compensation Plan
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 3 - |_| |_| |_|
Appointment of Independent Auditors
- --------------------------------------------------------------------------------
**PLEASE RETURN YOUR PROXY OR IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
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 ^
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE
- --------------------------------------------------------------------------------
CALL TOLL FREE ON A TOUCH-TONE TELEPHONE ANYTIME
1-800-840-1208
THERE IS NO CHARGE TO YOU FOR THIS CALL.
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.
o 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. To 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.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
VOTE VIA THE INTERNET
- --------------------------------------------------------------------------------
http://www.eproxy.com/ipplans
Your Internet vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy cards. You must enter
your control number listed below. Follow the simple instructions.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD
IF YOU VOTED BY PHONE OR VIA THE INTERNET.
- --------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL [LOGO] PAPER
TO PARTICIPANTS IN THE PUERTO RICO CONTAINER EMPLOYEES' SAVINGS PLAN, UNION CAMP
CORPORATION SALARIED EMPLOYEES' SAVINGS AND INVESTMENT PLAN, UNION CAMP
CORPORATION FRANKLIN EMPLOYEE INVESTMENT PLAN, UNION CAMP CORPORATION PRATTVILLE
EMPLOYEE INVESTMENT PLAN, UNION CAMP CORPORATION SAVANNAH EMPLOYEE INVESTMENT
PLAN,UNION CAMP CORPORATION EMPLOYEES INVESTMENT PLAN, UNION CAMP CORPORATION
EMPLOYEES' SAVINGS AND INVESTMENT 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, 1999, you may instruct the Trustee
how to vote such shares at the Annual Meeting of Shareholders to be held May 9,
2000. The 1999 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 4, 2000, 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
one Class I, one Class II and five III Directors, FOR Item 2, and FOR Item 3.
T. Rowe Price
Trustee
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE 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.
OR
3. Vote via the Internet: http://www.eproxy.com/ipunion
PLEASE VOTE
<PAGE>
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To T. Rowe Price, Trustee of the Plans listed on the reverse Please mark |X|
side: I understand that the Board of Directors proxy referred your votes as
to on the reverse authorizes the proxy holders to vote "FOR" indicated in
or "WITHHOLD AUTHORITY" on the election of Class I, II and III this example
Directors; and to vote "FOR", "AGAINST" or "ABSTAIN" on Items
2, and 3 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" |_| |_| |_|
Item 1-Election of the following
nominees as Directors:
Class III (3-year term) Class I (1-year term)
01 Robert J. Eaton 06 James A. Henderson
02 John R. Kennedy
03 Donald F. McHenry Class II (2-year term)
04 Patrick F. Noonan 07 Robert D. Kennedy
05 Charles R. Shoemate
-------------------------------
Except Nominee(s) written above
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 2 - |_| |_| |_|
Approval of amendments to the Company's
Long Term Incentive Compensation Plan
FOR AGAINST ABSTAIN
The Board recommends a vote "FOR" Item 3 - |_| |_| |_|
Appointment of Independent Auditors
- --------------------------------------------------------------------------------
**PLEASE RETURN YOUR PROXY OR IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
PLEASE READ THE INSTRUCTIONS BELOW**
- --------------------------------------------------------------------------------
TRUSTEE AUTHORIZATION
I hereby authorize T. Rowe Price, as
Trustee under the Puerto Rico Container
Employees' Savings Plan, Union Camp
Salaried Employees' Savings and
Investment Plan, Union Camp Corporation
Franklin Employee Investment Plan, Union
Camp Corporation Prattville Employee
Investment Plan, Union Camp Corporation
Savannah Employee Investment Plan,Union
Camp Corporation Employee Investment
Plan, Union Camp Corporation Employees'
Savings and Investment 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. T. Rowe Price,
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 ^
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE
- --------------------------------------------------------------------------------
CALL TOLL FREE ON A TOUCH-TONE TELEPHONE ANYTIME
1-800-840-1208
THERE IS NO CHARGE TO YOU FOR THIS CALL.
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.
o 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. To 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.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
VOTE VIA THE INTERNET
- --------------------------------------------------------------------------------
http://www.eproxy.com/ipunion
Your Internet vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy cards. You must enter
your control number listed below. Follow the simple instructions.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD
IF YOU VOTED BY PHONE OR VIA THE INTERNET.
- --------------------------------------------------------------------------------
<PAGE>
PLEASE DETACH PROXY CARD HERE
YOUR VOTE IS IMPORTANT
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES "FOR" ITEMS 1, 2 AND 3
1. ELECTION OF DIRECTORS
FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below.
Nominees: Class III (3-Year Term) Robert J. Eaton, John R. Kennedy,
Donald F. McHenry, Patrick F. Noonan, Charles R. Shoemate
Class I (1-Year Term) James A. Henderson
Class II (2-Year Term) Robert D. Kennedy
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions: ___________________________________________________________________
2. Approval of amendments to the Company's Long Term Incentive
Compensation Plan
FOR / / AGAINST / / ABSTAIN / /
3. Appointment of Independent Auditors
FOR / / AGAINST / / ABSTAIN / /
In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting or any adjournment thereof.
/ / Change of Address and/or Comments
Mark Here
Please sign below exactly as name or names appear. If
stock is held in the name of joint holders, each
should sign. If you are signing as trustee, executor,
etc., please so indicate.
Dated: ________________________________________, 2000
_____________________________________________________
Signature
_____________________________________________________
Signature
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
Votes must be indicated
(x) in Black or Blue ink. /X/
- --------------------------------------------------------------------------------
==============================================
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE
==============================================
<PAGE>
INTERNATIONAL PAPER COMPANY
TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577
This Proxy is solicited on behalf of the Board of Directors.
This proxy is solicited on behalf of the Board of Directors and will be
voted FOR item 1, the election of five Class III Directors, the election of one
Class I Director and the election of one Class II Director, FOR item 2, and FOR
item 3, 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 9, 2000 or adjournment thereof. The proxies are instructed as indicated
on the reverse side. This proxy revokes all prior proxies given by the
Undersigned.
(PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE)
INTERNATIONAL PAPER COMPANY
P.O. BOX 11439
NEW YORK, N.Y. 10203-0439
