-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QuFUK1AFDMR643noM81kuy9hRtiTKrPJbGK3oTh+JuIg4BgVd1dROKKUqF008g1c 9CStN84plwWn9eEviy0VRA== 0000912057-96-005248.txt : 19960328 0000912057-96-005248.hdr.sgml : 19960328 ACCESSION NUMBER: 0000912057-96-005248 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960509 FILED AS OF DATE: 19960327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL PAPER CO /NEW/ CENTRAL INDEX KEY: 0000051434 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 130872805 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03157 FILM NUMBER: 96539006 BUSINESS ADDRESS: STREET 1: TWO MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9143971500 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PAPER & POWER CORP DATE OF NAME CHANGE: 19710527 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 International Paper Company - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) Registrant - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 PROXY RULES 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:* ------------------------------------------------------------------------ 4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ * Set forth the amount on which the filing fee is calculated and state how it was determined. / / 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: ------------------------------------------------------------------------ [LOGO] TWO MANHATTANVILLE ROAD PURCHASE, NEW YORK 10577 JOHN A. GEORGES CHAIRMAN March 29, 1996 Dear Fellow Shareholders: The annual meeting of International Paper will be held this year at Swissotel Chicago, 323 East Wacker Drive, Chicago, Illinois. The meeting will start at 8:30 a.m., on Thursday, May 9, 1996. You are cordially invited to attend this meeting and we look forward to seeing you there. The following Proxy Statement outlines the business to be conducted at the meeting, which includes the election of one class of directors and one director to the remaining term of his designated class and approval of the appointment of Arthur Andersen LLP as independent auditors for 1996. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR REPRESENTATION AND VOTE ARE IMPORTANT. WE URGE YOU TO VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. Attendance at the meeting will be limited to shareholders of record as of the close of business on March 22, 1996, or their duly appointed proxy holder (not to exceed one proxy per shareholder), and to guests of management. If you or your proxy holder plan to attend this meeting, please complete, sign and return the enclosed Request for Admittance card. Thank you for your continued support. Sincerely, [SIGNATURE] JOHN A. GEORGES [LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE OWNERS OF COMMON STOCK OF INTERNATIONAL PAPER COMPANY: The annual meeting of shareholders of International Paper Company will be held Thursday, May 9, 1996, at 8:30 a.m. at the Swissotel Chicago, 323 East Wacker Drive, Chicago, Illinois to: 1. Elect one class of directors comprised of five members to the Board of Directors and one director to the remaining term of his designated class; 2. Approve the appointment of Arthur Andersen LLP as independent auditors for 1996; and 3. Transact such other business as may properly come before the meeting or any adjournments thereof. YOUR BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE FOR ITEMS 1 AND 2. Shareholders of record at the close of business on March 22, 1996, will be entitled to vote at the meeting or any adjournments thereof. By order of the Board of Directors JAMES W. GUEDRY VICE PRESIDENT AND SECRETARY March 29, 1996 INTERNATIONAL PAPER COMPANY PROXY STATEMENT TWO MANHATTANVILLE ROAD PURCHASE, NEW YORK 10577 (914) 397-1500 GENERAL INFORMATION This statement is furnished by the Board of Directors of International Paper Company (the "Company") in connection with the solicitation of proxies to be voted at the annual meeting of shareholders to be held on May 9, 1996. Owners of shares of common stock outstanding are entitled to one vote for each share of common stock held of record at the close of business on March 22, 1996. As of that date, there were 291,649,514 shares of common stock outstanding. The annual report, including the audited financial statements of the Company for the fiscal year ended December 31, 1995, has been mailed to shareholders with this Proxy Statement and should be read carefully in conjunction with this Proxy Statement before voting on any proposals contained herein, as it contains details of the Company's operations and other relevant disclosures. PROXY PROCEDURE Shares eligible to be voted, and for which a proxy is properly signed and returned, will be voted in accordance with the instructions specified thereon. Where no instruction is received, eligible shares will be voted as recommended by the Board of Directors in this Proxy Statement. If any other matters come before the meeting, including any proposal submitted by a shareholder which was omitted from this Proxy Statement in accordance with the applicable provisions of the federal securities laws, the persons voting the proxies will vote them in accordance with their best judgment. As of the time this Proxy Statement was printed, management was not aware of any other matters to be voted upon. Any proxy may be revoked at any time before its exercise by submitting a written revocation or a new proxy, or by the shareholder's attendance and vote at the annual meeting. Solicitation of proxies from the Company's shareholders may be undertaken by directors, officers and employees, as well as by Georgeson & Company Inc. Payments to that firm as compensation are estimated at approximately $14,500 plus reimbursable expenses. This solicitation may be carried out either by mail, telephone, telegraph, or personal interview. The cost of any such solicitation will be borne by the Company. The Company has a policy of confidentiality in the voting of shareholder proxies generally and uses the services of its registrar and transfer agent, Chemical Mellon Shareholder Services L.L.C., as independent inspectors of election to receive and tabulate the proxy vote. This Proxy Statement and the form of Proxy were sent to shareholders commencing March 29, 1996. MEETING ADMITTANCE PROCEDURES Shareholders of record as of the close of business on March 22, 1996 (or their duly appointed proxy holder upon verification--not to exceed one proxy per shareholder) will be entitled to vote and attend the meeting. The following procedures have been adopted to insure that no inconvenience or delays are caused to the Company's shareholders or their proxy holders when entering the meeting. If you plan to attend the annual meeting in person or will appoint a proxy to attend the meeting (other than the proxies set forth on the proxy card), please complete (including the name of the appointed proxy, if any), sign and return the enclosed Request for Admittance promptly so that an admittance card can be reserved for you or your proxy in advance of the meeting. These admittance cards will be delivered to you or your proxy holder upon verification of identification at the shareholders' admittance counter at the meeting. Record shareholders who do not have admittance cards reserved for them at the meeting will be admitted upon verification of ownership at the shareholders' admittance counter. If you have not appointed a proxy in advance or have changed the appointed proxy on the Request for Admittance, your duly appointed proxy who will attend the meeting will be required to present evidence of your signature on the proxy (a copy of your driver's license or employment identification card or other identification with your signature) in order to determine that only valid proxies are admitted and voted. 2 Beneficial owners of record on March 22, 1996 (or their duly appointed proxy holder upon verification--not to exceed one proxy per shareholder) can obtain admittance cards only at the shareholders' admittance counter by presenting evidence of common stock ownership in the Company. This evidence could be a proxy from the institution that is the record holder of the stock or your most recent bank or brokerage firm account statement, along with proper identification. If you are a beneficial shareholder who will appoint a proxy to attend the meeting on your behalf, your duly appointed proxy will be required to comply with the procedures in this paragraph, as well as the admittance procedures described above for duly appointed proxies not designated in advance on the Request for Admittance. CORPORATE GOVERNANCE BOARD OF DIRECTORS The Board is classified into three classes of directors: Class II directors, of which there are currently four, were elected to serve until the 1996 annual meeting; Class III directors, of which there are currently five, were elected to serve until the 1997 annual meeting; and Class I directors, of which there are currently four, were elected to serve until the 1998 annual meeting. Each class is elected for a three-year term. In addition, Messrs. C. Wesley Smith and John R. Kennedy were elected directors, effective December 12, 1995 and March 12, 1996, respectively. Mr. Smith has been designed to stand for election as a Class II director at the 1996 annual meeting and Mr. Kennedy has been designed to stand for election as a Class I director at the 1996 annual meeting. Mr. Kennedy is to serve the remaining term of his designated class. Eleven regular meetings and seven special meetings of the Board of Directors were held in 1995. In addition, there were 28 Committee meetings. Each director attended at least 83% of the meetings of the Board and the Committees on which he or she serves. All of the directors attended an average of 95% of such meetings of the Board and the Committees on which he or she serves. In December 1995, a Company affiliate sold 6,184 acres of property in North Carolina to The Conservation Fund, a not-for-profit natural resources conservation entity, for approximately $1.6 million and a donation value of $1.5 million, which price approximates the fair market value as determined by the Company's land utilization department based upon an MAI independent appraisal. Mr. Noonan, a director of the Company, is chairman of The Conservation Fund but did not participate in the sale negotiations. Mr. John R. Kennedy, a director, was the president and chief executive officer of Federal Paper Board Company ("FPB") which merged into a Company subsidiary on March 12, 1996 (the "Merger"). As the holder of 662,856 shares of FPB, he received consideration valued at $36,457,080 in the Merger. Various trusts and other holdings of which Mr. Kennedy is a trustee, or co-trustee, held 316,612 FPB shares and received consideration valued at $17,413,660; Mr. Kennedy disclaims beneficial ownership of these shares and consideration. In addition, in the Merger, all FPB options were assumed by the Company. Since Mr. Kennedy held options for 274,000 FPB shares at an average exercise price of $25.45, these were converted into options for 398,397 Company shares at an average exercise price of $16.40. In the Merger, it was agreed that Mr. Kennedy's FPB bonus of $1,842,227 would be paid by the Company on January 1, 1997. He also will receive benefits from the FPB pension plan, the Benefit Equalization Plan and the Supplemental Executive Retirement Plan insofar as he retired from FPB coincident with the Merger. Finally, as part of the Merger, the Company agreed to take all necessary action to appoint Mr. Kennedy a Company director, which he became on March 12, 1996. Beneficial ownership of current directors in equity securities of the Company is shown in the table on page 6. AUDIT COMMITTEE The functions of the Audit Committee of the Board are to assist the Board in carrying out its responsibilities for monitoring management's accounting for the Company's financial results and for the timeliness and adequacy of the reporting of those results; to discuss and make inquiry into the audits of the Company's books made internally and by outside independent auditors, the Company's financial and accounting policies, its internal controls and its financial reporting; and to investigate and make a recommendation to the Board each year with respect to the appointment of independent auditors for the following year. 3 Current members of the Committee, none of whom is an employee of the Company, are J. C. Pfeiffer (Chairman), W.C. Butcher, A.G. Hansen, P.F. Noonan and R.B. Smith. Four meetings of the Committee were held in 1995. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE The functions of the Management Development and Compensation Committee are to review Company policies and programs for the development of management personnel; to make recommendations to the Board with respect to any proposals for compensation or compensation adjustments of officers who are also directors of the Company; to authorize compensation or compensation adjustments for other elected officers of the Company; to administer the Company's executive bonus and Long-Term Incentive Compensation Plan; to review and endorse changes in Company employee retirement and benefits plans; to review officer candidates and endorse nominees for election as officers; and to make recommendations to the Board with respect to directors' compensation. Current members of the Committee, none of whom is an employee of the Company, are S.C. Gault (Chairman), W.C. Butcher, R. J. Eaton, T.C. Graham, E.T. Pratt, Jr. and C. R. Shoemate. Nine meetings of the Committee were held in 1995. NOMINATING COMMITTEE The functions of the Nominating Committee are to review the size and composition of the Board; to review possible director candidates and director nominations properly presented by shareholders; to recommend to the Board individuals suitable for election as directors; to review and recommend annually to the full Board the slate of nominees for election by the Company's shareholders; and to review assignments of individual Board members to various Board committees. Current members of the Committee, none of whom is an employee of the Company, are W.C. Butcher (Chairman), D.F. McHenry, J.C. Pfeiffer, E.T. Pratt, Jr. and C.R. Shoemate. Two meetings of the Committee were held in 1995. ENVIRONMENT, HEALTH AND TECHNOLOGY COMMITTEE The functions of the Environment, Health & Technology Committee are to discuss and make inquiries into the environmental and safety audits performed by the Company's internal auditors; to review environmental, safety and health and technological policies and programs throughout the Company, to assure that they are appropriate to the short- and long-term objectives of the Company in terms of industry leadership, compliance with federal and state laws and regulations and social responsibility; and to advise the Board of the effectiveness of these policies and programs. Current members of the Committee are T.C. Graham (Chairman), J.T. Dillon, R.J. Eaton, S.C. Gault, A.G. Hansen and P.F. Noonan. Five meetings of the Committee were held in 1995. OTHER COMMITTEES Membership of the other regular Committees of the Board of Directors is shown on page 69 of the Company's annual report. FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS Any shareholder proposals intended to be presented at the 1997 annual meeting must be made in writing and received by the Secretary of the Company at the Company's principal executive offices by the close of business on December 4, 1996, for inclusion in the 1997 Proxy Statement and form of proxy relating to the meeting. Nomination by shareholders for directors, at a meeting called for the purpose of electing directors, shall be made in accordance with Article II, Section 9 of the Company's By-laws, as set forth below: "Nominations for election to the Board of Directors of the Corporation at a meeting of the Stockholders may be made by the Board, or on behalf of the Board by any nominating committee appointed by the Board, or by any Stockholder of the Corporation entitled to 4 vote for the election of Directors at such meeting. Such nominations, other than those made by or on behalf of the Board, shall be made by notice in writing delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation, and received by him not less than thirty (30) days nor more than sixty (60) days prior to any meeting of the Stockholders called for the election of Directors; provided, however, that if less than thirty-five (35) days notice of the meeting is given to the Stockholders, such nomination shall have been mailed or delivered to the Secretary of the Corporation not later than the close of business on the seventh (7th) day following the day on which the notice of meeting was mailed. Such notice shall set forth as to each proposed nominee who is not an incumbent Director (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee and by the nominating Stockholder, and (iv) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations pursuant to Rule 14(a) of the Securities Exchange Act of 1934. Such notice shall be accompanied by the written consent of each proposed nominee to serve as a Director of the Corporation. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth herein. "The Presiding Officer of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded." The effect of this By-law is that shareholder nominations for the 1997 election of directors must be received by the Secretary of the Company not earlier than March 17, 1997, or later than April 14, 1997, if the annual meeting is held on the second Tuesday of May, 1997. 5 COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT The following table shows, as of March 22, 1996, the number of shares of Company common stock beneficially owned (as defined by the Securities and Exchange Commission) or otherwise claimed by each current director and each nominee for director and by all directors and executive officers of the Company as a group, as adjusted for the two-for-one stock dividend on September 15, 1995. To the best knowledge of the Company, no person or group beneficially owns more than 5% of the Company's common stock outstanding, except as set forth below in the table.
- ---------------------------------------------------------------- SHARES PERCENT OF TOTAL NAME OF INDIVIDUAL BENEFICIALLY COMMON STOCK OR GROUP OWNED (1) OUTSTANDING - ---------------------------------------------------------------- W.C. Butcher 5,184 J.T. Dillon 239,591 R.J. Eaton 3,400 S.C. Gault 19,146 No director or executive J.A. Georges 471,958 officer owns as much as T.C. Graham 13,160 1/5th of 1% A.G. Hansen 6,416 J.R. Kennedy 152,629 D.F. McHenry 5,877 P.F. Noonan 2,050 J.C. Pfeiffer 5,571 E.T. Pratt 5,160 C.R. Shoemate 2,100 C.W. Smith 143,869 R.B. Smith 7,000 J.P. Melican 143,813 M.J. Turk 74,903 All directors and executive officers as a group 1,721,590 0.59% Bank trustee under Company and subsidiary employee benefit plans (2) 22,407,510 7.68% - ----------------------------------------------------------------
(1) Ownership shown includes securities over which the individual has or shares, directly or indirectly, voting or investment powers, including shares held in the Restricted Stock Plan for Non-Employee Directors, shares owned by a spouse or certain relatives and ownership by trusts for the benefit of such relatives, as required to be reported by the Securities and Exchange Commission. Certain individuals may disclaim beneficial ownership of some of these shares, but they are included for the purpose of computing the holdings and the percentages of common stock owned. Interests in shares resulting from participation in the Company's Salaried Savings Plan, Performance Share Awards, and Executive Continuity Awards, are included above. The above table does not include 1,507,337 shares represented by stock options granted executive officers under the Long-Term Incentive Compensation Plan, including options for 749,500 shares for Mr. Georges, 157,037 shares for Mr. Dillon, 131,000 shares for Mr. Melican, 99,200 shares for Mr. C.W. Smith and 66,000 shares for Mr. Turk. In addition, under the 6 Nonfunded Deferred Compensation Plan for Non-Employee Directors or the Unfunded Savings Plan, the Directors and executive officers (as indicated by the asterisk) listed below own or have a restricted right to the non-voting stock-equivalent Units set forth in the following chart:
- -------------------------------------------------------------------------------- STOCK STOCK DIRECTOR UNITS DIRECTOR UNITS - -------------------------------------------------------------------------------- W.C. Butcher 20,025 P.F. Noonan 2,159 J.T. Dillon* 157,037 J.C. Pfeiffer 4,610 R.J. Eaton 2,554 E.T. Pratt 38,820 J.A. Georges* 349,500 C.R. Shoemate 3,214 T.C. Graham 24,048 C.W. Smith* 99,200 S.C. Gault 7,425 R.B. Smith 20,116 A.G. Hansen 16,325 J.P. Melican* 131,000 D.F. McHenry 24,346 M.J. Turk* 66,000 - --------------------------------------------------------------------------------
(2) As of December 31, 1995, State Street Bank & Trust Co., N.A. holds such shares as the independent trustee in trust funds for employee savings, thrift, and similar employee benefit plans of the Company and its subsidiaries ("Company Trust Funds"). In addition, State Street Bank & Trust Co., N.A. is trustee for various third party trusts and employee benefits plans and is an Investment Advisor. As a result of its holdings in all capacities, State Street Bank & Trust Co., N.A. is the record holder of 24,676,896 shares of common stock of the Company. The trustee disclaims beneficial ownership of all such shares except 2,256,208 of which it has sole power to dispose or to direct the disposition of. The common stock held by the Company Trust Funds is allocated to participants' accounts and such stock or the cash equivalent will be distributed to participants upon termination of employment or pursuant to withdrawal rights. The trustee votes the shares of common stock held in the Company Trust Funds in accordance with the instructions of the participants; shares for which no instructions are received are voted proportionately to those shares voted by participants. MATTERS TO BE CONSIDERED AT THE MEETING ITEM NO. 1--ELECTION OF DIRECTORS Five (5) directors are to be elected as Class II directors for three-year terms expiring in 1999. One (1) director who joined the Board since the last annual meeting is to be elected as a Class I director, for a term expiring in 1998. Each nominee is currently a director of the Company. Election requires the affirmative vote by the holders of a plurality of outstanding common stock voting at the annual meeting of shareholders. A plurality means that the six (6) nominees receiving the largest number of votes cast will be elected. Votes which are withheld from any nominee, as well as broker non-votes, will not be counted in such nominee's favor. Shareholders voting at the meeting may not vote for more than the number of nominees listed in the Proxy Statement. Proxies given to management to vote will be voted according to instructions given, but only for nominees listed in the Proxy Statement. 7 The term of the present Class II directors expires at the adjournment of the 1996 annual meeting. The five nominees for election at the 1996 meeting as Class II directors are: CLASS II NOMINEES--TERM EXPIRING IN 1999 [PHOTO] WILLARD C. BUTCHER, 69, former Chairman and Chief Executive Officer of The Chase Manhattan Bank, N.A. He is a director of ASARCO, Incorporated, M.I.M. Holdings, Ltd. (Australia), Olympia & York Companies (U.S.A.) and Texaco Inc. He is a member of The Business Council, the International Advisory Board for Banca Nazionale del Lavaro, vice chairman of the International Advisory Committee for The Chase Manhattan Bank and vice chairman of the Lincoln Center for the Performing Arts, Inc. He is a trustee emeritus of the American Enterprise Institute for Public Policy Research and a fellow emeritus of Brown University and a trustee of Business Committee for the Arts, Inc. Director since August 1, 1989 [Photo] THOMAS C. GRAHAM, 69, Chairman of the Board of AK Steel Corporation. Previously, he was Chairman and Chief Executive Officer, elected to those posts concurrent with the formation of AK Steel, a publicly held corporation which emerged from the privately-held Armco Steel Company, L.P. in April of 1994. He had been named president and chief executive officer of Armco Steel in June 1992. He was formerly chairman and chief executive officer of Washington Steel Corporation until he assumed his current position in 1992. He was vice chairman--steel and diversified group and executive director of USX Corporation from 1986 to 1991. He was named vice chairman and chief operating officer--steel and related resources, U.S. Steel Corporation, in 1983. Prior to that time he served as president and chief executive officer of Jones & Laughlin Steel Corporation. He is a director of Hershey Foods Corporation and IP Forest Resources Company (the managing general partner of IP Timberlands, Ltd.). Director since October 14, 1986 [Photo] JANE C. PFEIFFER, 63, management consultant. She is a director of Ashland, Inc., IP Forest Resources Company (the managing general partner of IP Timberlands, Ltd.), J.C. Penney Company, Inc. and The Mutual Life Insurance Company of New York. She is a trustee of the Conference Board, The University of Notre Dame and the Overseas Development Council and a member of The Council on Foreign Relations. Director since June 14, 1977 [Photo] EDMUND T. PRATT, JR., 69, former Chairman of the Board (from 1972 to 1992) and Chief Executive Officer from (1972 to 1991) of Pfizer Inc. He is chairman emeritus and a director of Pfizer, Inc., a director of Minerals Technologies, Inc., The Chase Manhattan Corporation, The Chase Manhattan Bank, N.A., and General Motors Corporation. He is a director and member of the Executive Committee of AEA Investors, Inc. and a member of the Board of Trustees of Logistics Management Institute. Director since September 9, 1975
8 [Photo] C. WESLEY SMITH, 56, Executive Vice President--printing papers since 1992. Prior thereto, he was president--International Paper--Europe from 1989. Director since December 12, 1995
The one nominee for election at the 1996 meeting as a Class I director is listed below. CLASS I NOMINEE--TERM EXPIRING 1998 [PHOTO] JOHN R. KENNEDY, 65, former President and Chief Executive Officer of Federal Paper Board Company, Inc. from 1975 to 1996. He is a director of DeVlieg Bullard, Inc. and Chase Brass Industries, Inc. Director since March 12, 1996
Other directors who will continue to serve are listed below under their respective classes. None of these directors are to be elected at the 1996 annual meeting. CLASS III DIRECTORS--TERM EXPIRING IN 1997 [PHOTO] ROBERT J. EATON, 56, Chairman and Chief Executive Officer of the Chrysler Corporation. He joined Chrysler in 1992, as Vice Chairman and Chief Operating Officer and a member of the Board. Prior to joining Chrysler, his 29-year career with General Motors included various management positions, the most recent being President of General Motors Europe (1988 - 1992). He is a fellow of both the Society of Automotive Engineers and the Engineering Society of Detroit and a member of the National Academy of Engineering. He is a director of the American Automobile Manufacturers Association and is a member of The Business Council, The Business Roundtable, and the U.S./Japan Business Council. He also is a member of the President's Advisory Committee on Trade Policy and Negotiations and serves as a director of Detroit Renaissance, United Way of Southeastern Michigan, Economic Club of Detroit, Detroit Symphony Orchestra and the Michigan Leaders Health Care Group. Director since January 10, 1995
9 [Photo] JOHN A. GEORGES, 65, Chairman and Chief Executive Officer. He was elected chief executive officer in 1984 and became chairman and chief executive officer in 1985. He has been a director, chairman of the board and chief executive officer of IP Forest Resources Company (the managing general partner of IP Timberlands, Ltd.) since 1985. He is a director of AK Steel Holding Corporation, Ryder Systems, Inc., Scitex Corporation Ltd. and Warner-Lambert Company. He is a member of The Business Council and the Policy Committee of the Business Roundtable. He is a board member of the Business Council of New York State, a member of The Trilateral Commission, the President's Advisory Committee for Trade Policy and Negotiations and president of the University of Illinois Foundation. Mr. Georges has announced his retirement as Chairman and Chief Executive Officer of the Company, effective March 31, 1996. He will remain a director. Director since February 1, 1980 [Photo] DONALD F. MCHENRY, 59, University Research Professor of Diplomacy and International Affairs at Georgetown University since 1981. He is president of the IRC Group and a director of American Telephone and Telegraph Company, The Coca-Cola Company, Bank of Boston Corporation, the First National Bank of Boston, SmithKline Beecham plc and the Institute for International Economics. He is a trustee of the Johnson Foundation, The Brookings Institution, The Mayo Foundation and Columbia University; and chairman of the board of Africare. Director since April 14, 1981 [Photo] PATRICK F. NOONAN, 53, Chairman of the Board of The Conservation Fund (a nonprofit organization dedicated to conserving America's land and water resources) and previously, also its chief executive officer since 1985. Prior to that he was president of The Nature Conservancy. He is a trustee of The National Geographic Society and the American Farmland Trust. He is also a director of Ashland, Inc., the Fund for Government Investors, Saul Centers and the American Gas Association Index Fund. He is a member of the Board of Visitors of Duke University School of the Environment. Director since December 14, 1993 [Photo] CHARLES R. SHOEMATE, 56, Chairman, President and Chief Executive Officer of CPC International Inc. He was elected president and a member of its board of directors in 1988, chief executive officer in August 1990 and chairman in September 1990. He joined CPC International in 1962 and progressed through a variety of positions in manufacturing, finance and business management within the consumer foods and corn refining businesses. In 1981, he was named president of Canada Starch Company, CPC's Canadian subsidiary. He was elected vice president of the corporation in 1983, and in 1986 became president of the Corn Refining Division. He is a director of CIGNA Corporation and the Grocery Manufacturers of America, Inc. He is a member of the Business Roundtable; a trustee of the Committee for Economic Development; and a trustee of The Conference Board. Director since November 1, 1994
10 CLASS I DIRECTORS--TERM EXPIRING IN 1998 [PHOTO] JOHN T. DILLON, 57, President and Chief Operating Officer since 1995 and prior thereto, Executive Vice President--packaging since 1987. He is a director of Carter Holt Harvey Limited, a New Zealand forest products and paper company. He is a member of the Board of Trustees of the Executive Committee of The Joint Council on Economic Education. He is the chairman of the Forest Industries Committee on Timber Valuation and Taxation. Mr. Dillon was elected Chairman and Chief Executive Officer of the Company, effective April 1, 1996. Director since March 1, 1991 [Photo] STANLEY C. GAULT, 70, Chairman of the Board since January 1, 1996 and previously thereto the chairman and chief executive officer of The Goodyear Tire & Rubber Company, holding that position since June 1991. Previously, he was chairman and chief executive officer of Rubbermaid Incorporated (1980-1991). He is a director of Avon Products, Inc., PPG Industries, Inc., The New York Stock Exchange, Inc., Rubbermaid Incorporated and The Timken Company. He is a trustee and chairman of the board of The College of Wooster and honorary vice chairman of the National Association of Manufacturers. Director since January 8, 1980 [Photo] ARTHUR G. HANSEN, 71, educational consultant. He was director of research of the Hudson Institute from 1987 to 1988, chancellor of the Texas A&M University System from 1982 to 1986, president of Purdue University from 1971 to 1982 and president of Georgia Institute of Technology from 1969 to 1971. He is a director of American Electric Power Company, Inc. and IP Forest Resources Company (the managing general partner of IP Timberlands, Ltd.). He is a member of the National Academy of Engineering, a Commissioner of the Indiana Commission for Higher Education and a fellow of the American Association for the Advancement of Science. Director since February 10, 1976 [Photo] ROGER B. SMITH, 70, former Chairman and Chief Executive Officer of General Motors Corporation from 1981 to 1990, when he retired. He is a director of Citicorp, IP Forest Resources Company (the managing general partner of IP Timberlands, Ltd.), Johnson & Johnson and PepsiCo, Inc. He is a member of The Business Council and is a trustee of the Michigan Colleges Foundation, Inc. and the Sloan Foundation. Director since December 1, 1989
11 ITEM NO. 2--APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR 1996 The Audit Committee has considered the qualifications of Arthur Andersen LLP and recommended that the Board of Directors appoint them as independent auditors of the consolidated financial statements of the Company for the year 1996. This included a review of their performance in prior years, as well as their reputation for integrity and competence in the fields of accounting and auditing. The Committee has expressed its satisfaction with Arthur Andersen in all of these respects. The Committee's review also included inquiry concerning litigation involving Arthur Andersen and the existence of any investigations by the Securities and Exchange Commission into the financial reporting practices of the companies audited by them. In this respect, the Committee concluded that the ability of Arthur Andersen to perform services for the Company is not in any way adversely affected by any such investigation or litigation. The Board of Directors desires to obtain shareholders' approval of the Board's action in appointing Arthur Andersen LLP, as independent auditors of the consolidated financial statements of the Company for the year 1996. 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. Approval of Item No. 2 requires the affirmative vote of the holders of a majority of the shares voting on this proposal. Abstentions and broker non-votes will not be counted as having voted on this Item No. 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR 1996 12 REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS As of December 31, 1995, the Management Development and Compensation Committee (the "Committee") consisted of six outside directors: William C. Butcher, Robert J. Eaton, Stanley C. Gault, Thomas C. Graham, Edmund T. Pratt, Jr. and Charles R. Shoemate. Mr. Gault is chairman. The Committee met nine times in 1995 with a 100% 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. These companies are surveyed on an on-going basis by independent compensation consulting firms and include a cross section of approximately 40 manufacturing companies in industries that are close in size and manufacturing complexity to International Paper and who compete directly with International Paper for executive talent. The Committee reviews and approves the selection of companies used for compensation comparisons. International Paper also uses independent compensation consulting firms to advise the Committee. The Company's compensation levels for each component of pay are compared to the median of the comparator group's competitive pay levels. The Company's Management Incentive Plan (MIP) links payment of an annual cash bonus directly to achievement of a specified level of net earnings, which accounts for 80% of target bonus funds available, and predetermined targets for qualitative nonfinancial performance factors, which were quality, safety and employee development, which account for the remainder. In 1995, the Company achieved a level of net earnings and performance compared to predetermined nonfinancial targets which generated a bonus fund. Performance against the financial target for 1995 was exceeded. The Company, in the aggregate, met the 1995 nonfinancial targets. The Company's Long-Term Incentive Compensation Plan and amendments, which were approved by the shareholders in 1989 and 1994, respectively, provides for awards of stock options and restricted stock in the form of performance shares which are made in amounts which the Committee determines to be competitive based on the surveys described above. Stock options are granted at fair market value at the time of the award and are restricted for four years. Contingent awards of performance shares are made in December of the year preceding a five-year Award Period. At the end of the five-year Award Period, the number of shares earned is determined by financial performance which the Committee measures by comparing the Company's and Peer Paper Group's (eight companies which comprise the Peer Line of the Performance Graphs on page 15) and weighing equally, the five-year average return on equity and earnings per share. If the threshold level of performance is not attained, no shares are earned. Above the threshold, the contingent award is reduced if the target goal is not met or supplemented if the target goal is exceeded. Payouts of earned performance shares are made in Company stock at the end of the five-year Award Period. One half of the shares earned is mandatorily deferred for an additional three years, and payout is subject to the executive's continued employment throughout that period. From time to time executive continuity awards are made with long-term vesting requirements which are designed to encourage retention of a small number of senior executives designated by the Committee. The size of an award, and any adjustments, is determined by the Committee to reflect an executive's level of responsibility and individual performance. As provided by the Company's Long-Term Incentive Compensation Plan, a continuity award may consist of restricted stock or a tandem grant of restricted stock together 13 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 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. Any limitations upon deductibility of compensation are not expected to be material to the Company. The Committee will continue to monitor tax and other related compensation legislation. In 1995, the Committee recognized that a portion of Mr. Georges's and Mr. Dillon's total current cash compensation is above $1 million. THE 1995 EXECUTIVE OFFICERS' COMPENSATION The Committee approved merit salary increases for the named executive officers based on competitiveness of the executives' pay and personal performance. In May 1995, Mr. Georges's salary was increased to $1,060,000, approximating the median increase awarded CEO's in the group of surveyed companies referred to above. Salaries paid to the named officers in 1995, including Mr. Georges's salary, were competitively positioned from slightly above to below the median of the survey companies. MIP awards for the named executive officers in 1995 were determined by the Committee after review of respective levels of responsibility, personal performance and Company performance compared to the predetermined 1995 financial and nonfinancial goals. Actual awards to all named executive officers represented 11.5% of the bonus fund. All named executive officers' MIP awards increased compared to 1994 in recognition of the 173% improvement in earnings before a net charge resulting from an accounting change in 1994. The performance share guidelines described above were used by the Committee to determine contingent performance share awards in December 1995 to the named executive officers for the 1996-2000 Award Period and the payout in 1995 of earned shares for the 1990-1994 Award Period. The pretax values of Mr. Georges's performance share awards in 1995 were: $722,262 in contingent restricted stock for the 1996-2000 Award Period; $206,457 in deferred restricted stock for the Award Period 1990-1994; and $206,457 in earned shares (long-term incentive payout) for the 1990-1994 Award Period. The shares earned for the 1990-1994 Award Period reflect Company performance which exceeded performance of the Peer Paper Group. The Committee granted stock options in 1995 based on competitive surveys described earlier, without consideration of the amount of stock options already held by named executive officers. Mr. Georges's 1995 stock option award was 38,000 shares, the same as his award in 1993 and 1994. In 1995, a continuity award of restricted stock and a related option was granted to Mr. Dillon based on his promotion to President. There were no other executive continuity awards granted to any of the named executive officers in 1995. THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS William C. Butcher Robert J. Eaton Stanley C. Gault, chairman Thomas C. Graham Edmund T. Pratt, Jr. Charles R. Shoemate COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No executive officer or other employee of the Company served as a member of the Committee or as a member of the compensation committee on the board of any company where an executive officer of such company is a member of the Committee. Mr. Graham, a member of the Committee, is the chairman of AK Steel Corporation; Mr. Georges, chairman and chief executive officer of the Company, is on the board of AK Steel Corporation. 14 PERFORMANCE GRAPHS The following charts compare a $100 investment in International Paper stock with a similar investment in a peer group of eight key competitor companies and the S&P 500. The charts portray total nominal return, 1990-1995 and 1985-1995 assuming reinvestment of dividends. The Company has presented information pertaining to total shareholder return over two different time periods since all holders of the common stock did not acquire their investment in International Paper on the same date. The Company believes a presentation in this format more accurately reflects the financial return provided to the holders of its Common Stock which may not be evident if only one time period was highlighted. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN International Paper S & P 500 Index Peer Group 1990 100 100 100 1991 136 131 136 1992 131 141 152 1993 137 155 173 1994 156 157 178 1995 160 216 194
Assumes $100 invested on December 31, 1990. * Total return assumes reinvestment of dividends. ** Includes Boise Cascade, Champion, Georgia Pacific, Mead, Stone Container, Union Camp, Westvaco, and Weyerhaeuser. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN International Paper S & P 500 Index Peer Group 1985 100 100 100 1986 154 119 134 1987 177 125 145 1988 200 146 154 1989 251 192 169 1990 245 186 136 1991 333 242 186 1992 321 261 208 1993 335 287 236 1994 382 291 243 1995 393 400 265
Assumes $100 invested on December 31, 1985. * Total return assumes reinvestment of dividends. ** Includes Boise Cascade, Champion, Georgia Pacific, Mead, Stone Container, Union Camp, Westvaco, and Weyerhaeuser. 15 ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATION The compensation of the Company's executive officers is approved by the Committee except for the compensation of the officer-directors, which is recommended by the Committee and approved by the Board of Directors. The Company paid a two-for-one stock dividend on September 15, 1995. Amounts of stock prior to that date referenced to herein have been restated to reflect that share dividend. The following tables set forth information with respect to the Chairman and Chief Executive Officer and the four most highly compensated executive officers of the Company for the years 1993-1995. SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------------- LONG-TERM COMPENSATION ANNUAL COMPENSATION CONTINGENT AWARDS ------------------------------------ --------------------- (A) (B) (C) (D) (E) (F) (G) (H) OTHER RESTRICTED ANNUAL STOCK ALL OTHER SALARY BONUS COMPENSATION AWARD OPTIONS COMPENSATION NAME AND POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6) - ---------------------------------------------------------------------------------------------------------------------------------- John A. Georges as 1995 $1,035,000 $1,300,000 $ 0 $1,083,393 38,000 $264,713 Chief Executive Officer 1994 $ 953,750 $1,115,000 $ 0 $1,051,857 38,000 $198,548 1993 $ 880,833 $ 525,000 $ 0 $ 819,672 38,000 $136,571 John T. Dillon as 1995 $ 490,417 $ 600,000 $ 0 $2,227,287 35,737 $129,717 President and Chief Operating Officer 1994 $ 430,000 $ 370,000 $ 0 $ 398,690 16,000 $ 96,681 1993 $ 396,667 $ 230,000 $ 0 $ 332,316 16,000 $ 77,234 James P. Melican as 1995 $ 446,667 $ 410,000 $ 0 $ 373,480 27,700 $106,803 Executive Vice President 1994 $ 420,000 $ 345,000 $ 0 $ 362,664 64,592 $ 88,763 1993 $ 386,667 $ 215,000 $ 0 $ 302,430 15,400 $ 69,747 C. Wesley Smith as 1995 $ 380,750 $ 410,000 $ 0 $ 551,428 36,600 $ 93,299 Executive Vice President 1994 $ 333,750 $ 335,000 $357,784 $ 362,664 15,400 $ 78,922 1993 $ 283,333 $ 190,000 $ 0 $ 944,705 13,600 $ 55,390 Milan J. Turk as 1995 $ 293,750 $ 260,000 $ 0 $ 287,108 27,200 $ 60,554 Senior Vice President, (now Executive Vice 1994 $ 278,333 $ 210,000 $ 0 $ 279,006 9,600 $ 37,164 President) 1993 $ 265,000 $ 150,000 $ 0 $ 973,164 9,600 $ 41,382 - ----------------------------------------------------------------------------------------------------------------------------------
(1) Salary paid in 1995 including amounts deferred pursuant to Section 401(k) of the Internal Revenue Code or pursuant to unfunded deferral arrangements. (2) Management Incentive Plan awards paid in 1996, 1995 and 1994 attributable to 1995, 1994 and 1993 respectively, including amounts deferred pursuant to Section 401(k) of the Internal Revenue Code or pursuant to deferral arrangements reported in the year earned. (3) Represents settlement of tax equalization with respect to Mr. Smith's expatriate assignment from 1989 to 1992. (4) Represents (a) 150% of the value of gross target restricted performance shares contingently awarded in 1995 for the 1996-2000 award period, in 1994 for the 1995-1999 award period and in 1993 for the 1994-1998 award period, which is the maximum achievable for those award periods; only 100% of the target restricted performance shares are earned if the target goal is met for an award period, with the awards being reduced if the goal is not met or entirely forfeited if a predetermined threshold goal is not met; (b) 150% of the value of incremental maximum awards for prior award periods made upon promotion, subject to the same contingencies; and (c) the value of continuity awards of $858,750 in 1995 for Mr. Dillon, $497,000 in 1993 for Mr. Smith and $745,500 in 1993 for Mr. Turk. The number and dollar value of restricted stock holdings at December 31, 1995 are as follows: 210,271/$7,964,014 for Mr. Georges; 129,200/$4,893,457 for Mr. Dillon; 88,590/$3,355,335 for Mr. Melican; 86,353/$3,270,615 for Mr. Smith; and 55,629/$2,106,940 for Mr. Turk. These numbers include the restricted stock portion of the tandem awards of restricted stock/options made to the respective individuals under continuity awards. Dividends are paid on restricted shares. (5) Includes replacement options if applicable. These figures do not include the tandem option awards made as part of the continuity awards referred to in footnote (4) above insofar as the awards are characterized as restricted stock awards. Such tandem options were for 100,000 shares for Mr. Dillon in 1995; 80,000 shares for Mr. Smith in 1993; and 24,000 shares for Mr. Turk in 1993. The options are generally restricted as to exercise prior to age 62. (6) 1995 totals represent Company contributions to the Salaried Savings Plan and Unfunded Savings Plan, premium payments grossed up for taxes for the Executive Supplemental Insurance Plan (ESIP), accruals for ESIP lump sum dividend payments and imputed income from group life as follows: $103,200, $74,168, $58,984 and $28,361 for Mr. Georges; $41,300, $59,194, $20,846 and $8,378 for Mr. Dillon; $38,000, $36,444, $20,323 and $12,036 for Mr. Melican; $34,356, $31,938, $17,221 and $9,785 for Mr. Smith; and $24,180, $28,928, $0 and $7,446 for Mr. Turk. 16 The table below sets out information on the option grants made in 1995 to the named executive officers: OPTION GRANTS IN 1995
- ---------------------------------------------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED COMPOUND ANNUAL GROWTH RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM INDIVIDUAL GRANTS (2) ----------------------------------------------------- ---------------------------------------------- (A) (B) (C) (D) (E) (F) (G) (H) % OF TOTAL OPTIONS OPTIONS GRANTED EXERCISE OR GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION NAME AND POSITION (#)(1) 1995 ($/SH) DATE 0% 5% 10% - ---------------------------------------------------------------------------------- ---------------------------------------------- John A. Georges as Chief 38,000 1.15% $ 38.875 01/10/05 $0 $ 814,450 $ 2,006,028 Executive Officer John T. Dillon as President 16,000 0.48% $ 43.500 01/12/03 $0 $ 283,342 $ 660,307 and Chief Operating 17,000 0.51% $ 38.875 01/10/05 $0 $ 364,359 $ 897,434 Officer 2,737 0.08% $ 42.938 09/12/05 $0 $ 71,075 $ 178,547 James P. Melican as 12,300 0.37% $ 40.875 01/09/00 $0 $ 51,533 $ 105,580 Executive Vice President 15,400 0.46% $ 38.875 01/10/05 $0 $ 330,066 $ 812,969 C. Wesley Smith as 4,000 0.12% $ 39.750 02/09/97 $0 $ 7,950 $ 15,900 Executive Vice President 8,600 0.26% $ 39.750 01/09/00 $0 $ 73,671 $ 158,653 8,600 0.26% $ 39.750 01/08/01 $0 $ 94,447 $ 208,703 15,400 0.46% $ 38.875 01/10/05 $0 $ 330,066 $ 812,969 Milan J. Turk as Senior 7,600 0.23% $ 39.688 05/08/00 $0 $ 71,013 $ 154,239 Vice President, (now 7,600 0.23% $ 39.688 01/08/01 $0 $ 83,333 $ 184,145 Executive Vice President) 12,000 0.36% $ 38.875 01/10/05 $0 $ 257,195 $ 633,483 - ---------------------------------------------------------------------------------------------------------------------------------- All shareholders N/A N/A N/A N/A $0 $6,569,389,207 $16,648,122,070 - ----------------------------------------------------------------------------------------------------------------------------------
(1) Each option granted may be replaced upon exercise. This means that a new option is granted for the same number of shares as is exercised, with the then current market value becoming the new exercise price. The replacement option does not extend the term of the original option. Options may not be replaced more than three times. These numbers do not include any options granted as part of the tandem awards of restricted stock/options made as continuity awards in 1995; the restricted stock is reported as part of the total holdings of the respective individuals under footnote (4) to the Summary Compensation Table. (2) The dollar amounts under these columns are the result of calculations at 0%, and at the 5% and 10% rates set by the SEC and therefore are not intended to forecast possible future appreciation, if any, of the stock price. (3) No gain to the optionee is possible without an increase in stock price, which will benefit all shareholders commensurately. A zero percent gain in stock price will result in zero dollars for the optionee. 17 The table below sets out information on options exercised and options outstanding. AGGREGATED OPTION EXERCISES IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------------------- (A) (B) (C) (D) (E) (F) (G) NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT 12/31/95 OPTIONS AT 12/31/95 SHARES VALUE REALIZED ($) (#)(5) ($)(5) ACQUIRED ON ---------------------- ------------------------- ------------------------- EXERCISE AGGREGATE ANNUALIZED RESTRICTED UNRESTRICTED RESTRICTED NAME AND POSITION (1) (#)(1) (1) (2) UNRESTRICTED (3) (4) (3)(4) - ---------------------------------------------------------------------------------------------------------------------------------- John A. Georges as 11,756 $ 50,698 $ 24,335 183,000 152,000 $949,113 $410,875 Chief Executive Officer John T. Dillon as 32,100 $281,225 $127,541 72,200 67,737 $328,369 $ 71,000 President and Chief Operating Officer James P. Melican as 21,708 $204,625 $ 52,710 62,900 61,600 $ 0 $166,513 Executive Vice President C. Wesley Smith as 21,200 $241,726 $ 50,746 29,200 53,000 $ 43,000 $132,088 Executive Vice President Milan J. Turk as 15,200 $204,625 $ 49,354 15,200 38,800 $ 0 $ 97,050 Senior Vice President, (now Executive Vice President) - ----------------------------------------------------------------------------------------------------------------------------------
(1) The number of incremental shares retained on exercises is as follows: 5,778 for Mr. Dillon; 2,710 for Mr. Melican and 3,632 for Mr. Turk. (2) Represents the aggregate incremental value realized divided by the number of years the option was held prior to exercise. (3) All options are exercisable under the plan upon grant; however, columns (e) and (g) indicate the number and value of options, the underlying shares of which, while exercisable, cannot be sold or are otherwise restricted. (4) Total value of options (market value minus exercise price) based on fair market value of Company stock of $37.875 as of December 31, 1995. (5) Options granted as part of the tandem awards of restricted stock/options made as continuity awards are not included; these awards are counted as restricted stock awards and holdings. 18 RETIREMENT BENEFITS 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: COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
- --------------------------------------------------------------------------------- PENSIONABLE REMUNERATION CREDITABLE YEARS OF SERVICE - --------------------------------------------------------------------------------- 5 10 15 20 25 30 -------- -------- ---------- ---------- ---------- ---------- $ 400,000 $100,000 $125,324 $ 187,986 $ 192,806 $ 192,806 $ 193,206 $ 600,000 $150,000 $190,324 $ 285,486 $ 292,806 $ 292,806 $ 293,406 $ 800,000 $200,000 $255,324 $ 382,986 $ 392,806 $ 392,806 $ 393,606 $1,000,000 $250,000 $320,324 $ 480,486 $ 492,806 $ 492,806 $ 493,806 $1,500,000 $375,000 $482,824 $ 724,236 $ 742,806 $ 742,806 $ 744,306 $2,000,000 $500,000 $645,324 $ 967,986 $ 992,806 $ 992,806 $ 994,806 $2,500,000 $625,000 $807,824 $1,211,736 $1,242,806 $1,242,806 $1,245,306 - ---------------------------------------------------------------------------------
"Pensionable Remuneration" for purposes of the table above means salary, bonus and compensation deferred under the Unfunded Savings Plan or awards deferred under the MIP. Retirement benefits are payable under one or more of the following plans: a qualified plan covering all salaried employees which provides pension benefits based on final average earnings; a supplementary plan which provides a make-up of qualified plan benefits limited by the imposition of statutory Code limitations; and a supplementary plan covering designated senior managers which provides supplemental benefits to the qualified plan. At December 31, 1995, the number of creditable years of service and the currently applicable average pensionable remuneration under the retirement plans for Mr. Georges were 16.58 years and $2,335,000; for Mr. Dillon, 28.92 years and $1,090,417; for Mr. Melican, 11.92 years and $856,667; for Mr. Smith, 15.33 years and $790,750; and for Mr. Turk, 5.58 years and $553,750. COMPENSATION OF DIRECTORS The compensation of each non-employee director of the Company is a retainer fee of $36,000 per year plus fees of $1,200 for each board and committee or other meeting attended. Directors may elect to defer receipt of all or part of their remuneration until a later date under a deferred compensation plan, at which time the director will be paid in cash equal to (1) the cash amount deferred plus interest at the higher of 6% per annum or the yield of U.S. Treasury bills or (2) the value at the time of payment of units equivalent to the value of Company common stock credited to the director's account at the time of each deferral, plus dividend equivalents. The Company terminated its Retirement Plan for Non-Employee Directors as of December 31, 1995 which provided that directors receive an annual retirement benefit equal to 100% of the annual retainer fee upon mandatory retirement at age 72, and instituted a compulsory portion to the Deferred Compensation Plan. Under this new plan, each non-employee director is credited with common stock equivalent units in the actuarially determined amount required to provide upon retirement an annual benefit equal to a director's retainer fee payable for the director's actuarially determined remaining life. Thus, each year a director will receive a continuing service award of 300 non-voting stock equivalent units. The common stock units held in each non-employee director's account are credited with dividend equivalents. Upon retirement, the amounts will be paid in cash. Employees of the Company who are also directors receive no compensation for services as a director or for attendance at board or committee meetings. 19 In addition, under the Non-Employee Directors Restricted Stock Plan, awards of 1,800 shares of common stock (on a two-for-one post stock dividend basis) are made upon the election or re-election of a director to a full three-year term, or the appointment of a non-employee director to fill an unexpired term (in which latter event the number of shares to be awarded will be a pro-rata portion of the number issued to non-employee directors elected to serve for a full term at the most recent annual meeting of shareholders). Awards made in 1995 were 1,800 shares each for Class I directors and pro-rata awards of 1,200 shares for two directors, reclassified as Class III directors. Directors receive dividend payments represented by the shares awarded under the Restricted Stock Plan, previously at $0.42 per share per quarter until June 15, 1995 and $0.25 commencing with the September 15, 1995 dividend pursuant to a two-for-one stock dividend. Further, four of the non-employee directors of the Company serve as directors of IP Forest Resources Company ("IPFR"), a wholly-owned subsidiary which acts as the managing general partner of IP Timberlands, Ltd., a New York Stock Exchange-listed limited partnership. As such, each of the four non-employee directors receives a retainer fee of $7,000 per year plus a fee of $1,200 for each IPFR board and committee meeting attended. These fees are paid by IPFR. There were six meetings of the board in 1995. As part of its overall program to assist corporate recruiting and research efforts, the Company has established a planned gift program funded by life insurance polices 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 Company approved 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. Moreover, 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, agreeing to compensate them for costs and liabilities incurred in actions brought against them while acting as directors or officers. On June 15, 1995, the Company amended the aforementioned policies with Federal Insurance Company at a current annual premium cost aggregating $525,825, such policies expiring on June 15, 1996. No monies have been paid under such policies by the carrier or by the Company under the contractual arrangements. TERMINATION AGREEMENTS The Company has agreements with members of the executive officer group, providing for payments and other benefits if there is a change of control of the Company and the officer's employment is terminated (i) by the Company or its successor, other than for cause, disability or retirement, or (ii) by the officer if the chief executive officer of the Company ceases to hold that position for reasons other than cause, retirement or disability, or if the officer determines that by reason of adverse changes in, among other things, the officer's authority, compensation, duties, office location or responsibilities, the officer is unable to perform the duties and responsibilities of the position the officer held immediately prior to the change in control. These agreements provide that if the officer's employment terminates under the circumstances described above, the officer will receive: (a) continuation of medical and dental insurance coverage until age 65 or eligibility to join a comparable plan sponsored by another employer; (b) retiree medical coverage comparable to the Company's pre-change 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 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 20 of the Company. Also, the Supplemental Retirement Plan for senior managers provides that if a change of control of the Company occurs, pension benefits will vest immediately and the minimum benefit will be increased from 25% to 50% of pensionable remuneration. The Company has authorized a grantor trust under Sections 671 through 677 of the Code in connection with the Company's benefit plans and termination agreements. Under the grantor trust, the trustee will pay the beneficiaries of the trust the amounts to which they are entitled under such plans and agreements subject to claims of the Company's creditors. 21 [LOGO] TWO MANHATTANVILLE ROAD PURCHASE, NEW YORK 10577 Printed on Hammermill Papers, Accent Opaque 40 lbs. Hammermill Papers is a division of International Paper. PROXY [INTERNATIONAL PAPER LOGO] 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 CLASS II AND CLASS I DIRECTORS AND FOR ITEM 2, IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED. 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, 1996 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 a trustee, executor, etc., please so indicate. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE Please mark /X/ your choices like this THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN ITEM 1 AND "FOR" ITEM 2. WITHHELD FOR FOR ALL The Board of Directors Recommends a vote / / / / FOR Item 1.-Election of the following nominees as Directors: Class II (3 year terms) Willard C. Butcher, Thomas C. Graham, Jane C. Pfeiffer, Edmund T. Pratt, Jr. and C. Wesley Smith Class I (2 year term) John R. Kennedy WITHHELD FOR:(Write that nominee's name in the space provided below). ________________________________________________________________________________ FOR AGAINST ABSTAIN The Board of Directors / / / / / / Recommends a vote FOR Item 2.-Appointment of Independent Auditors. 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 [INTERNATIONAL PAPER LOGO] TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577 [INTERNATIONAL PAPER LOGO] TO PARTICIPANTS IN THE SALARIED SAVINGS PLAN AND RETIREMENT 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, 1995, you may instruct the Trustee how to vote such shares at the Annual Meeting of Shareholders to be held May 9, 1996. The 1995 Annual Report and the Board of Directors proxy statement is 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 as to which it has not received voting instructions by May 3, 1996 will be voted in the same manner, proportionately, as the shares as to which voting instructions have been received. Any shares held by the Trustee as to which it has been instructed to sign the Board of Directors proxy, with no additional instructions to the contrary indicated, will be voted, FOR Item 1, the election of Class II and Class I Directors and FOR Item 2. STATE STREET BANK & TRUST CO., N.A., Trustee - -------------------------------------------------------------------------------- FOLD AND DETACH HERE Please mark /X/ your choices like this To State Street Bank & Trust Co., N.A., Trustee of the Salaried Savings Plan and Retirement Savings Plan of International Paper Company: Understand that the Board of Directors proxy referred to on the reverse authorizes the proxy holders to vote FOR or WITHHOLD AUTHORITY on the election of Class II and Class I Directors, vote FOR, AGAINST or ABSTAIN on Item 2, and in their discretion, on any other business that may properly come before the meeting. You are hereby instructed to sign the Board of Directors proxy. You are further instructed to direct the proxy holders to vote as follows: WITHHOLD FOR FOR ALL The Board of Directors Recommends a vote / / / / FOR Item 1.-Election of the following nominees as Directors. Class II (3 year terms) Willard C. Butcher, Thomas C. Graham, Jane C. Pfeiffer, Edmund T. Pratt, Jr. and C. Wesley Smith Class I (2 year term) John R. Kennedy WITHHELD FOR: (Write that nominee's name in the space provided below). ________________________________________________________________________________ FOR AGAINST ABSTAIN The Board of Directors / / / / / / Recommends a vote FOR Item 2.-Appointment of Independent Auditors. TRUSTEE AUTHORIZATION I hereby authorize State Street Bank & Trust Co., N.A. as Trustee under the Salaried Savings Plan and the Retirement 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., N.A., Trustee, has appointed Chemical Mellon 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 an attorney, executor, administrator, trustee or guardian, please give full title as such. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE [INTERNATIONAL PAPER LOGO] TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577 [INTERNATIONAL PAPER LOGO] TO PARTICIPANTS IN THE FEDERAL PAPER BOARD COMPANY, INC. RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES AND RETIREMENT SAVINGS PLAN FOR NON-UNION HOURLY EMPLOYEES OF INTERNATIONAL PAPER COMPANY (THE "PLANS"): As a participant in the Plans, with full shares of the Company's common stock allocated to your account as of December 31, 1995, you may instruct the Trustee how to vote such shares at the Annual Meeting of Shareholders to be held May 9, 1996. The 1995 Annual Report and the Board of Directors proxy statement is 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 Plans, 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 in the Plans by the Trustee as to which it has not received voting instructions by May 3, 1996 will be voted in the same manner, proportionately, as the shares as to which voting instructions have been received, except that the employee stock ownership portion of the shares in the Plans will not be voted if voting instructions have not been received by the deadline. Any shares held by the Trustee as to which it has been instructed to sign the Board of Directors proxy, with no additional instructions to the contrary indicated, will be voted, FOR Item 1, the election of Class II and Class I Directors and FOR Item 2. VANGUARD FIDUCIARY TRUST COMPANY, Trustee - -------------------------------------------------------------------------------- FOLD AND DETACH HERE To Vanguard Fiduciary Trust Company, Trustee of the Federal Paper Board Company, Inc. Retirement Savings Plan for Salaried Employees and the Retirement Plan for Non-Union Hourly Employees of International Paper Company ("the Plans"): I understand that the Board of Directors proxy referred to on the reverse authorizes the proxy holders to vote FOR or WITHHOLD AUTHORITY on the election of Class II and Class I Directors, vote FOR, AGAINST or ABSTAIN on Item 7, and in their discretion, on any other business that may properly come before the meeting. Please mark your choice like this /x/ You are hereby instructed to sign the Board of Directors proxy. You are further instructed to direct the proxy holders to vote as follows: The Board of Directors Recommends a vote FOR Item 1. - Election of the following nominees as Directors: FOR WITHHELD FOR ALL / / / / Class II (3 year terms) Willard C. Butcher, Thomas C. Graham, Jane C. Pfeiffer, Edmund T. Pratt, Jr. and C. Wesley Smith Class I (2 year term) John R. Kennedy WITHHELD FOR: (Write that nominees' name in the space provided below). - ------------------------------------------------------------------------ FOR AGAINST WITHHELD / / / / / / The Board of Directors Recommends a vote FOR Item 2. - Appointment of Independent Auditors. TRUSTEE AUTHORIZATION I hereby authorize Vanguard Fiduciary Trust Company, as Trustee under the Plans to vote the shares of Common Stock held for my account under said Plans at the Annual Meeting in accordance with the instructions given above. Vanguard Fiduciary Trust Company, Trustee, has appointed Chemical Mellon 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 an attorney, executor, administrator, trustee or guardian, please give full title as such. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE [INTERNATIONAL PAPER LOGO] TWO MANHATTANVILLE ROAD, PURCHASE, N.Y. 10577 [LOGO] TWO MANHATTANVILLE ROAD PURCHASE, NEW YORK 10577 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED FOR THE ELECTION OF CLASS II AND I DIRECTORS, AND FOR ITEM 2 IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED. The undersigned hereby appoints JOHN T. DILLON and C. WESLEY SMITH, jointly or individually, proxies with the power of substitution to vote all shares the undersigned is entitled to vote at the Annual Meeting of Shareholders on May 9, 1996 or adjournments thereof: THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.--Election of the following nominees as Directors: 2.--Appointment of Independent Auditors. CLASS II (3 YEAR TERMS) CLASS I (2 YEAR TERM) FOR AGAINST ABSTAIN Willard C. Butcher John R. Kennedy / / / / / / Thomas C. Graham Jane C. Pfeiffer Edmond T. Pratt. Jr. C. Wesley Smith For all Withhold for Nominees all Nominees / / / / Withheld for the following only:
PLEASE SIGN YOUR NAME(S) ON THE REVERSE SIDE. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting. Please sign exactly as name appears on this card. If stock is held in name of joint holders, each should sign. If you are signing as a trustee, executor, etc., please so indicate. DATED: ------------------------------------------------, 1996 ------------------------------------------------------------- Please mark, sign, date and mail the card promptly in the Signature postage prepaid return envelope provided. ------------------------------------------------------------- Signature if held jointly
[LOGO] TWO MANHATTANVILLE ROAD PURCHASE, NY 10577 To Owners of Our Common Stock: Have you sent in your proxy to vote your shares at the Annual Meeting on May 9, 1996? We would like to have every shareholder record their vote FOR Item 1, the election of Class II Directors and the one Class I Director, and FOR Item 2, the approval of Independent Auditors, as fully described in the Proxy Statement dated March 29, 1996 and mailed to each record holder of common stock. REMINDER We are sending another proxy with this reminder in case you have lost or misplaced the one sent earlier. It would be most helpful if you would complete it, sign it and mail it back to us in the enclosed business reply envelope--TODAY, IF POSSIBLE. IF YOU HAVE ALREADY FORWARDED YOUR PROXY, Yours very truly, PLEASE DISREGARD THIS COMMUNICATION. JAMES W. GUEDRY, SECRETARY April 10, 1996
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