-----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, RupYz3iiBdPp743GA0MA6xRnhaDHlImtEDOy50bjHi3h9sTKaM2APenDx1t9WCyX VsPZsBusJhDvTTkKwxTlOw== 0000950103-01-501358.txt : 20010910 0000950103-01-501358.hdr.sgml : 20010910 ACCESSION NUMBER: 0000950103-01-501358 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL PAPER CO /NEW/ CENTRAL INDEX KEY: 0000051434 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 130872805 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-69082 FILM NUMBER: 1732912 BUSINESS ADDRESS: STREET 1: TWO MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9143971500 MAIL ADDRESS: STREET 1: TWO MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PAPER & POWER CORP DATE OF NAME CHANGE: 19710527 S-3 1 aug2901_s3.txt As filed with the Securities and Exchange Commission on September 7, 2001 Registration No. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- INTERNATIONAL PAPER COMPANY (Exact name of Registrant as specified in its charter) New York 13-0872805 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) ----------------------- 400 Atlantic Street Stamford, Connecticut 06921 (203) 541-8000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------------- Barbara Smithers Vice President and Corporate Secretary International Paper Company 400 Atlantic Street Stamford, Connecticut 06921 (203) 541-8000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------------- Copies to: Francis J. Morison Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 (212) 450-4000 ----------------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement as determined by market conditions. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| ----------------------- CALCULATION OF REGISTRATION FEE =============================================================================================================================== Proposed Maximum Proposed Maximum Title of Each Class of Offering Price Per Aggregate Amount of Securities to be Registered Amount to be Registered (1) Unit Offering Price (2) Registration Fee - ------------------------------------------------------------------------------------------------------------------------------- Zero Coupon Convertible Debentures due June 20, 2021(1)........................ $2,105,000,000 principal 49.062%(2) $1,032,755,100 $258,188.78 amount at maturity Common Stock, par value $1 per share.... (3) (3) (3) (4) - -------------------------------------------------------------------------------------------------------------------------------
(1) The Zero Coupon Convertible Debentures due June 20, 2021 were issued at an original price of $475.66 per $1,000 principal amount at maturity, which represents an aggregate issue price of $1,001,264,300 and a principal amount at maturity of $2,105,000,000. 1 (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, based upon the average of the bid and asked prices of the debentures quoted in the secondary market by one of the initial purchasers of the debentures on September 4, 2001, as reported to the Registrant by the initial purchaser. (3) Includes 20,020,865 shares of common stock issuable upon conversion of the debentures at the rate of 9.5111 shares of common stock for each $1,000 principal amount at maturity of the debentures. This registration statement is registering the resale of the debentures and the underlying common stock into which the debentures are convertible. Pursuant to Rule 416 under the Securities Act, such number of shares of common stock registered hereby shall include an intermediate number of shares of common stock that may be issued in connection with a stock split, stock dividend, recapitalization or similar event. (4) Pursuant to Rule 457(i), there is no additional filing fee with respect to the shares of common stock issuable upon conversion of the debentures because no additional consideration will be received in connection with the exercise of the conversion privilege. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. 2 The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED SEPTEMBER 7, 2001 PROSPECTUS $2,105,000,000 International Paper Company Zero Coupon Convertible Debentures due June 20, 2021 and Common Stock issuable upon conversion of the Debentures THE SECURITIES International Paper Company issued the debentures in a private placement in June 2001 at an issue price of $475.66 per debenture. This prospectus will be used by selling securityholders to resell their debentures and the common stock issuable upon conversion of the debentures. We will not receive any of the proceeds from the sale of these debentures. The debentures are our senior unsecured obligations. We will not pay cash interest on the debentures prior to maturity unless an increased accretion rate occurs or we elect to do so following a tax event. The issue price represents a yield to maturity of 3.75% per year, subject to an upward adjustment in the event there is an increased accretion rate. We may not redeem the debentures prior to June 20, 2006. On or after June 20, 2006 and prior to June 20, 2008, we may redeem the debentures for cash, in whole or in part, but only if our stock price exceeds 120% of the accreted conversion price for a specified period. On or after June 20, 2008, we may redeem the debentures at any time, in whole or in part. On June 20, 2004, June 20, 2006, June 20, 2011 and June 20, 2016, holders may require us to repurchase the debentures. The repurchase prices are set forth in this prospectus, but will be higher if an increased accretion rate applies for one or more annual periods. We may choose to pay the repurchase price in cash, shares of our common stock, or a combination of both. In addition, upon a change in control, holders may require us to repurchase for cash all or a portion of their debentures at a repurchase price equal to the accreted principal amount plus any accrued and unpaid cash interest. The debentures are convertible at the option of the holder into shares of our common stock at a conversion rate of 9.5111 shares of common stock per debenture, subject to adjustment in some events, but only (i) if the closing sales price of our common stock for at least 20 of the 30 trading days prior to conversion is more than the applicable percentage of the accreted conversion price, initially 120% and declining over the life of the debentures to 110% as described herein, (ii) if our senior long-term credit ratings are downgraded by Moody's Investors Service, Inc. to below Baa3 and Standard & Poor's Ratings Services to below BBB - , (iii) if we call the debentures for redemption, or (iv) upon the occurrence of certain corporate events. The conversion rate of 9.5111 shares is equivalent to an initial conversion price of $50.01 per share of common stock based on the price to investors of the debentures. Beginning on June 20, 2004, if the closing sales price of our common stock is equal to or less than 60% of the accreted conversion price of the debentures for any 20 trading days out of the last 30 consecutive trading days ending six business days prior to such date or six business days prior to any June 20 thereafter, then the accretion rate on the debentures for the annual period commencing on such date will be subject to an increased accretion rate equal to the applicable per annum reset rate in effect at that time. An increased accretion rate made pursuant to the preceding sentence will remain in effect until the next June 20 thereafter when the closing sales price of our common stock is not equal to or less than 60% of the accreted conversion price of the debentures for any 20 trading days out of the last 30 consecutive trading days ending six business days prior to such date, at which time the accretion rate will revert to 3.75%. If an increased accretion rate is in effect for a particular annual period, we will pay a portion of the increased accretion rate as cash interest at a rate of 0.25% per annum (0.125% per semi-annual period) of the applicable principal amount and the remaining increased accretion rate will be accrued and payable at maturity, redemption or repurchase. The "applicable principal amount" means the sum of the issue price of the debentures and the accrued interest as of the beginning of each applicable semi-annual period. THE OFFERING The debentures and the common stock issuable upon conversion of the debentures may be offered and sold from time to time pursuant to this prospectus by the holders of those securities or by their transferees, pledgees, donees or successors (all of which we refer to as selling securityholders). The securities may be sold by the selling securityholders directly to purchasers or through agents, underwriters or dealers. To the extent required, the names of any selling securityholders, agents, underwriters or dealers involved in the sale of the securities, and the agent's commission, dealer's purchase price or underwriter's discount, if any, will be provided in supplements to this prospectus. The selling securityholders will receive all of the proceeds from the sale of the securities and will pay all underwriting discounts and selling commissions, if any, applicable to any sale. We are responsible for the payment of all other expenses incident to the offer and sale of the securities. The selling securityholders and any broker-dealers, agents or underwriters that participate in the distribution of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission received by them and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Our common stock is listed on the New York Stock Exchange under the symbol "IP." The last reported sales price of our common stock on September 6, 2001 was $40.73 per share. Investing in the debentures involves risks. See "Risk Factors" on page 12. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. [ ], 2001 1 TABLE OF CONTENTS Page Special Note Regarding Forward-looking Statements.............................3 Summary.......................................................................4 Selected Consolidated Financial Data.........................................10 Risk Factors.................................................................12 Use of Proceeds..............................................................14 Price Range of Common Stock and Dividends....................................14 Ratio of Earnings to Fixed Charges...........................................15 Capitalization...............................................................16 Securities Offered...........................................................17 Description of Debentures....................................................18 Description of Capital Stock.................................................36 Selling Securityholders......................................................38 Material United States Federal Income Tax Considerations..........................................................41 Plan of Distribution.........................................................45 Where You Can Find More Information..........................................47 Legal Matters................................................................49 Experts......................................................................49 ----------------------- This document is called a prospectus and is part of a registration statement that we filed with the SEC using a "shelf" registration or continuous offering process. Under this shelf process, selling securityholders may from time to time sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that the selling securityholders may offer. Each time a selling securityholder sells securities, the selling securityholders are required to provide you with a prospectus supplement containing specific information about the selling securityholder and the terms of the securities being offered. That prospectus supplement may include additional risk factors or other special considerations applicable to those securities. The prospectus supplement may also add, update or change information in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in that prospectus supplement. You should read both this prospectus and any prospectus supplement together with the additional information described under the heading "Where You Can Find More Information." The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the securities offered under this prospectus. The registration statement, including the exhibits, can be read at the SEC web site or at the SEC offices mentioned under the heading "Where You Can Find More Information." You should rely only on the information contained in this document and the information to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus, including information included or incorporated by reference in this document, contains certain forward-looking statements concerning our financial condition, results of operations and business. Generally, the words "will," "may," "should," "continue," "believes," "expects," "intends," "anticipates" or similar expressions identify forward-looking statements. These forward-looking statements involve certain risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following factors: o whether our initiatives relating to balancing our internal supply with demand will be successful; o whether anticipated savings from restructuring activities and facility rationalizations can be achieved; o whether our divestiture program will achieve anticipated proceeds; o changes in domestic or foreign competition; o changes in the cost or availability of raw materials; o cost of compliance with environmental laws and regulations; o competitive pressure among companies in our industry may increase significantly; o adverse changes in the interest rate environment may reduce interest margins or adversely affect our asset values; o relative adverse changes in exchange rates of the currencies in which we transact business; o general economic conditions, whether nationally or in the geographic market areas in which we conduct business, may be less favorable than expected; o legislation or regulatory changes may adversely affect the businesses in which we are engaged; or o adverse changes may occur in the securities markets. See "Where You Can Find More Information." 3 SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this prospectus. Prospective investors should consider carefully the information set forth in this prospectus under the heading "Risk Factors." International Paper Company We are a global forest products, paper and packaging company that is complemented by an extensive distribution system, with primary markets and manufacturing operations in the United States, Canada, Europe, the Pacific Rim, and South America. Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to available industry capacity and general economic conditions. We are a New York corporation and were incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898. In the United States at December 31, 2000, we operated 35 pulp, paper and packaging mills, 105 converting and packaging plants, 46 wood products facilities, seven specialty panels and laminated products plants and eight specialty chemicals plants. Production facilities at December 31, 2000 in Europe, Asia, Latin America, South America and Canada included 15 pulp, paper and packaging mills, 48 converting and packaging plants, 15 wood products facilities, three specialty panels and laminated products plants and seven specialty chemicals plants. We distribute printing, packaging, graphic arts, maintenance and industrial products through over 300 distribution branches located primarily in the United States. At December 31, 2000, we owned or managed approximately 12 million acres of forestlands in the United States, mostly in the South, 1.5 million acres in Brazil and had, through licenses and forest management agreements, harvesting rights on government-owned timberlands in Canada. At December 31, 2000, through Carter Holt Harvey, a New Zealand company which is approximately 50.4% owned by International Paper, we operated five mills producing pulp, paper, packaging and tissue products, 26 converting and packaging plants and 56 wood products manufacturing and distribution facilities, primarily in New Zealand and Australia. Carter Holt Harvey distributes paper and packaging products through seven distribution branches located in New Zealand and Australia. In New Zealand, Carter Holt Harvey owns approximately 820,000 acres of forestlands. Our principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06921 and our telephone number is (203) 541-8000. 4 The Offering Debentures..............$2,105,000,000 aggregate principal amount at maturity, subject to an upward adjustment in the event there is an increased accretion rate, of Zero Coupon Convertible debentures due June 20, 2021. Issue Price.............We initially issued the debentures at a price of $475.66 per debenture and with a principal amount at maturity of $1,000, subject to an upward adjustment in the event there is an increased accretion rate. Maturity................June 20, 2021. Ranking.................The debentures are our senior unsecured obligations and rank equally with all of our other unsecured and unsubordinated debt. Yield to Maturity.......3.75% annually (computed on a semi-annual bond equivalent basis), subject to an upward adjustment in the event there is an increased accretion rate. Cash Interest Payment...We will not pay cash interest on the debentures unless an increased accretion rate is in effect or we elect to do so following a tax event, each as described below. If an increased accretion rate is in effect for an annual period, we will pay a portion of the increased accretion rate as cash interest at a rate of 0.25% per annum (or 0.125% for each semi-annual period) on the Applicable Principal Amount and the remaining portion of the increased accretion rate will be accrued and payable at maturity, redemption or repurchase. If we elect to pay cash interest upon the occurrencse of a tax event, the amount of cash interest payable for each semi-annual period will be determined based on the initial accretion rate or the increased accretion rate, whichever is in effect. Cash interest, if any, will be paid semi-annually in arrears on each June 20 or December 20 to the holders of record of the debentures as of the preceding June 5 or December 5. 5 Interest Adjustment.....Beginning on June 20, 2004, if the closing sales price of our common stock is equal to or less than 60% of the Accreted Conversion Price (as defined herein) of the debentures for any 20 trading days out of the last 30 consecutive trading days ending six business days prior to such date or six business days prior to any June 20 thereafter, then the accretion rate on the debentures for the annual period commencing on such date will be subject to an increased accretion rate equal to the applicable per annum Reset Rate in effect at that time. An increased accretion rate made pursuant to the preceding sentence will remain in effect until the next June 20 thereafter when the closing sales price of our common stock is not equal to or less than 60% of the Accreted Conversion Price of the debentures for any 20 trading days out of the last 30 consecutive trading days ending six business days prior to such date, at which time the accretion rate will revert to 3.75%. If the closing sales price of our common stock is equal to or less than 60% of the Accreted Conversion Price of the debentures for any 20 out of the last 30 trading days ending six business days prior to any June 20 after the accretion rate has reverted to 3.75%, then the debentures will again be subject to an increased accretion rate equivalent to the Reset Rate in effect from time to time. The "Reset Rate" will be established by the Reset Rate Agent (as defined herein) as of each Reset Rate Determination Date (as defined herein). Tax Event...............We can irrevocably elect to pay cash interest on the debentures upon the occurrence of a tax event from and after the date a tax event occurs instead of accreting the principal amount of the debentures, in addition to any cash interest payable pursuant to an increased accretion rate. If that happens, the principal amount on which we pay interest will be restated and will be equal to the accreted principal amount on the date of restatement. See "Description of Debentures--Tax Event." 6 Conversion Rights.......The debentures are convertible at the option of the holder into our common stock at a conversion rate of 9.5111 shares per debenture, subject to adjustment in certain events, under any of the following circumstances: o if the closing sales price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the day prior to the day of surrender is more than the Applicable Percentage (the "Applicable Percentage" shall be initially 120% and shall decline by 0.256% at the end of each semi-annual period over the life of the debentures to 110%) of the Accreted Conversion Price; o if each of Moody's and S&P has downgraded our senior long-term credit rating to below Baa3 and BBB-, respectively; o if the debentures have been called for redemption; or o upon the occurrence of specified corporate transactions described under "Description of Debentures--Conversion Rights." Redemption of the Debentures at Our Option........... We may not redeem the debentures prior to June 20, 2006. On or after June 20, 2006 and prior to June 20, 2008, we may redeem the debentures for cash, in whole or in part, but only if our stock price exceeds 120% of the Accreted Conversion Price for at least 20 trading days in the 30 consecutive trading days ending on the date we make public a notice of our intention to redeem the debentures. On or after June 20, 2008, we may redeem the debentures at any time, in whole or in part, upon not less than 30 nor more than 60 days notice by mail to holders of the debentures, for a price equal to the accreted principal amount plus any accrued and unpaid cash interest to the redemption date. Repurchase of Debentures at Your Option........You have the right to require us to repurchase the debentures on June 20, 2004, June 20, 2006, June 20, 2011 and June 20, 2016. In each case, the repurchase price payable will be equal to the accreted principal amount plus any accrued and unpaid cash interest to the repurchase date. We may choose to pay the repurchase price in cash or common stock, or a combination of both. If we elect to pay the repurchase price with shares of our common stock or a combination of cash and our common stock, we must notify holders not less than 20 business days prior to the repurchase date. Our common stock will be valued at the average of the closing sales price for five trading days ending on the third trading day prior to the repurchase date. 7 Change in Control.......If we undergo a change in control, you will have the option to require us to repurchase the debentures for cash. We will pay a repurchase price equal to the accreted principal amount plus any accrued and unpaid cash interest to such repurchase date. Events of Default.......If there is an event of default on the debentures, the accreted principal amount of the debentures plus any accrued and unpaid cash interest up to such payment date may be declared due and payable. Tax ...................Each holder agrees, for U.S. federal income tax purposes, to treat the debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments, including our determination that the rate at which interest will be deemed to accrue for federal income tax purposes will be 6.28% compounded semi-annually, which is the rate comparable to the rate at which we would borrow on a noncontingent, nonconvertible debt obligation with terms and conditions similar to the debentures. Accordingly, each holder will be required to accrue interest on a constant yield to maturity basis at that rate, with the result that a holder will recognize taxable income significantly in excess of any cash received while the debentures are outstanding. In addition, a holder will recognize ordinary income upon a conversion of a debenture into our common stock equal to the excess, if any, between the value of our common stock received on the conversion and the holder's original purchase price increased by any interest income previously accrued by the holder. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE TAX TREATMENT OF THE DEBENTURES AND WHETHER A PURCHASE OF THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION. Book-Entry Form.........The debentures have been issued only in book-entry form and are represented by permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company, commonly known as DTC, in New York, New York. Beneficial interests in any of the securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated securities, except in limited circumstances. See "Description of Debentures--Book-Entry System." 8 Use of Proceeds.........We will not receive any of the proceeds from the sale of the debentures or the underlying common stock by any selling securityholders. Absence of Market for the Debentures........The debentures were initially sold in transactions exempt from the registration requirements of the Securities Act. As a result of the effectiveness of the registration statement of which this prospectus is a part, the debentures are no longer restricted securities under the Securities Act. However, there is currently no market for the debentures. Although the Initial Purchasers informed us at the time of the initial offering and sale of the debentures that they planned to make a market in the debentures, the Initial Purchasers are not obligated to do so, and they may discontinue any such market making at any time without notice. Accordingly, we cannot assure you as to the development or liquidity of any market for the debentures. Trading.................The common stock is traded on the New York Stock Exchange under the symbol "IP." 9 SELECTED CONSOLIDATED FINANCIAL DATA The following selected financial data for each of the five years in the period ended December 31, 2000 have been derived from our consolidated financial statements, which have been audited by Arthur Andersen LLP, independent public accountants. The financial data as of June 30, 2001 and 2000, and each of the six-month periods then ended, have been derived from our unaudited condensed consolidated financial statements which include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly our results of operations and financial position for the periods and dates presented. This data should be read in conjunction with our audited and unaudited consolidated financial statements, including the notes thereto, incorporated herein by reference. For the Six Months Ended For the Year Ended June 30, December 31, ---------------------------------- ----------------------------------------------------------------------- 2001 2000 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ---- (Unaudited) (in millions, except per share amounts) Earnings Data: Net Sales..........$ 13,580 $13,151 $28,180 $24,573 $23,979 $24,556 $24,182 Earnings (loss) before income taxes, minority interest, extraordinary items and accounting change ........... (345)(a)(b) 915(d)(e) 723(g) 448(i) 429(k) 143(l) 939(m) Net earnings (loss).. (357)(a)(b)(c) 648(d)(e)(f) 142(g)(h) 183(i)(j) 247(k) (80)(l) 379(m) Consolidated Balance Sheet Data: Total assets ........ 39,325 44,456 42,109 30,268 31,466 31,971 33,357 Notes payable and current maturities of long-term debt ............. 1,271 3,147 2,115 920 1,418 2,465 3,578 Long term debt ...... 12,787 12,933 12,648 7,520 7,697 8,521 7,943 Common shareholders' equity ........... 11,229 13,041 12,034 10,304 10,738 10,647 11,349 Per Share Data: Net earnings (loss) per common share before extraordinary items and accounting change ........... $ (0.61)(a)(b) $1.23(d)(e) $0.82(g) $0.48(i) $0.60(k) $(0.20)(l) $0.95(m) Net earnings (loss) per common share ............ $ (0.74)(a)(b)(c) $1.55(d)(e)(f) $0.32(g)(h) $0.44(i)(j) $0.60(k) $(0.20)(l) $0.95(m) Cash dividend ....... $ 0.50 $0.50 $1.00 $1.01 $1.05 $1.05 $1.05 per share(n)
- ------------- (a) Includes a $42 million pre-tax charge ($28 million after taxes) for Champion merger-related costs. (b) Includes a charge of $465 million before taxes and minority interest ($300 million after taxes and minority interest) for facility closures, administration realignment and related severance reserves, and a charge of $85 million ($55 million after taxes) for impairment losses on assets of businesses held for sale. 10 (c) Includes a $25 million pre-tax charge ($16 million after taxes and minority interest) for the cumulative effect of adopting the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138, and a $73 million pre-tax extraordinary charge ($46 million after taxes) for an adjustment to the expected loss on the sale of the Masonite business and the loss on the sale of oil and gas interests. (d) Includes a $12 million pre-tax charge ($8 million after taxes) for merger-related costs. (e) Includes a charge of $71 million before taxes and minority interest ($42 million after taxes and minority interest) for asset shutdowns of excess internal capacity and cost reduction actions. (f) Includes a $385 million extraordinary gain ($134 million after taxes and minority interest) on the sale of our investment in Scitex and Carter Holt Harvey's sale of its share of COPEC. (g) Includes a $54 million pre-tax charge ($33 million after taxes) for merger related expenses, a $125 million pre-tax charge ($80 million after taxes) for additional Masonite legal reserves, an $824 million charge before taxes and minority interest ($509 million after taxes and minority interest) for asset shutdowns and a $34 million pre-tax credit ($21 million after taxes) for the reversals of reserves no longer required. (h) Includes an extraordinary gain of $385 million before taxes and minority interest ($134 million after taxes and minority interest) on the sale of International Paper's investment in Scitex and Carter Holt Harvey's sale of its share of COPEC, an extraordinary loss of $460 million before taxes ($310 million after taxes) related to the impairment of the Zanders and Masonite businesses to be sold, an extraordinary gain before taxes and minority interest of $368 million ($183 million after taxes and minority interest) related to the sale of Bush Boake Allen, an extraordinary loss of $5 million before taxes and minority interest ($2 million after taxes and minority interest) related to Carter Holt Harvey's sale of its Plastics division, and an extraordinary pre-tax charge of $373 million ($231 million after taxes) related to impairments of the Argentine investments, as well as the Chemical Cellulose pulp business and Fine Papers businesses to be sold. (i) Includes a $148 million pre-tax charge ($97 million after taxes) for Union Camp merger-related termination benefits, a $107 million pre-tax charge ($78 million after taxes) for merger-related expenses, a $298 million pre-tax charge ($180 million after taxes and minority interest) for asset shutdowns of excess internal capacity and cost reduction actions, a $10 million pre-tax charge ($6 million after taxes) to increase existing environmental remediation reserves related to certain former Union Camp facilities, a $30 million pre-tax charge ($18 million after taxes) to increase existing legal reserves and a $36 million pre-tax credit ($27 million after taxes) for the reversals of reserves that were no longer required. (j) Includes an extraordinary loss of $26 million before taxes ($16 million after taxes) for the extinguishment of high-interest debt that was assumed in the merger with Union Camp. (k) Includes a $20 million pre-tax gain ($12 million after taxes) on the sale of the Veratec nonwovens business, an $83 million pre-tax credit ($50 million after taxes) from the reversals of previously established reserves that were no longer required, a $111 million pre-tax charge ($68 million after taxes) for the impairment of oil and gas reserves due to low prices, a $145 million pre-tax restructuring and asset impairment charge ($82 million after taxes and minority interest expense) and $16 million of pre-tax charges ($10 million after taxes) related to International Paper's share of charges taken by Scitex, a 13% investee company, for the write-off of in-process research and development related to an acquisition and costs to exit the digital video business. (l) Includes a pre-tax business improvement charge of $535 million ($385 million after taxes), a $150 million pre-tax provision for legal reserve ($93 million after taxes), a pre-tax charge of $125 million ($80 million after taxes) for anticipated losses associated with the sale of the Imaging businesses, and a pre-tax gain of $170 million ($97 million after taxes and minority interest) from the redemption of certain retained West Coast partnership interests and the release of a related debt guaranty. (m) Includes a pre-tax restructuring and asset impairment charge of $554 million ($386 million after taxes), a $592 million pre- tax gain on the sale of a West Coast partnership interest ($336 million after taxes and minority interest), a $155 million pre-tax charge ($99 million after taxes) for the write-down of the investment in Scitex and a $10 million pre-tax charge ($6 million after taxes) for International Paper's share of a restructuring charge announced by Scitex in November 1996. (n) The International Paper dividend has remained at $1.00 per share since 1996. However, dividends on a per share basis have been restated to include dividends paid by Union Camp which merged with International Paper during 1999 in a transaction accounted for as a pooling-of-interests. 11 RISK FACTORS Investing in these debentures involves risk. In addition to the other information contained in this prospectus, you should carefully consider the risk factors described below before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Risks Relating to the Debentures We may be unable to repay the debentures when due or repurchase the debentures when we are required to do so. At final maturity, the entire outstanding principal amount of the debentures will become due and payable, plus any accrued and unpaid interest. At any accelerated maturity prior to final maturity, the issue price plus any accrued and unpaid interest, will become due and payable. On or after June 20, 2006, with certain conditions required for redemptions prior to June 20, 2008, we may redeem for cash all or part of the debentures. If we undergo a change in control, you will have the option to require us to repurchase the debentures for cash. A holder may also require us to repurchase all or a portion of that holder's debentures at certain times during the term of the debentures. At maturity, or at any time when a holder may require us to repurchase debentures, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amount due. Our borrowing arrangements or agreements relating to indebtedness to which we may become a party may limit our ability to repay or repurchase the debentures with cash. Our failure to repay any debentures due upon maturity or repurchase tendered debentures would constitute an event of default under the indenture. Any such default, in turn, may cause a default under the terms of our other indebtedness. Because there is no public market for the debentures, you may not be able to resell the debentures easily or at a favorable price. There is no public market for the debentures and we are not certain of: o the liquidity of any market that may develop; o the ability of the holders to sell their debentures; or o the price at which holders would be able to sell their debentures. If such a market were to develop, the debentures could trade at prices that may be higher or lower than the issue price to the public plus any accrued interest. The actual trading price may depend on many factors, including prevailing interest rates, the market for similar debentures and our financial performance. Credit Suisse First Boston and Goldman, Sachs & Co, the initial purchasers ("Initial Purchasers") advised us at the time of the initial offering and sale of the debentures that they planned to make a market in the debentures. The Initial Purchasers are not obligated, however, to make a market in the debentures, and the Initial Purchasers may discontinue any such market-making activity at any time at their sole discretion. In addition, such market-making activity will be subject to the limits imposed by the Securities Act of 1933 and the Securities Exchange Act of 1934. Accordingly, no assurance can be given as to the development or liquidity of any market for the debentures. The amount you must include in your income for United States federal income tax purposes will exceed the amount of cash interest you receive. We and each holder agree to treat the debentures as contingent payment debt instruments. As a result, in the absence of an administrative determination or judicial ruling to the contrary, you will be required to include in your gross income each year, amounts of interest at an assumed yield of 6.28% compounded semi-annually based on the issue price of the debentures, or under certain circumstances at a greater or lesser yield, similarly compounded. You will recognize gain or loss on the sale of a debenture, repurchase by us of a debenture at your option, conversion of a debenture or redemption of a debenture. The amount of gain or loss recognized will be equal to the difference between the amount realized on the sale, repurchase by us at your option, conversion or redemption (including the 12 fair market value of our common stock received upon conversion or otherwise) and your adjusted tax basis in the debenture. Any gain recognized by you on the sale, repurchase by us at your option, conversion or redemption of a debenture generally will be ordinary interest income; any loss will be ordinary loss to the extent of the excess of previous interest inclusions and, thereafter, capital loss. See "Material United States Federal Income Tax Considerations." 13 USE OF PROCEEDS We will not receive any of the proceeds from the sale of the debentures or the underlying common stock by any selling securityholders. PRICE RANGE OF COMMON STOCK AND DIVIDENDS Our common stock is traded on the New York Stock Exchange under the symbol "IP." On September 6, 2001, the last sale price reported on the NYSE for our common stock was $40.73 per share. The following table sets forth the high and low sales price per share of our common stock on the NYSE composite tape of transactions and the dividends paid on our common stock during the quarterly periods presented below: Dividend High Low Per Share(a) ---- --- ------------ 1998 First Quarter..............................$52.625 $40.875 $0.26 Second Quarter............................. 55.250 42.500 0.26 Third Quarter.............................. 49.375 35.500 0.26 Fourth Quarter............................. 49.188 40.188 0.27 1999 First Quarter..............................$47.250 $39.500 $0.26 Second Quarter............................. 59.500 42.688 0.25 Third Quarter.............................. 56.063 46.938 0.25 Fourth Quarter............................. 57.688 43.563 0.25 2000 First Quarter..............................$60.000 $32.875 $0.25 Second Quarter............................. 45.938 29.563 0.25 Third Quarter.............................. 36.813 27.000 0.25 Fourth Quarter............................. 43.000 26.313 0.25 2001 First Quarter..............................$43.313 $32.900 $0.25 Second Quarter ............................ 41.000 33.313 0.25 Third Quarter(through September 6, 2001)... 42.500 35.203 0.25 - --------- (a) Our dividend was $1.00 per share in 1998 and 1999. However, dividends on a per share basis were restated to include dividends paid by Union Camp which merged with International Paper during 1999 in a transaction accounted for as a pooling-of-interests. 14 RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth our ratio of earnings to fixed charges on a historical basis for each of the five years in the period ended December 31, 2000, and for the six-month periods ended June 30, 2001 and June 30, 2000. 2001 2000 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ---- - --(1) 2.77 1.42 1.27 1.38 --(1) 1.83 - --------- (1) Our deficiency in earnings necessary to cover fixed charges was $407.5 million for the six months ended June 30, 2001 and $72.0 million for the year ended December 31, 1997. For purposes of computing the ratio of earnings to fixed charges, earnings include pre-tax earnings before extraordinary charges and the cumulative effect of accounting changes, interest expense, the estimated interest factor in rent expense (which, in our opinion, approximates one-third of rent expense) and preferred dividends of subsidiaries, and adjustments for undistributed equity earnings and the amortization of capitalized interest. Fixed charges include interest incurred (including amounts capitalized), the estimated interest factor in rent expense and preferred dividends of subsidiaries. 15 CAPITALIZATION Set forth below is our unaudited consolidated capitalization as of June 30, 2001, adjusted to give effect to the issuance of the debentures. This information should be read in conjunction with the audited and unaudited financial statements, including the notes thereto, and other financial information pertaining to us incorporated herein by reference. As of June 30, 2001 --------------- Actual --------------- (Unaudited) (in millions) Indebtedness: Notes payable and current maturities of long-term debt........ $ 1,271 ---------- Total short-term debt...................................... 1,271 Long-term debt, excluding current maturities.................. 12,787 ---------- Total Indebtedness............................................... 14,058 International Paper--Obligated Mandatorily Redeemable Preferred Securities of Subsidiaries Holding International Paper Debentures.......................................................1,805 Common Shareholders' Equity: Common stock....................................................... 484 Paid-in capital.................................................... 6,443 Retained earnings.................................................. 5,711 Accumulated other comprehensive income (loss)...................... (1,358) Less: Common stock held in treasury, at cost....................... 51 ---------- Total Common Shareholders' Equity..................................... 11,229 Total Capitalization..................................................$ 27,092 ========== 16 SECURITIES OFFERED Using this prospectus, selling securityholders may offer for sale the debentures and the common stock into which the debentures are convertible. We registered all of these securities under the Securities Act using a "shelf" registration statement. This shelf registration statement allows the selling securityholders to offer and sell any combination of these securities. Each time selling securityholders offer securities during the period of time that we are required by the Registration Rights Agreement to keep the shelf registration statement effective, such selling securityholder must provide this prospectus, which names the selling securityholders and describes the specific securities offered. This prospectus may be amended or supplemented by one or more prospectus supplements, which may provide new information or update the information in this prospectus. 17 DESCRIPTION OF DEBENTURES We have issued the debentures under an indenture dated April 12, 1999, between us and The Bank of New York, as trustee (hereinafter referred to as the base indenture), as supplemented by a supplemental indenture dated June 20, 2001, between us and the trustee. The supplemental indenture and the base indenture will be referred to together as the "indenture." The base indenture provides for the issuance from time to time of debt securities in an unlimited dollar amount and an unlimited number of series. We have summarized selected provisions of the indenture and the debentures below. This is a summary, and it is not complete. It does not describe all exceptions and qualifications contained in the indenture or all of the terms of the debentures. You should read the indenture and the debentures for provisions that may be important to you. Copies of the indenture and the form of debentures have been filed as exhibits to the registration statement of which this prospectus is a part. Brief Description of the Debentures The debentures are our senior unsecured obligations and rank equally with all of our other unsecured and unsubordinated indebtedness. The debentures are limited to an aggregate principal amount at maturity of $2,105,000,000, subject to an upward adjustment in the event there is an increased accretion rate. The debentures will mature on June 20, 2021. The debentures have been offered and sold at a discount from their value at maturity. We initially issued the debentures, as part of a private placement, at a price to investors of $475.66 per debenture. We will not pay cash interest on the debentures unless an increased accretion rate is in effect or we elect to do so following a tax event (as defined below). The maturity value of each debenture will exceed $1,000 in the event there is an increased accretion rate. The issue price represented a yield to maturity of 3.75% per annum unless the debentures become subject to an increased accretion rate. The debentures were issued only in denominations of $1,000 principal amount at maturity and multiples of $1,000 principal amount at maturity, subject to an upward adjustment in the event there is an increased accretion rate. You have the option to convert your debentures into our common stock, par value $1.00 per share, at a conversion rate of 9.5111 shares of common stock per debenture. This is equivalent to an initial conversion price of $50.01 per share of common stock based on the price to investors of the debentures. The conversion rate is subject to adjustment if certain events occur. If all conditions are met such that the debentures can be converted by the holders, then we will include the potential dilutive effect of the shares of our common stock issuable on conversion in our diluted earnings per share calculations only during the periods those conversion conditions are met. Each holder has agreed in the indenture, for U.S. federal income tax purposes, to treat the debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments. This includes our determination that the rate at which interest will be deemed to accrue for federal income tax purposes will be 6.28%, compounded semi-annually. This is the rate comparable to the rate at which we would borrow on a noncontingent, nonconvertible borrowing with terms and conditions otherwise comparable to the debentures (including the rank, term and general market conditions). Accordingly, each holder is required: o to accrue interest on a constant yield to maturity basis at that rate, with the result that a holder will recognize taxable income significantly in excess of cash received while the debentures are outstanding, and o recognize ordinary income upon a conversion of a debenture into our common stock equal to the excess, if any, of the value of the stock received on the conversion above the holder's adjusted tax basis in the debenture. However, the application of the regulations that govern contingent payment debt instruments is uncertain in a number of respects, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other differences, a holder: 18 o should have accrued interest income at a lower rate, o should not have recognized income or gain upon the conversion, or o should not have recognized ordinary income or loss upon a taxable disposition of its debenture. HOLDERS SHOULD CONSULT THEIR TAX ADVISERS REGARDING THE TAX TREATMENT OF THE DEBENTURES AND WHETHER A PURCHASE OF THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION. Interest Adjustment Beginning June 20, 2004, and on each one year anniversary thereafter (each referred to as an "accretion rate measurement date"), the accretion rate on the debentures is subject to adjustment as described below. However, at no time shall the accretion rate be less than 3.75% per annum or more than 11% per annum. If the valuation condition (as defined below) is satisfied then the accretion rate shall be reset as described below. If, however, on any accretion rate measurement date, the valuation condition with respect to such accretion rate measurement date is not satisfied, then the accretion rate shall be 3.75%. The "valuation condition" is satisfied if the closing sales price of our common stock is equal to or less than 60% of the accreted conversion price (as defined below) for any 20 trading days out of the last 30 consecutive trading days ending six business days prior to an accretion rate measurement date. The "accreted conversion price" as of any day will equal the accreted principal amount of a debenture divided by the number of shares of common stock issuable upon conversion of such debenture on that day. On June 20, 2004 and/or June 20, 2005, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 16, 2004. On June 20, 2006, if the valuation condition is satisfied, then the accretion rate for the period beginning on June 20, 2006 until the earlier of: o June 20, 2011, or o the next accretion rate measurement date on which the valuation condition is not satisfied shall be reset to the five-year rate, as determined on June 15, 2006. Notwithstanding the next two paragraphs, the five-year rate will continue to be in effect until June 20, 2011 if the valuation condition is satisfied on the accretion rate measurement dates in 2007, 2008, 2009 and 2010. On June 20, 2007 and/or June 20, 2008, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 15, 2007. On June 20, 2009 and/or June 20, 2010, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 17, 2009. On June 20, 2011, if the valuation condition is satisfied, then the accretion rate for the period beginning on June 20, 2011 until the earlier of: o June 20, 2016, or o the next accretion rate measurement date on which the valuation condition is not satisfied shall be reset to the five-year rate as determined on June 16, 2011. Notwithstanding the next two paragraphs, the five-year rate will continue to be in effect until June 20, 2016 if the valuation condition is satisfied on the accretion rate measurement dates in 2012, 2013, 2014 and 2015. 19 On June 20, 2012 and/or June 20, 2013, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 15, 2012. On June 20, 2014 and/or June 20, 2015, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 17, 2014. On June 20, 2016, if the valuation condition is satisfied, then the accretion rate for the period beginning on June 20, 2016 until the earlier of: o maturity, or o the next accretion rate measurement date on which the valuation condition is not satisfied shall be reset to the five-year rate as determined on June 15, 2016. Notwithstanding the next two paragraphs, the five-year rate will continue to be in effect until maturity if the valuation condition is satisfied on the accretion rate measurement dates in 2017, 2018, 2019 and 2020. On June 20, 2017 and/or June 20, 2018, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 15, 2017. On June 20, 2019 and/or June 20, 2020, if the valuation condition is satisfied, then the accretion rate shall be reset to the two-year rate as determined on June 17, 2019. The reset rate determined as of each reset rate determination date will be equal to the rate that would, in the sole judgment of the reset rate agent, result in a trading price of par of a hypothetical issue of senior, nonconvertible, noncontingent, fixed-rate debt securities of International Paper with: o a final maturity equal to, o in the case of the five-year rate, five years; and o in the case of the two-year rate, two years; o an aggregate principal amount equal to the accreted principal amount of the debentures; and o covenants and other provisions that are, insofar as would be practicable for an issue of senior, nonconvertible, fixed-rate debt securities, substantially identical to those of the debentures. Also, if the reset rate agent has not established the reset rate for the applicable annual period, or if the reset rate agent determines in its sole judgment that there is no suitable reference rate from which the reset rate may be determined, the reset rate for that period will be the reset rate most recently determined. If there is no reset rate most recently determined the reset rate shall be a rate mutually agreed upon by the reset rate agent and us reflecting current market conditions. In either case, such reset rate will remain in effect until the reset rate agent determines that there is a suitable reference rate, at which time the reset rate agent will determine a new reset rate for the period ending on the next reset rate determination date. All dates above refer to such date, or if such date is not a business day, the next succeeding business day. If an increased accretion rate is in effect for a particular period, we will pay a portion of the increased accretion rate as cash interest at an annualized rate of 0.25% (0.125% per semi-annual period) of the applicable principal amount. In the event of an increased accretion rate, we will pay cash interest on each June 20 or December 20 to holders of record on the preceding June 5 or December 5, as the case may be. Cash interest will be determined on the basis of a 360-day year, consisting of twelve 30-day months. 20 In the event of an increased accretion rate, the accreted principal amount of the debentures will increase at a rate greater than the initial accretion rate, and the maturity value of the debentures will exceed their initial maturity value of $1,000. The redemption and repurchase prices set forth in the tables below will also increase. The "closing sales price" of our common stock on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on that date as reported in composite transactions for the principal U.S. securities exchange on which our common stock is traded or, if our common stock is not listed on a U.S. national or regional securities exchange, as reported by the Nasdaq system. In the event of an increased accretion rate, we will disseminate a press release through Reuters Economic Services or Bloomberg Business News containing this information or publish the information on our web site on the world wide web or through such other public medium as we may use at that time. Reset Rate Agent; Determinations Conclusive We will appoint a reset rate agent. For the determination of the reset rate, the reset rate agent shall seek indicative reference rates from three nationally recognized investment banks. The determination of any reset rate will be conclusive and binding upon the reset rate agent, us, the trustee and the holders of the debentures, in the absence of manifest error. The reset rate agent may be removed at any time by us giving at least 60 days' written notice to the reset rate agent. The reset rate agent may resign at any time upon giving at least 30 days' written notice to us. Interest We will not pay cash interest on the debentures unless: o an increased accretion rate is in effect, or o we elect to do so following a tax event. Interest will be based on a 360-day year comprised of twelve 30-day months, and will be payable semi- annually on June 20 and December 20. If an increased accretion rate is in effect for an annual period, we will pay a portion of the increased accretion rate as cash interest at the rate of 0.25% (or 0.125% per semi-annual period) of the Applicable Principal Amount. Cash interest following a tax event and our election to pay the interest in cash, will be paid at a rate equal to the accretion rate that would be in effect from time to time if we had not elected to pay cash. The record date for the payment of cash interest to holders will be June 5 and December 5 of each year. We will give notice to the registered holders of the debentures, no later than 15 days prior to each record date, of the amount of cash interest to be paid as of the next interest payment date. We will pay interest on the debentures to registered holders of the debentures as of the record date. Redemption Rights On or after June 20, 2006, and prior to June 20, 2008, we may redeem the debentures for cash, in whole or in part. During that time period, the redemption option will be available only if our common stock price exceeds 120% of the accreted conversion price for at least 20 trading days in the 30 consecutive trading days ending on the date we publicize our intention to redeem the debentures. This date must be at least 30 and not more than 60 days prior to the redemption date. On or after June 20, 2008, we may redeem the debentures for cash, in whole or in part, at any time, on at least 30 but not more than 60 days' notice by mail to holders of debentures. The debentures will be redeemed for a price equal to the then accreted principal amount plus any accrued and unpaid cash interest to the redemption date. The table below shows redemption prices of the debentures at June 20, 2006, at each following June 20 prior to maturity and the price at maturity on June 20, 2021, assuming that neither an increased accretion rate nor a tax event occurs. The prices reflect the accreted principal amount calculated through each date. The redemption price of a 21 debenture redeemed between these dates would include an additional increase in the accreted principal amount accrued from the immediately preceding date in the table to the actual redemption date. Debenture Original Accrued Redemption Issue Price Interest Price ----------- -------- ----- Redemption Date June 20, 2006..............$475.66 $97.10 $572.76 June 20, 2007...............475.66 118.78 594.44 June 20, 2008...............475.66 141.28 616.94 June 20, 2009...............475.66 164.63 640.29 June 20, 2010...............475.66 188.87 664.53 June 20, 2011...............475.66 214.02 689.68 June 20, 2012...............475.66 240.13 715.79 June 20, 2013...............475.66 267.22 742.88 June 20, 2014...............475.66 295.34 771.00 June 20, 2015...............475.66 324.52 800.18 June 20, 2016...............475.66 354.81 830.47 June 20, 2017...............475.66 386.25 861.91 June 20, 2018...............475.66 418.87 894.53 June 20, 2019...............475.66 452.73 928.39 June 20, 2020...............475.66 487.87 963.53 June 20, 2021 (maturity)....475.66 524.34 1,000.00 If the trustee selects a portion of your debentures for redemption and you convert a portion of the same debentures, the converted portion will be deemed to be from the portion selected for redemption. Each debenture will be redeemed in whole. Conversion Rights Subject to the conditions described below, holders may convert their debentures into shares of our common stock at a conversion ratio of 9.5111 shares of our common stock per $1,000 principal amount at maturity of debentures. This is equivalent to an initial conversion price of $50.01 per share of our common stock. The conversion ratio and the equivalent conversion price of a debenture in effect at any given time are referred to in this prospectus as the applicable conversion ratio and the accreted conversion price, respectively, and will be subject to adjustment as described below. If a debenture has been called for redemption, the holder will be entitled to convert the debenture from the date of notice of the redemption until the close of business on the business day immediately preceding the date of redemption. A holder may convert fewer than all of such holder's debentures so long as the debentures converted are an integral multiple of $1,000 principal amount at maturity, subject to an upward adjustment in the event there is an increased accretion rate. Holders may surrender their debentures for conversion into our common stock prior to maturity if any of the following conditions is satisfied: o if the closing sales price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the day prior to the day of surrender is more than the Applicable Percentage (as described below) of the accreted conversion price; o if our senior long-term credit rating is downgraded by each of Moody's and S&P to below Baa3 and BBB-, respectively; o if the debentures have been called for redemption; or o upon the occurrence of specified corporate transactions described under "--Conversion Upon Specified Corporate Transactions." 22 Conversion Upon Satisfaction of Market Price Condition Holders may surrender debentures for conversion into shares of our common stock if the closing sales price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the day prior to the day of surrender for conversion is more than the Applicable Percentage of the accreted conversion price (as of the beginning of the six month period during which such debenture is surrendered for conversion). The Applicable Percentage shall be initially 120% and shall decline by 0.256% at the end of each semi-annual period over the life of the debentures to 110%. The following table illustrates the conversion trigger price for the debentures for each semi- annual period for which the debentures are outstanding, assuming we have not elected to pay cash interest from and after a tax event. Accreted Conversion Applicable Conversion Price Percentage Trigger Price ----- ---------- ------------- Semi-annual Period Beginning - ---------------------------- June 20, 2001.......................$50.01 120.00% $60.01 December 20, 2001................... 50.95 119.74% 61.01 June 20, 2002....................... 51.90 119.49% 62.02 December 20, 2002................... 52.88 119.23% 63.05 June 20, 2003....................... 53.87 118.97% 64.09 December 20, 2003................... 54.88 118.72% 65.15 June 20, 2004....................... 55.91 118.46% 66.23 December 20, 2004................... 56.96 118.21% 67.32 June 20, 2005....................... 58.02 117.95% 68.44 December 20, 2005................... 59.11 117.69% 69.57 June 20, 2006....................... 60.22 117.44% 70.72 December 20, 2006................... 61.35 117.18% 71.89 June 20, 2007....................... 62.50 116.92% 73.08 December 20, 2007................... 63.67 116.67% 74.28 June 20, 2008....................... 64.87 116.41% 75.51 December 20, 2008................... 66.08 116.15% 76.76 June 20, 2009....................... 67.32 115.90% 78.02 December 20, 2009................... 68.58 115.64% 79.31 June 20, 2010....................... 69.87 115.38% 80.62 December 20, 2010................... 71.18 115.13% 81.95 June 20, 2011....................... 72.51 114.87% 83.30 December 20, 2011................... 73.87 114.62% 84.67 June 20, 2012....................... 75.26 114.36% 86.06 December 20, 2012................... 76.67 114.10% 87.48 June 20, 2013....................... 78.11 113.85% 88.92 December 20, 2013................... 79.57 113.59% 90.38 June 20, 2014....................... 81.06 113.33% 91.87 December 20, 2014................... 82.58 113.08% 93.38 June 20, 2015....................... 84.13 112.82% 94.92 December 20, 2015................... 85.71 112.56% 96.48 June 20, 2016....................... 87.32 112.31% 98.06 December 20, 2016................... 88.95 112.05% 99.67 June 20, 2017....................... 90.62 111.79% 101.31 December 20, 2017................... 92.32 111.54% 102.97 June 20, 2018....................... 94.05 111.28% 104.66 December 20, 2018................... 95.81 111.03% 106.38 June 20, 2019....................... 97.61 110.77% 108.12 December 20, 2019................... 99.44 110.51% 109.90 June 20, 2020.......................101.31 110.26% 111.70 December 20, 2020...................103.21 110.00% 113.53 The conversion agent will, on our behalf, determine daily if the debentures are convertible and will notify us and the trustee accordingly. 23 Conversion Upon a Ratings Downgrade If at any time both Moody's and S&P have downgraded our senior long-term credit rating to below Baa3 and BBB-, respectively, then holders may surrender their debentures for conversion into our common stock prior to maturity. Conversion Upon Notice of Redemption A holder may surrender for conversion any of the debentures called for redemption at any time following receipt of a notice of redemption until the close of business one business day prior to the redemption date. This may be done even if the debentures are not otherwise convertible at such time. However, if a holder has already delivered a repurchase notice or a change in control repurchase notice with respect to a debenture the holder may not surrender that debenture for conversion until the holder has withdrawn the notice in accordance with the indenture. Conversion Upon Specified Corporate Transactions Even if any of the conditions described above have not occurred, if we elect to: o distribute to all holders of our common stock certain rights entitling them to purchase, for a period expiring within 60 days, our common stock at less than the quoted price at the time, or o distribute to all holders of our common stock our assets, debt securities or certain rights to purchase our securities, which distribution has a per share value exceeding 15% of the closing price of our common stock on the day preceding the declaration date for such distribution, we must notify the holders of debentures at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their debentures for conversion at any time until the earlier of close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place. No adjustment to the ability of a holder to convert will be made if the holder will otherwise participate in the distribution without conversion. In addition, if we are a party to a consolidation, merger or binding share exchange pursuant to which our common stock would be converted into cash, securities or other property, a holder may surrender debentures for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction. If we are a party to a consolidation, merger or binding share exchange pursuant to which our common stock is converted into cash, securities or other property, then at the effective time of the transaction, the right to convert a debenture into our common stock will be changed into a right to convert it into the kind and amount of cash, securities and other property which the holder would have received if the holder had converted its debentures immediately prior to the transaction. If the transaction also constitutes a change in control, the holder can require us to repurchase all or a portion of the holder's debentures as described under "--Change in Control." Additional Conversion Information The conversion rate is 9.5111 shares of our common stock for each debenture. This is equivalent to an initial conversion price of $50.01 per share of our common stock based on the issue price of the debentures. You will not receive any cash payment representing any accrued interest upon conversion of a debenture. Additionally, you will not receive fractional shares upon conversion of the debentures. Instead, upon conversion we will deliver to you a fixed number of shares of common stock and any cash payment to account for fractional shares. The cash payment for fractional shares will be based on the closing sales price of our common stock on the trading day immediately prior to the conversion date. Delivery of the common stock will be deemed to satisfy our obligations to pay the principal amount of the debentures, including accrued cash interest. Accrued cash interest will be deemed paid in full rather than canceled, extinguished or forfeited. We will not adjust the conversion ratio to account for the accrued cash interest. If you wish to exercise your conversion right, you must deliver an irrevocable conversion notice, together, if the debentures in definitive form have been issued, with the definitive security, to the conversion agent who will, on 24 your behalf, convert the debentures into our common stock. You may obtain copies of the required form of the conversion notice from the conversion agent. Upon a conversion, based on our treatment of the debentures for U.S. federal income tax purposes, a holder will generally be required to recognize ordinary income upon a conversion of a debenture into our common stock equal to the excess, if any, of the then current fair market value of the stock received on the conversion over the holder's adjusted tax basis in the debenture. For a more detailed discussion, see "Material United States Federal Income Tax Consequences." If you submit your debenture for conversion after we have elected to exercise our option to pay cash interest instead of accruing interest following a tax event or if we are required to make a cash payment pursuant to an interest adjustment, between a record date and the opening of business on the next interest payment date (as defined below) (except for debentures or portions of debentures called for redemption on a redemption date occurring during the period from the close of business on a record date and ending on the close of business on the first business day after the next interest payment date, or if this interest payment date is not a business day, the second business day after the interest payment date), you must pay us an amount equal to the interest payable on the converted principal amount. Adjustments to Conversion Rate The conversion rate will be subject to adjustment only upon the following events: o the payment of dividends and other distributions to all holders of our common stock payable exclusively in our common stock; o the issuance to all holders of our common stock of rights or warrants that allow the holders to purchase our common stock at less than the current market price; however, no adjustment will be made if holders of the debentures may participate in the transaction on a basis and with notice that our board of directors determines to be fair and appropriate or in some other cases; o subdivisions or combinations of our common stock; o the payment of dividends and other distributions to all holders of our common stock consisting of evidences of our indebtedness, securities, capital stock or assets; this does not include dividends and other distributions paid in cash and those rights or warrants referred to in the next paragraph relating to stockholders' rights plans, provided that no adjustment will be made if all holders of the debentures may participate in the transactions; o the payment to holders of our common stock in respect of a tender or exchange offer, other than an odd-lot offer, in which we or any of our subsidiaries offer aggregate consideration for our common stock that, together with: o any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for shares of our common stock consummated within the preceding 12 months that did not trigger a conversion price adjustment, and o all-cash distributions to all or substantially all stockholders made within the preceding 12 months that did not trigger a conversion price adjustment, exceeds an amount equal to 15% of the market capitalization of our common stock on the expiration date of the tender offer; and o the distribution to all or substantially all stockholders of all-cash distributions in an aggregate amount that, together with: 25 o any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for shares of our common stock consummated within the preceding 12 months that did not trigger a conversion price adjustment, and o all other all-cash distributions to all or substantially all stockholders made within the preceding 12 months that did not trigger a conversion price adjustment, exceeds an amount equal to 15% of the market capitalization of our common stock on the business day immediately preceding the day on which we declare a distribution. If we were to adopt a stockholders' rights plan under which we issued rights providing that each share of our common stock issued upon conversion of the debentures at any time prior to the distribution of separate certificates representing the rights will be entitled to receive those rights, there shall not be any adjustment to the conversion rate as a result of: o the issuance of the rights; o the distribution of separate certificates representing the rights; o the exercise or redemption of the rights in accordance with any rights agreement; or o the termination or invalidation of the rights. We may increase the conversion rate as permitted by law for at least 20 days, so long as the increase is irrevocable during the period. No adjustment in the accreted conversion price will be required unless the adjustment would require an increase or decrease of at least 1% of the accreted conversion price. If the adjustment is not made because the adjustment does not change the accreted conversion price by more than 1%, then the adjustment that was not made will be carried forward and taken into account in any future adjustment. Except as specifically described above, the accreted conversion price will not be subject to adjustment in the case of the issuance of any of our common stock or securities convertible into or exchangeable for our common stock. Exchange in Lieu of Conversion We have the option of designating a financial institution to which the conversion agent will initially offer any debentures surrendered to it for exchange in lieu of conversion. When a holder surrenders debentures for conversion, the conversion agent will first offer the debentures to a financial institution chosen by us for exchange in lieu of conversion. We expect that when the debentures are convertible, the designated institution will submit to the conversion agent a non-binding offer to accept debentures that have been surrendered for conversion. In order to accept these debentures, the designated institution must agree to exchange a number of shares of our common stock equal to the number of shares the holder would receive upon conversion, plus cash for any fractional shares. If the institution accepts any of the debentures, it will deliver the appropriate number of shares and appropriate amount of cash to the conversion agent. The conversion agent will then deliver the shares and the cash, if any, to the holder who surrendered the debentures. Our designation of an institution to which debentures may be submitted for exchange does not require that institution to accept any debentures from the conversion agent. If the designated institution declines to accept any debentures in whole or in part, those debentures or parts of debentures will be converted into shares of our common stock by the conversion agent. The conversion agent will convert those shares at the close of business on the business day following the business day on which the debentures are surrendered for conversion. If the designated institution agrees to accept any debentures for exchange but does not timely deliver the related common shares, the debentures will be converted and the shares of our common stock, and cash amount, if any, will be delivered by the conversion agent as though the designated institution declined to accept the debentures for exchange. Any debentures accepted for exchange by the designated institution will remain outstanding. 26 We anticipate that we will initially designate Credit Suisse First Boston Corporation as the institution to which offers described above will be made, although we may change this designation at any time. Repurchase Right You have the right to require us to repurchase the debentures on June 20, 2004, June 20, 2006, June 20, 2011 and June 20, 2016. We will be required to repurchase any outstanding debentures for which you deliver a written repurchase notice to the paying agent. This notice must be delivered no more than 20 business days prior to the relevant repurchase date and no less than five business day prior to the relevant repurchase date. If the repurchase notice is given and withdrawn during the period, we will not be obligated to repurchase the related debentures. Our repurchase obligation will be subject to some additional conditions. Also, our ability to satisfy our repurchase obligations may be affected by the factors described in "Risk Factors" under the caption "--Risks Relating to the Debentures--We may be unable to repay the debentures when due or repurchase the debentures when we are required to do so." The repurchase price payable will be equal to the accreted principal amount plus any accrued and unpaid cash interest through the repurchase date. Assuming that an increase in the accretion rate does not occur, the repurchase prices of a debenture as of each of the repurchase dates will be: o $531.74 per debenture on June 20, 2004; o $572.76 per debenture on June 20, 2006; o $689.68 per debenture on June 20, 2011; and o $830.47 per debenture on June 20, 2016. We may choose to pay the repurchase price in cash, in shares of our common stock, or in a combination of both. For a discussion of the tax treatment of a holder receiving cash, our common stock, or any combination thereof, see "Material United States Federal Income Tax Considerations--Classification of the Debentures--Sale, Exchange, Conversion or Retirement of the Debentures." If we have previously exercised our irrevocable option to pay cash interest instead of accreting the principal amount of the debentures following a tax event, the repurchase price will be equal to the restated principal amount plus any accrued and unpaid interest through the repurchase date. See "--Tax Event." If we choose to pay the repurchase price in whole or in part in shares of our common stock or a combination of cash and our common stock, we are required to give notice on a date not less than 20 business days prior to each repurchase date. The notice must be provided to all debenture holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law. If no notice is given, we will pay the repurchase price with cash. The notice must state among other things: o whether we will pay the repurchase price of the debentures in our common stock, or any combination of cash and our common stock, specifying the percentages of each; o the method used to calculate the market price of our common stock; and o the procedures that holders must follow to require us to repurchase their debentures. Simultaneously with our notice of repurchase, we will disseminate a press release through Reuters Economic Services or Bloomberg Business News containing this information or publish the information on our web site on the world wide web or through such other public medium as we may use at that time. Your notice electing to require us to repurchase your debentures must state: o if certificated debentures have been issued, the debenture certificate numbers, or if not certificated, your notice must comply with appropriate DTC procedures; 27 o the portion of the principal amount at maturity of the debentures to be repurchased, in multiples of $1,000, subject to an upward adjustment in the event there is an increased accretion rate; o that the debentures are to be repurchased by us pursuant to the applicable provisions of the indenture and the debentures; and o in the event that we have elected, pursuant to the notice that we are required to give, to pay all or part of the repurchase price in shares of our common stock, but the repurchase price is ultimately to be paid entirely in cash because of a failure to timely satisfy any of the necessary conditions specified in the indenture, whether the holder elects: o to withdraw the repurchase notice as to some or all of the debentures to which it relates, or o to receive cash in respect of the entire repurchase price for all debentures or portions of debentures specified in the repurchase notice. If the holder fails to indicate its choice with respect to the election described in the final bullet point above, the holder will be deemed to have elected to receive cash. For a discussion of the tax treatment of a holder receiving cash instead of shares of common stock, see "Material United States Federal Income Tax Considerations-- Classification of the Debentures--Sale, Exchange, Conversion or Retirement of the Debentures." You may withdraw any repurchase notice by providing a written notice of withdrawal to the paying agent prior to the close of business on the fifth business day prior to the repurchase date. The notice of withdrawal must state: o the principal amount at maturity of the withdrawn debentures; o if certificated debentures have been issued, the certificate numbers of the withdrawn debentures, or if not certificated, your notice must comply with appropriate DTC procedures; and o the principal amount at maturity, if any, which remains subject to the repurchase notice. If we elect to pay all or part of the repurchase price in shares of our common stock, the number of shares to be delivered by us will be equal to the portion of the repurchase price to be paid in our common stock divided by the market price (as defined herein) of one share of our common stock as determined by us in our payment notice. We will pay cash based on the market price for all fractional shares. The "market price" means the average of the closing sales prices of our common stock for the five trading day period ending on the third business day prior to the applicable repurchase date. If the third business day prior to the applicable repurchase date is not a trading day then the five trading day period will end on the last trading day prior to the third business day. This average will be appropriately adjusted to take into account some events that would result in an adjustment of the conversion rate with respect to our common stock, occurring during a period commencing on the first trading day of the five trading day period and ending on the repurchase date. Because the market price of our common stock is determined prior to the applicable repurchase date, holders of debentures bear the risk that the value of our common stock may fluctuate between the date when the market price is determined and the repurchase date. We may pay all or part of the repurchase price in shares of our common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation or other widely disseminated public source. Upon determination of the actual number of shares of common stock to be paid upon redemption of the debentures, we will issue a press release containing this information or publish the information on our web site on the world wide web or through such other public medium as we may use at that time. A holder must either effect book-entry transfer or deliver the debentures, together with necessary endorsements, to the office of the paying agent after delivery of the repurchase notice to receive payment of the repurchase price. You will receive payment on the later of the repurchase date or the time of book-entry transfer or 28 delivery of the debenture. If the paying agent holds money or securities to pay the repurchase price of the debenture on the business day following the repurchase date, then: o the debenture will cease to be outstanding; o original issue discount (or, if the debentures have been converted to interest-bearing debentures following a tax event, interest) will cease to accrue; and o all other rights of the holder will terminate. This will be the case whether or not book-entry transfer of the debenture is made or whether or not the debenture is delivered to the paying agent. No debentures may be repurchased at the option of the holder for cash if there has occurred, prior to, on or after giving by the holders of the debentures of the required repurchase notice, an event of default described under "-- Events of Default" below, other than a default in the payment of the repurchase price with respect to the debentures, and such default is continuing. Tax Event We have the option to irrevocably elect to pay cash interest instead of accreting the principal amount of the debentures. This option will be available to us from and after the date a tax event (as defined below) occurs. If that happens, the principal amount on which we pay interest will be restated and will be equal to the accreted principal amount as of the date of restatement. This restated principal amount will be the amount due at maturity. If we elect this option, interest will be based on a 360-day year comprised of twelve 30-day months. Interest will accrue from the date on which we exercised our option and will be payable semi-annually in arrears on June 20 and December 20 (each, an "interest payment date"). In the event that we exercise this option within 60 days prior to any interest payment date, the first payment of cash interest shall be made on the interest payment date following the immediate interest payment date. A tax event occurs when we receive an opinion from experienced independent tax counsel stating that as a result of either: o any amendment, change or announced prospective change in the laws or regulations of the United States, any of its political subdivisions, or any taxing authority of the United States; or o any amendment, change, interpretation or application of the laws or regulations by any legislative body, court, government agency or regulatory authority, there is more than an insubstantial risk that interest, including original issue discount, payable on the debentures either: o would not be deductible on a current accrual basis; or o would not be deductible under any other method, in whole or in part, by us for United States federal income tax purposes. Change in Control If a change in control, as defined below, occurs, a debenture holder will have the right to require us to repurchase any portion of its debentures not previously called for redemption. We will only purchase portions of a holders' debentures that are equal to $1,000 or an integral multiple of $1,000. The price we are required to pay is equal to the accreted principal amount plus any accrued and unpaid cash interest. Within 30 days after the occurrence of a change in control, we are obligated to provide notice to the holders of the debentures of the change in control and of their repurchase right arising from the that event. We must also deliver a copy of this notice to the trustee. To exercise the repurchase right, within 30 days following the date of our 29 notice, a debenture holder must deliver irrevocable written notice to the trustee together with the debentures that the holder desires to be repurchased. We are required to repurchase the debentures on the 45th day after the date of our notice. A change in control will be said to have occurred if: o after the first issuance of debentures, any person or group, other than us and our subsidiaries, becomes the beneficial owner of more than 50% of the total voting power of all of the classes of our voting stock entitled to participate in the election of the members of our board of directors; or o we consolidate with or merge into another person (other than a subsidiary), we sell, convey, transfer or lease our properties and assets substantially as an entirety to a person (other than a subsidiary), or any person (other than a subsidiary) consolidates with or merges with or into us, and our outstanding common stock is reclassified into, exchanged for or converted into the right to receive any other property or security, provided that none of these circumstances will constitute a change in control if, after a transaction, the persons that beneficially owned our voting stock immediately prior to the transaction beneficially own, in substantially the same proportion, shares with a majority of the total voting power of all outstanding voting securities of the surviving or transferee person that are entitled to vote generally in the election of that person's board of directors. If a change in control were to occur, we may not have sufficient funds available in the time period specified to repurchase the debentures upon a change in control. See "Risk Factors" under the caption "--Risks Relating to the Debentures--We may be unable to repay the debentures when due or repurchase the debentures when we are required to do so." In addition, we have, and may in the future incur, other indebtedness with similar change in control provisions which permit its holders to accelerate or to require us to repurchase our indebtedness upon the occurrence of similar events or on some specified dates. If we fail to repurchase the debentures when required following a change in control, we will be in default under the indenture. Book-Entry; Delivery and Form General The certificates representing the debentures have been issued in fully registered form without interest coupons in denominations of $1,000 and any integral multiple of $1,000. The debentures sold in reliance on Rule 144A are represented by one or more permanent global debentures in definitive, fully registered form without interest coupons ("Restricted Global Debentures"). The debentures will be deposited with the trustee as custodian for, and registered in the name of a nominee of the Depository Trust Company (the "depositary"). Ownership of beneficial interests in a global security is limited to persons who have accounts with the depositary ("participants") or persons who hold interests through participants. Ownership of beneficial interests, and the transfer of beneficial interests, in a global security will be shown on records maintained by the depositary or its nominee (with respect to interest of participants) and the records of participants (with respect to interests of persons other than participants). So long as the depositary, or its nominee, is the registered owner or holder of a global security, the depositary or its nominee, will be considered the sole owner or holder of the debentures represented by the global security for all purposes under the indenture and the debentures. No beneficial owner of an interest in a global security will be able to transfer that interest except in accordance with the depositary's applicable procedures. Payments of the principal of, and interest on, a global security will be made to the depositary or its nominee as the registered owner of that security. None of us, the trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests. Nor will we have any liability or responsibility for maintaining, supervising, or reviewing any records relating to these beneficial ownership interests. We expect that the depositary or its nominee, upon receipt of any payment, will credit participants' accounts in amounts proportionate to their respective beneficial interests. We also expect that payments by participants to 30 owners of beneficial interests in that global security held through those participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for those customers. These payments will be the responsibility of those participants. Transfers between participants in the depositary will be effected in the ordinary way in accordance with the depositary rules and will be settled in same-day funds. We expect that the depositary will only perform an action permitted to be taken by a holder of debentures on behalf of a participant (including the presentation of debentures for exchange as described below) at the direction of that participant. However, if there is an event of default under the debentures, the depositary will exchange the applicable global security for certificated securities, which it will distribute to its participants and which may be legended as set forth under the heading "Transfer Restrictions." We understand that: the depositary is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The depositary was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates and certain other organizations. Indirect access to the depositary system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although the depositary is expected to follow these procedures, it is under no obligation to do so, and these procedures may be discontinued at any time. None of us, the trustee or any paying agent will have any responsibility for the performance by the depositary, its participants, or its indirect participants of its obligations under the rules and procedures governing its operations. If the depositary is at any time unwilling or unable to continue as a depositary for the global securities and a successor depositary is not appointed by us within 90 days, we will issue certificated securities in exchange for the global securities, which may bear the legend referred to under "Transfer Restrictions." Holders of an interest in a global security may receive certificated securities, which may bear the legend referred to under "Transfer Restrictions," in accordance with the depositary's rules and procedures in addition to those provided for under the indenture. So long as the depository continues to make its settlement system available to us, all payments of principal of and interest on the debentures will be made by us in immediately available funds. Resales Under this Prospectus Debentures resold under the registration statement of which this prospectus forms a part will be represented by a single, permanent global debenture in definitive, fully registered form (the "Unrestricted Global Debenture"), which will be deposited with the trustee and registered in the name of a nominee of the depository. Upon each sale by a selling securityholder of debentures (or shares of our common stock into which the debentures may be converted) offered hereby, such selling securityholder will be required to deliver a notice (the "Notice") of such sale to the trustee and to us. The Notice will, among other things, identify the sale as a sale pursuant to the registration statement of which this prospectus forms a part, certify that the prospectus delivery requirements, if any, of the Securities Act have been satisfied, and certify that the selling securityholder and the number of debentures or shares of our common stock, as the case may be are identified in the prospectus in accordance with the applicable rules and regulations under the Securities Act. A copy of the Notice is included herein in Appendix A. Additional copies may be requested from International Paper Company, 400 Atlantic Street, Stamford, Connecticut 06921, Attention: Investor Relations Department (Telephone: (203) 541-8625). Upon receipt by the trustee of the Notice relating to a sale of debentures, an appropriate adjustment will be made to reflect a decrease in the principal amount of the Restricted Global Debentures or the cancellation of 31 debentures in certificated form upon the transfer thereof, and a corresponding increase in the principal amount of the Unrestricted Global Debentures. Certain Covenants We have covenanted in the indenture that we will not, and will not permit any subsidiary (as hereinafter defined) to, issue, assume or guarantee any debt for money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security interest or lien (a "mortgage" or "mortgages") upon any forestlands or principal manufacturing facility (as hereinafter defined), now owned or hereafter acquired, without in any such case effectively providing that the debentures shall be secured equally and ratably with (or prior to) such Debt, except that the foregoing restrictions shall not apply to: (1) mortgages on any property acquired, constructed or improved by us or any subsidiary after April 1, 1994 which are created within 180 days after such acquisition (or in the case of property constructed or improved, after the completion and commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of the purchase price or cost thereof, or existing mortgages on property acquired, provided such mortgages shall not apply to any property theretofore owned by us or any Subsidiary other than theretofore unimproved real property; (2) mortgages on any property acquired from a corporation which is merged with or into us or a subsidiary or mortgages outstanding at the time any corporation becomes a subsidiary; (3) mortgages in favor of us or any subsidiary; or (4) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any mortgage referred to in the foregoing clauses (1), (2) or (3); and except that the following types of transactions, among others, shall not be deemed to create Debt secured by a mortgage: (1) the sale, mortgage or other transfer of timber in connection with an arrangement under which either we are or a subsidiary is obligated to cut such timber or a portion thereof in order to provide the transferee with a specified amount of money however determined; and (2) mortgages in favor of governmental bodies of the United States to secure advance, progress or other payments pursuant to any contract or statute or to secure indebtedness incurred to finance the purchase price or cost of constructing or improving the property subject to such mortgages. Notwithstanding the foregoing, we and any of our Subsidiaries may, without securing the debentures, issue, assume or guarantee secured Debt (which would otherwise be subject to the foregoing restrictions) in an aggregate amount which, together with all other such Debt and the Attributable Debt (as hereinafter defined) in respect of Sale and Lease-Back Transactions (as hereinafter defined) of us and our Subsidiaries existing at such time (other than Sale or Lease-Back Transactions the proceeds of which have been applied to the retirement of Funded Debt (as hereinafter defined)), does not at the time exceed 10% of our net tangible assets and our consolidated Subsidiaries as of the latest fiscal year. "Net tangible assets" is defined as the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities and (b) all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense (to the extent included in said aggregate amount of assets) and other like intangibles, all as set forth on the most recent consolidated balance sheet of ours and our consolidated Subsidiaries and computed in accordance with generally accepted accounting principles. Neither we will nor any of our Subsidiaries will enter into any arrangement with any person providing for the leasing to us or a Subsidiary of any Forestlands or any Principal Manufacturing Facility (except for temporary leases for a term of not more than three years), which property has been owned and, in the case of any such Principal Manufacturing Facility, has been placed in commercial operation more than 180 days by us or that Subsidiary and has been or is said to be sold or transferred by us or the Subsidiary to such person (herein referred to as a "Sale and Lease-Back Transaction"), unless either: 32 (1) we or our Subsidiary would be entitled to incur Debt secured by a mortgage on the property to be leased in an amount equal to the Attributable Debt with respect to such Sale and Lease-Back Transaction without equally and ratably securing the debentures, or (2) we shall, and in any such case we will covenant that we will, apply an amount equal to the fair value (as determined by our Board of Directors) of the property so leased to the retirement, within 180 days of the effective date of any such Sale and Lease-Back Transaction, of debentures or of our Funded Debt which ranks on a parity with the debentures. The term "Forestlands" shall mean property in the United States which contains standing timber which is, or upon completion of a growth cycle then in process is expected to become lumber or timber products of a commercial quantity and of merchantable quality. The term "Forestlands" does not include any land which is held by or transferred to a Subsidiary primarily for development and/or sale of the land itself, and not for the production of any lumber or other timber products. The term "principal manufacturing facility" means any paperboard, paper or pulp mill, or any paper converting plant located within the United States. The term "principle manufacturing facility does not include any mill or plant or portion thereof: (1) which is financed by obligations issued by a State, a Territory, or a possession of the United States, or any political subdivision of any of the foregoing, or the District of Columbia, the interest on which is excludible from gross income of the holders thereof pursuant to the provisions of Section 103(a) of the Internal Revenue Code (or any successor to such provision) as in effect at the time of issuance of such obligations, or (2) which, in the opinion of our Board of Directors, is not of material importance to the total business conducted by us and our Subsidiaries as an entirety. The term "Subsidiary" means any corporation of which we, or one or more of our subsidiaries, beneficially own at least a majority of the outstanding stock having by its terms ordinary voting power to elect a majority of the Board of Directors of such corporation. This is irrespective of whether or not stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency. The term "Attributable Debt" means, at the time of determination, the present value (discounted at the interest rate, compounded semiannually, equal to the weighted average Yield to Maturity of the debentures then Outstanding, such average being weighted by the principal amount of the debentures or, in the case of Original Issue Discount Securities, such amount to be determined as provided in the definition of "Outstanding" in the indenture) of the obligation of a lessee for net rental payments during the remaining term of any lease (including any period for which such lease has been extended) entered into in connection with a sale and leaseback transaction. The term "Funded Debt" shall mean Debt which by its terms matures at, or is extendible or renewable at the option of the obligor to, a date more than twelve months after the date of the creation of such Debt. Events of Default Any one of the following events will constitute an event of default under the indenture with respect to debentures: o default for 30 days in the payment of any interest on the debentures, following an election by us to pay cash interest on the debentures following a tax event, or in the payment of any additional interest due under the registration rights agreement; o default in payment of the principal of or any premium on the debentures at maturity (or, if we have elected to pay cash interest on the debentures following a tax event, the restated principal amount), original issue price, accrued original issue discount, redemption price, repurchase price or change in control price, when the same becomes due and payable; 33 o our failure to comply with any of our covenants or agreements regarding these debentures found in the debentures or in the indenture for 60 days after written notice by the trustee or by the holders of at least 25% in principal amount of all outstanding debt securities affected by that failure; or o certain events in bankruptcy, insolvency or reorganization involving us. If an event of default with respect to the outstanding debentures occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debentures may declare the principal amount of the debentures to be due and payable immediately by notice as provided in the indenture. In the case of any debenture that is an Original Issue Discount Security or the if the principal amount of is not determinable, the amount due upon a declaration will be a portion of the principal amount of such debenture, or some other amount, as may be specified in the terms of the debenture. A declaration for acceleration may be rescinded and annulled by the holders of a majority of the aggregate principle amount of the outstanding debentures, under certain circumstances. Such a recission must be made before a judgment or decree for payment of money has been obtained by the trustee. If the trustee acts with the appropriate standard of care, it is under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any of the holders, unless the holders have offered the trustee a reasonable indemnity. Subject to such provisions for the indemnification of the trustee, the holders of a majority of the aggregate principal amount of the outstanding debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the debentures. We are required to furnish to the trustee annually a statement as to the performance of certain of our obligations under the indenture and as to any default in our performance. Modification and Waiver Except in limited circumstances, modifications and amendments of the indenture may be made by us and the trustee under the indenture. However, in order to make any such modification we or the trustee must have the consent of the holders of a majority of the aggregate principal amount of the outstanding debentures issued under the indenture and that are affected by such modification or amendment. Without the consent of each affected debenture holder none of the following modifications or amendments may be made: o reduce the principal of any debenture; o reduce the premium on any debenture; o change the stated maturity of any debenture; o reduce the rate of cash interest on any debenture; o change the time for payment of cash interest on any debenture; o reduce the accretion rate of any debenture; o reduce or alter the method of computation of the redemption price, repurchase price or change in control repurchase price of any debenture or the time when those prices are payable; o make the principal of, or cash interest on, any debenture payable in money or securities other than that stated in the debenture, or change the price of payment; o impair the right to institute suit for the enforcement of any payment related to the debentures; or o reduce the percentage of principal amount of the outstanding debentures required to amend or supplement the indenture or waive any of its provisions. 34 The holders of at least a majority of the aggregate principal amount of the outstanding debentures may, on behalf of the holders of all the debentures, waive compliance by us with certain restrictive provisions of the indenture and the debentures. The holders of at least a majority of the aggregate principal amount of the outstanding debentures may, on behalf of all holders of debentures, waive any past default under the indenture. These majority holders cannot, however, waive a default: (1) in the payment of principal of, or premium, if any, or any interest on any debenture, and (2) in respect of a covenant or provision of the indenture or the debentures which cannot be modified or amended without the consent of each affected debenture holder. Consolidation, Merger and Sale of Assets We, without the consent of the holders of any of the outstanding debentures under the indenture, may consolidate or merge with or into, sell, lease, transfer or otherwise dispose of our assets substantially as an entirety to, any person which is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, or may permit any such person to consolidate or merge with or into us or sell, lease, transfer or otherwise dispose of its assets substantially as an entirety to us, provided that any successor person assumes our obligations on the debentures and under the indenture, that after giving effect to the transaction no event of default, and no event which, after notice or lapse of time, would become an event of default, shall have occurred and be continuing, and that certain other conditions are met. Further Issues We may, without notice to or the consent of the holders of the debentures, issue additional debentures of the same tenor as the debentures, so that such additional debentures and the debentures offered in this issue shall form a single series. All references to the debentures in this document shall include (unless the context otherwise requires) any further debentures issued as described in this paragraph. Purchasers of the debentures after the date of any further issue will not be able to differentiate between the debentures sold as part of the further issue and those sold previously. If we were to issue debentures with a greater amount of original issue discount, persons that are subject to U.S. federal income taxation who purchase debentures after that further issue may be required to accrue greater amounts of original issue discount than they would otherwise have accrued with respect to their debentures. This may affect the price of debentures outstanding at the time of a further issue. Governing Law The indenture and the debentures are governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Regarding the Trustee The Bank of New York has been appointed by us as the trustee. The indenture contains limitations on the right of the trustee, as a creditor of ours, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the trustee may be deemed to have a conflicting interest and may be required to resign as trustee if at the time of a default under the indenture, it is our creditor. The Bank of New York also acts as trustee under various indentures and we and certain of our subsidiaries from time to time maintain deposit accounts and conduct our banking transactions with The Bank of New York in the ordinary course of our business. Registration Rights of Selling Securityholders This prospectus is part of a shelf registration statement filed under the terms of a Registration Rights Agreement among us and the Initial Purchasers of the debentures. 35 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock at September 6, 2001 consisted of 990,850,000 shares of common stock, $1 par value; 400,000 shares of cumulative $4 preferred stock, without par value (stated value $100 per share); and 8,750,000 shares of serial preferred stock, $1 par value. The serial preferred stock is issuable in one or more series by our Board of Directors without further shareholder action. The following summary is qualified in its entirety by the provisions of our certificate of incorporation and by-laws, which are available from us upon request as described in "Where You Can Find More Information." Common Stock The holders of our common stock are entitled to one vote per share on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Subject to the rights of the holders of any shares of our preferred stock which may at the time be outstanding, holders of our common stock are entitled to receive such dividends as may be declared from time to time by our Board of Directors out of funds legally available therefor. In the event of our liquidation, holders of our common stock are entitled to all remaining assets available for distribution to shareholders after satisfaction of our liabilities and the preferential rights of any preferred stock that may then be issued and outstanding. Our outstanding shares of common stock are, and the shares which may be acquired upon conversion of the debentures will be, fully paid and nonassessable. The holders of our common stock have no preemptive, conversion or redemption rights. Preferred Stock Under our Restated Certificate of Incorporation, as amended, our Board of Directors is authorized, without further stockholder action, to provide for the issuance of up to 8,750,000 shares of our Serial Preferred Stock. Our Serial Preferred Stock may be issued in one or more series, with such designations of titles; dividend rates; any redemption provisions; special or relative rights in the event of our liquidation, dissolution, distribution or winding up; any sinking fund provisions; any conversion provisions; any voting rights thereof; and any other preferences, privileges, powers, rights, qualifications, limitations and restrictions, as shall be set forth as and when established by our Board of Directors. The shares of any series of our Serial Preferred Stock will be, when issued, fully paid and nonassessable and holders thereof will have no preemptive rights in connection therewith. Any series of our preferred stock will, with respect to rights on liquidation, winding up and dissolution, rank (i) senior to all classes of our common stock and to all equity securities issued by us, the terms of which specifically provide that such equity securities will rank junior to such series of our preferred stock (the "International Paper Junior Liquidation Securities"); (ii) on a parity with all equity securities issued by us, the terms of which specifically provide that such equity securities will rank on a parity with such series of our Preferred Stock (the "International Paper Parity Liquidation Securities"), and (iii) junior to all equity securities issued by us, the terms of which specifically provide that such equity securities will rank senior to such series of our Preferred Stock (the "Senior Liquidation Securities"). In addition, any series of our preferred stock will, with respect to dividend rights, rank (i) senior to all equity securities issued by us, the terms of which specifically provide that such equity securities will rank junior to such series of our preferred stock and, to the extent provided in the applicable Certificate of Designation, to our common stock, (ii) on a parity with all equity securities issued by us, the terms of which specifically provide that such equity securities will rank on a parity with such series of our preferred stock and, to the extent provided in the applicable Certificate of Designation, to our common stock ("International Paper Parity Dividend Securities") and (iii) junior to all equity securities issued by us, the terms of which specifically provide that such equity securities will rank senior to such series of our preferred stock. As used in any Certificate of Designation for these purposes, the term "equity securities" will not include debt securities convertible into or exchangeable for equity securities. Anti-Takeover Provisions Our Restated Certificate of Incorporation contains provisions which: (1) divide our Board of Directors into three classes of as nearly equal size as possible, with directors in each class being elected for terms of three years; (2) require the affirmative vote of 80% of the outstanding shares of voting stock to remove any director except for cause; (3) require the affirmative vote of (a) 80% of the outstanding shares of voting stock and (b) a majority of the voting stock not owned by an Interested Stockholder (an owner of 10% or more of voting power) to approve any 36 Business Combination (as such term is defined in our Restated Certificate of Incorporation) with an Interested Stockholder unless (x) the Business Combination shall have been approved by our Board of Directors at a time when Disinterested Directors (those directors unaffiliated with an Interested Stockholder who were either on our Board of Directors prior to the time the Interested Stockholder became an Interested Stockholder or succeeded a Disinterested Director and were recommended for a nomination or election by a majority of the Disinterested Directors) constitute a majority of our entire Board of Directors or (y) in the case of a Business Combination involving the payment of consideration to holders of capital stock, certain conditions concerning the adequacy of the consideration are met; (4) require the affirmative vote of 80% of the outstanding shares of voting stock to amend or repeal those provisions of our Restated Certificate of Incorporation described in clauses (1) and (2) above; and (5) require the affirmative vote of (x) 80% of the outstanding shares of voting stock and (y) a majority of the voting stock not owned by an Interested Stockholder, to approve any proposal made by such Interested Stockholder to amend or repeal those provisions of our Restated Certificate of Incorporation described in clause (3) above, unless such proposal is recommended by our Board of Directors at a time when Disinterested Directors constitute a majority of our entire Board of Directors. The overall effect of these provisions may be to deter or discourage hostile takeover attempts by making it more difficult for a person who has gained a substantial equity interest in us to effectively to exercise control. 37 SELLING SECURITYHOLDERS We originally issued the debentures in a private placement. The debentures were resold by the initial purchasers to qualified institutional buyers within the meaning of Rule 144A under the Securities Act in transactions exempt from registration under the Securities Act. The debentures and the underlying common stock that may be offered under this prospectus will be offered by the selling securityholders, which includes their transferees, pledgees or donees or their successors. The following table sets forth certain information concerning the principal amount at maturity of debentures beneficially owned by each selling securityholder and the number of shares of underlying common stock that may be offered from time to time pursuant to this prospectus. The number of shares of common stock shown in the table below assumes conversion of the full amount of debentures held by such holder at the initial conversion rate of 9.5111 shares per $1,000 principal amount at maturity of debentures. This conversion rate is subject to certain adjustments. Accordingly, the number of shares of common stock issuable upon conversion of the debentures may increase or decrease from time to time. Under the terms of the indenture, fractional shares will not be issued upon conversion of the debentures. Cash will be paid instead of fractional shares, if any. We have prepared the table below based on information given to us by the selling securityholders on or prior to September 6, 2001. However, any or all of the debentures or the common stock listed below may be offered for sale pursuant to this prospectus by the selling securityholders from time to time. Accordingly, no estimate can be given as to the amount of debentures or the common stock that will be held by the selling securityholders upon consummation of any sales. In addition, the selling securityholders listed on the table below may have acquired, sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their debentures since the date as of which the information was last provided to us. Information about the selling securityholders may change over time. Any changed information will be set forth in prospectus supplements. From time to time, additional information concerning ownership of the debentures and the common stock may rest with holders of debentures or the common stock not named in the table below and of whom we are unaware. Number Principal Amount of Shares at Maturity of of Common Percentage Debentures Percentage Stock of Common Beneficially Owned of Debentures That May be Stock That May be Sold Outstanding Sold Outstanding(1) ---------------- ----------- ---- -------------- Name of Selling Securityholder Absolute Return Fund Ltd.................... $4,592,000 * 43,674.97 * AIG/National Union Fire Insurance........... 1,750,000 * 16,644.43 * Alexandra Global Investment Fund 1, Ltd...................................... 3,000,000 * 28,533.30 * Allstate Insurance Company.................. 4,250,000 * 40,422.18 * Allstate Life Insurance Company............. 11,150,000 * 106,048.77 * Amaranth Securities LLC..................... 8,000,000 * 76,088.80 * Arbitex Master Fund L.P..................... 10,000,000 * 95,111.00 * Banca Del Gottardo Lugano/Switzerland....... 600,000 * 5,706.66 * Bear Stearns International Limited.......... 38,000,000 1.81 361,421.80 * Canyon Capital Arbitrage Master Hedge Fund, Ltd.......................... 16,000,000 * 152,177.60 * Canyon Mac 18 Ltd. (RMF).................... 7,000,000 * 66,577.70 * Canyon Value Realization Fund (Cayman), Ltd............................ 44,000,000 2.09 418,488.40 * Clinton Multistrategy Master Fund, Ltd...................................... 2,200,000 * 20,924.42 * 38 Number Principal Amount of Shares at Maturity of of Common Percentage Debentures Percentage Stock of Common Beneficially Owned of Debentures That May be Stock That May be Sold Outstanding Sold Outstanding(1) ---------------- ----------- ---- -------------- Clinton Riverside Convertible Portfolio Limited.................................. 4,000,000 * 38,044.40 * Conseco Annuity Assurance - Multi Bucket Annuity Convertible Bond Fund..................................... 5,000,000 * 47,555.50 * Credit Industriel D'Alsace Et De Lorraine................................. 22,000,000 1.05 209,244.20 * Credit Suisse First Boston Corp............. 449,124,000 21.34 4,271,663.28 * D.E. Shaw Investments Group, L.P............ 6,000,000 * 57,066.60 * D.E. Shaw Valence Portfolios................ 24,000,000 1.14 228,266.40 * Deutsche Banc Alex Brown Inc................ 15,000,000 * 142,666.50 * Gaia Offshore Master Fund Ltd............... 27,700,000 1.32 263,457.47 * Granville Capital Corporation............... 30,000,000 1.43 285,333.00 * Gulf International Bank UK Ltd.............. 7,000,000 * 66,577.70 * Jersey (IMA) Ltd............................ 1,000,000 * 9,511.10 * JMG Triton Offshore Fund Ltd................ 5,000,000 * 47,555.50 * J.P. Morgan Securities Inc.................. 25,000,000 1.19 237,777.50 * KBC Financial Products (Cayman Islands) Ltd............................. 40,000,000 1.90 380,444.00 * KBC Financial Products USA Inc.............. 6,626,000 * 63,020.55 * Kerr-McGee Corporation...................... 1,675,000 * 15,931.09 * Lexington (IMA) Limited..................... 2,951,000 * 28,067.26 * LibertyView Fund L.L.C...................... 1,000,000 * 9,511.10 * LibertyView Funds L.P....................... 6,500,000 * 61,822.15 * LibertyView Global Volatility Fund, L.P...................................... 6,500,000 * 61,822.15 * Lutheran Brotherhood........................ 4,000,000 * 38,044.40 * Lyxor Master Fund........................... 2,300,000 * 21,875.53 * Merrill Lynch International Ltd............. 17,750,000 * 168,822.03 * Morgan Stanley & Co......................... 20,000,000 * 190,222.00 * NMS Services (Cayman) Inc................... 200,000,000 9.50 1,902,220.00 * Ondeo Nalco................................. 425,000 * 4,042.22 * OZ Master Fund, Ltd......................... 160,957,000 7.65 1,530,878.12 * Pacific Life Insurance Company.............. 1,000,000 * 9,511.10 * Paloma Securities LLC....................... 8,000,000 * 76,088.80 * RAM Trading Ltd............................. 5,000,000 * 47,555.50 * Royal Bank of Canada (Toronto).............. 37,800,000 1.80 359,519.58 * Royal Bank of Canada (New York)............. 15,000,000 * 142,666.50 * Southern Farm Bureau Life Insurance......... 2,785,000 * 26,488.41 * Starvest Combined Portfolio................. 1,885,000 * 17,928.42 * Starvest Managed Portfolio.................. 200,000 * 1,902.22 * State of Florida Division of Treasury....... 6,800,000 * 64,675.48 * TD Securities (USA) Inc..................... 90,000,000 4.28 855,999.00 * Teachers Insurance and Annuity Association.............................. 26,750,000 1.27 254,421.93 * Tribeca Investments, L.L.C.................. 4,000,000 * 38,044.40 * UBS AG London Branch........................ 59,559,000 2.83 566,471.60 * 39 Number Principal Amount of Shares at Maturity of of Common Percentage Debentures Percentage Stock of Common Beneficially Owned of Debentures That May be Stock That May be Sold Outstanding Sold Outstanding(1) ---------------- ----------- ---- -------------- Value Realization Fund, L.P................. 22,000,000 1.05 209,244.20 * White River Securities L.L.C................ 183,000,000 8.69 1,740,531.30 * Wolverine Trading L.P....................... 6,000,000 * 57,066.60 * Worldwide Transactions Ltd.................. 441,000 * 4,194.40 * Sub Total $1,712,270,000 81.34 16,285,571.20 3.37 All other holders of debentures or future transferees, pledgees, donees, assignees or successors of any of those holders(2)(3)..................... $392,730,000 18.66 3,735,293.80 0.77 Total......................................2,105,000,000 100.00 20,020,865.00 4.14
- --------- * Less than one percent (1%) (1) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 483,150,673 shares of common stock outstanding as of July 31, 2001. In calculating this amount, we treated as outstanding the number of shares of common stock issuable upon conversion of all of that particular holder's debentures. However, we did not assume the conversion of any other holder's debentures. (2) Information concerning other selling holders of debentures or underlying common stock will be set forth in prospectus supplements from time to time, if required. (3) Assumes that any other holders of debentures, or any future transferees, pledgees, donees or successors of or from any such other holders of debentures do not beneficially own any common stock other than the common stock issuable upon conversion of the debentures at the initial conversion rate. None of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates except as set forth below. Credit Suisse First Boston and Goldman, Sachs & Co, were initial purchasers in connection with the private placement of the debentures and have, along with certain of their affiliates, engaged and may engage in investment banking transactions with us. Merrill Lynch, Pierce Fenner & Smith, Inc. an affiliate of Merrill Lynch International Ltd. has from time to time acted as a financial advisor to us. We have used and may in the future use, the services of Bear Sterns an affiliate of Bear Stearns International Limited for occasional trading activities. Toronto Dominion Bank, an affiliate of TD Securities (USA) Inc has a lending relationship with us. Only selling securityholders identified above who beneficially own the debentures set forth opposite each such selling securityholders's name in the foregoing table on the effective date of the registration statement of which this prospectus forms a part may sell such debentures pursuant to the registration statement. Prior to any use of this prospectus in connection with an offering of the debentures and/or the common stock issuable upon conversion of the debentures by any holder not identified above, this prospectus will be supplemented to set forth the name and other information about the selling securityholder intending to sell such debentures and/or common stock. The prospectus supplement will also disclose whether any selling securityholder selling in connection with such prospectus supplement has held any position or office with, been employed by or otherwise has had a material relationship with, the Company or any of its affiliates during the three years prior to the date of the prospectus supplement if such information has not been disclosed herein. 40 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion describes the material U.S. federal income tax consequences to holders of the ownership and disposition of the debentures. This discussion applies only to debentures that are held as capital assets. As used in this section, the term "holder" means a beneficial owner of a debenture that is for United States federal income tax purposes: o a citizen or resident of the United States; o a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or o an estate or trust the income of which is subject to United States federal income taxation regardless of its source. The term holder also includes certain former citizens of the United States. This discussion does not describe the U.S. federal income tax consequences of the ownership or disposition of our common stock, nor does it describe all of the tax consequences that may be relevant to a holder in light of its particular circumstances or to holders subject to special rules, such as: o certain financial institutions; o insurance companies; o dealers in securities or foreign currencies; o persons holding debentures as part of a hedge; o holders whose functional currency is not the U.S. dollar; o partnerships or other entities classified as partnerships for U.S. federal income tax purposes; or o persons subject to the alternative minimum tax. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations all as of the date of this registration statement, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. Persons considering the purchase of debentures should consult their tax advisers with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. Classification of the Debentures We currently intend to treat the debentures as indebtedness for United States federal income tax purposes subject to the Treasury regulations governing contingent payment debt instruments (the "contingent debt regulations"). In the absence of an administrative determination or judicial ruling to the contrary, we and every holder agree to treat the debentures as subject to the contingent debt regulations. Each holder agrees to be bound by our application of the contingent debt regulations to the debentures, including our determination of the rate at which interest will be deemed to accrue on the debentures for U.S. federal income tax purposes as described below. However, the proper application of the contingent debt regulations to the debentures is uncertain in a number of respects, and no assurance can be given that the Internal Revenue Service ("IRS") will not assert that the debentures should be treated differently. Such treatment could affect the amount, timing and character of income, gain or loss with respect to an investment in the debentures. In particular, it might be determined that a holder should not have accrued interest income in excess of the stated yield, should not have recognized income upon the conversion of a 41 debenture and should have recognized capital gain or loss upon a taxable disposition of its debenture. Accordingly, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the debentures (including the possibility that the debentures are not contingent payment debt instruments) and with respect to any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. The remainder of this discussion assumes that the debentures will be treated as indebtedness subject to the contingent debt regulations as described above. Interest Accruals on the Debentures Under the contingent debt regulations, a holder, regardless of its method of accounting for federal income tax purposes, will be required to accrue interest income on the debentures on a constant yield basis at an assumed yield (the "comparable yield") determined at the time of issuance of the debentures. Accordingly, holders will be required to include interest in taxable income in each year despite the fact that no interest may actually be paid on the debentures. At the time the debentures were issued, we were required to determine the comparable yield for the debentures taking into account the yield at which we could have issued a nonconvertible, fixed rate debt instrument with terms similar to those of the debentures. Accordingly, we have determined the comparable yield to be 6.28% compounded semi-annually. Solely for purposes of determining the amount of interest income that a holder will be required to accrue, we were required to construct a "projected payment schedule" in respect of the debentures representing a series of payments the amount and timing of which would produce a yield to maturity on the debentures equal to the comparable yield. The projected payment schedule for the debentures includes an estimate for a payment at maturity taking into account the anticipated value of our common stock at the time. The comparable yield and the schedule of projected payments are set forth in the Indenture. Holders may also obtain the projected payment schedule by submitting a written request for it to us at International Paper Company, 400 Atlantic Street, Stamford, Connecticut 06921, Attention: Corporate Secretary. Neither the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual amount that will be paid on the debentures or the value at any time of the common stock into which the debentures may be converted. For U.S. federal income tax purposes, a holder is required to use the comparable yield and the projected payment schedule established by us in determining interest accruals and adjustments in respect of a debenture, unless under relevant Treasury regulations our determination is unreasonable and such holder timely and explicitly discloses and justifies another determination of the comparable yield and projected payment schedule to the IRS. Based on the comparable yield and the issue price of the debentures, a holder of a debenture (regardless of accounting method) will be required to accrue as interest the sum of the daily portions of interest on the debentures for each day in the taxable year on which the holder held the debenture. The issue price of the debentures is $475.66. These daily portions of interest will be adjusted upward and downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the debentures (as set forth below). In addition, any holder which has purchased a debenture for an amount which is more or less than its adjusted issue price on the date of purchase will be required to make further adjustments in the manner described below. The daily portions of interest in respect of a debenture are determined by allocating to each day in an accrual period the ratable portion of interest on the debenture that accrues in the accrual period. The amount of interest on a debenture that accrues in an accrual period is the product of the comparable yield on the debenture (adjusted to reflect the length of the accrual period) and the adjusted issue price of the debenture. The adjusted issue price of a debenture at the beginning of the first accrual period will equal its issue price and for any accrual periods thereafter will be the sum of the issue price of such debenture and any interest previously accrued thereon by a holder (disregarding any positive or negative adjustments). A holder will be required to recognize interest income equal to the amount of any positive adjustment (i.e., the excess of actual payments over projected payments) in respect of a debenture for a taxable year. For this purpose, the payments in a taxable year include the fair market value of property (including our common stock) received in 42 that year. A negative adjustment (i.e., the excess of projected payments over actual payments) in respect of a debenture for a taxable year: o will first reduce the amount of interest in respect of the debenture that a holder would otherwise be required to include in the taxable year and o to the extent of any excess, will give rise to an ordinary loss equal to that portion of such excess as does not exceed the excess of the amount of all previous inclusions under the debenture. A net negative adjustment is not subject to the two percent floor limitation imposed on miscellaneous deductions under Section 67 of the Code. A holder whose tax basis differs from the adjusted issue price of the debenture at the time of acquisition must reasonably allocate the difference to (a) daily portions of interest or (b) the projected payment at maturity. An allocation to daily portions of interest should be reasonable to the extent that the difference is due to a change in the yield at which we could issue a non-convertible fixed rate debt instrument with terms similar to the debenture at such acquisition date. An allocation to the projected payment at maturity should be reasonable to the extent that the anticipated value of our common stock at maturity, determined on the basis of the market conditions at the acquisition date, differs from the anticipated value of our common stock, as it had been determined on the basis of market conditions which prevailed at the time of original issuance. If a holder's basis is greater than adjusted issue price, the amount of the difference allocated to a daily portion of interest or to the projected payment is treated as a negative adjustment on the date the daily portion accrues or the payment is made. On the date of the adjustment, the holder's adjusted basis in the debt instrument is reduced by the amount the holder treats as a negative adjustment. If a holder's basis is less than adjusted issue price, the amount of the difference allocated to a daily portion of interest or to the projected payment is treated as a positive adjustment on the date the daily portion accrues or the payment is made. On the date of the adjustment, the holder's adjusted basis in the debt instrument is increased by the amount the holder treats as a positive adjustment. It should be noted that generally the rules for accrual of premium or discount will not apply. Sale, Exchange, Conversion or Retirement of the Debentures Upon a sale, exchange or retirement of a debenture for cash, a holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and such holder's adjusted tax basis in the debenture. A holder's adjusted tax basis in a debenture will generally be equal to the holder's original purchase price for the debenture, increased by any interest income previously accrued by the holder (determined without regard to any positive or negative adjustments to interest accruals described above). A holder generally will treat any gain as interest income and any loss as ordinary loss to the extent of the excess of previous interest inclusions, and the balance as capital loss. As described above, holders are generally bound by our determination of the comparable yield and the projected payment schedule. Our calculation of the comparable yield and the projected payment schedule for the debentures includes the receipt of stock upon conversion of a debenture into our common stock as a contingent payment in respect of the debentures. Accordingly, we intend to treat the delivery of our common stock upon the conversion of a debenture as a contingent payment. Such contingent payment will equal the fair market value of the common stock received upon conversion or repurchase, plus any cash paid. Any gain will be treated as interest income and any loss as ordinary loss to the extent of the excess of previous income inclusions. It is unclear whether the balance of any loss would be recognized as a capital loss or added to the holder's basis in our common stock. A holder's tax basis in our common stock received upon a conversion of a debenture or upon a holder's exercise of a repurchase right that we elect to satisfy in common stock will equal the then current fair market value of such common stock. The holder's holding period for the common stock received will commence on the day immediately following the date of conversion or redemption. 43 Constructive Dividends If at any time we make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for U.S. federal income tax purposes and, in accordance with the anti-dilution provisions of the debentures, the exchange rate of the debentures is increased, such increase may be deemed to be the payment of a taxable dividend to the holders of the debentures. For example, an increase in the exchange rate in the event of distributions of our evidences of indebtedness or our assets or an increase in the event of an extraordinary cash dividend will generally result in deemed dividend treatment to holders of the debentures. Generally, an increase in the exchange rate in the event of stock dividends or distributions of rights to subscribe for common stock will not be a taxable dividend. Backup Withholding and Information Reporting Information returns may be filed with the IRS in connection with payments on the debentures and the proceeds from a sale or other disposition of the debentures. You may be subject to United States backup withholding tax at the rates specified in the Code on these payments if you fail to provide your taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to you will be allowed as a credit against your United States federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the IRS. 44 PLAN OF DISTRIBUTION We will not receive any of the proceeds of the sale of the debentures and the underlying common stock offered by this prospectus. The aggregate proceeds to the selling securityholders from the sale of the debentures or underlying common stock will be the purchase price of the debentures or underlying common stock less any discounts and commissions. A selling securityholder reserves the right to accept and, together with their agents, to reject, any proposed purchase of debentures or common stock to be made directly or through agents. The debentures and the underlying common stock may be sold from time to time to purchasers: o directly by the selling securityholders and their successors, which includes their transferees, pledgees or donees or their successors, or o through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers of the debentures and the underlying common stock. These discounts, concessions or commissions may be in excess of those customary in the types of transactions involved. The selling securityholders and any underwriters, broker-dealers or agents who participate in the distribution of the debentures and the underlying common stock may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. As a result, any profits on the sale of the debentures and the underlying common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Selling securityholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to prospectus delivery requirements of the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to certain statutory liabilities of, including, but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. If the debentures and the underlying common stock are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions. The debentures and the underlying common stock may be sold in one or more transactions at: o fixed prices; o prevailing market prices at the time of sale; o prices related to such prevailing market prices; o varying prices determined at the time of sale; or o negotiated prices. These sales may be effected in transactions o on any national securities exchange or quotation service on which the debentures and underlying common stock may be listed or quoted at the time of the sale, including the New York Stock Exchange in the case of the common stock; o in the over-the-counter market; o in transactions otherwise than on such exchanges or services or in the over-the-counter market; or o through the writing of options, whether such options are listed on an options exchange or otherwise through the settlement of short sales. 45 These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with sales of the debentures and the underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions. These broker-dealers or other financial institutions may in turn engage in short sales of the debentures or the underlying common stock in the course of hedging their positions. The selling securityholders may also sell the debentures and underlying common stock short and deliver debentures and the underlying common stock to close out short positions, or loan or pledge debentures or the underlying common stock to broker-dealers that in turn may sell the debentures and the underlying common stock. At the time a particular offering of the securities is made, if required, a prospectus supplement will be distributed, which will set forth the names of the selling securityholders, the aggregate amount and type of securities being offered and the terms of the offering, including, to the extent required, the name or names of any underwriters, broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling securityholders and any discounts, commissions or concessions allowed or reallowed to paid broker-dealers. To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the debentures and the underlying common stock by the selling securityholders. Our common stock trades on the New York Stock Exchange under the symbol "IP". We do not intend to apply for listing of the debentures on any securities exchange or for quotation through Nasdaq. Accordingly, no assurances can be given as to the development of liquidity or any trading market for the debentures. See "Risk Factors-Risks relating to the Debentures." We cannot assure you that any selling securityholder will sell any or all of the debentures or the underlying common stock pursuant to this prospectus. Further, we cannot assure you that any such selling securityholder will not transfer, devise or gift the debentures and the underlying common stock by other means not described in this prospectus. In addition, any debentures or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than under this prospectus. The debentures and the underlying common stock may be sold in some states only through registered or licensed brokers or dealers. In addition, in some states the debentures and underlying common stock may not be sold unless they have been registered or qualified for sale or an exemption from registration. The selling securityholders and any other person participating in the sale of debentures or the underlying common stock will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the debentures and the underlying common stock by the selling securityholders and any other such person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the debentures and the underlying common stock to engage in market-making activities with respect to the particular debentures and the underlying common stock being distributed for a period of up to five business days before the commencement of such distribution. This may affect the marketability of the debentures and the underlying common stock and the ability of any person or entity to engage in market-making activities with respect to the debentures and the underlying common stock. Pursuant to the registration rights agreement that has been filed as an exhibit to the registration statement of which this prospectus is a part, we and the selling securityholders will be indemnified by the other against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with these liabilities. We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the debentures and underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents. 46 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934. You may read and copy this information at the following locations of the SEC: Public Reference Room North East Regional Office Midwest Regional Office 450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street Room 1024 Suite 1300 Suite 1400 Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511 You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide web site that contains reports, proxy statements and other information about issuers who file electronically with the SEC. The address of that site is http://www.sec.gov.You can also inspect reports, proxy statements and other information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. This prospectus is part of a registration statement that we have filed with the SEC relating to the debentures and the underlying common stock into which the debentures may be converted. This prospectus does not contain all of the information we have included in the registration statement and the accompanying exhibits and schedules in accordance with the rules and regulations of the SEC and we refer you to the omitted information. The statements this prospectus makes pertaining to the content of any contract, agreement or other document that is an exhibit to the registration statement necessarily are summaries of their material provisions, and we qualify them in their entirety by reference to those exhibits for complete statements of their provisions. The registration statement, exhibits and schedules are available at the SEC's public reference room or through its Web site. We "incorporate by reference" into this prospectus information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. This prospectus, incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition. The following documents listed below that we have previously filed with the SEC are incorporated by reference: Our SEC Filings Period --------------- ------ Annual Report on Form 10-K........................Year ended December 31, 2000, as filed on March 26, 2001 Quarterly Report on Form 10-Q ..................Quarter ended March 31, 2001, as filed on May 14, 2001 and for the quarter ended June 30, 2001, as filed on August 13, 2001 Current Reports on Form 8-K ..................Filed on: January 24, 2001 April 18, 2001 June 14, 2001 July 17, 2001 Registration Statement on Form 8-A (as amended)...Filed on July 20, 1976 All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from the date of this prospectus and prior to the termination of this offering shall also be deemed to be incorporated herein by reference. You can obtain any of the filings incorporated by reference in this prospectus through us or from the SEC through the SEC's web site or at the addresses listed above. We will provide without charge to each person to whom a copy of this prospectus has been delivered, upon the written or oral request of such person, a copy of any or all of 47 the documents which are incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to International Paper Company, 400 Atlantic Street, Stamford, Connecticut 06921, Attention: Investor Relations Department (Telephone: (203) 541-8625). 48 LEGAL MATTERS The validity of the debentures and the shares of common stock issuable upon conversion of the debentures will be passed upon for us by Davis Polk & Wardwell, New York, New York. EXPERTS Our consolidated financial statements and related financial statement schedule included or incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2000, incorporated by reference in this prospectus and elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. 49 APPENDIX A NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT Barbara Smithers Vice President and Corporate Secretary International Paper Company 400 Atlantic Street Stamford, Connecticut 06921 Facsimile: (203) 541-8208 and The Bank of New York 101 Barclay Street Floor 21 West New York, NY 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Administration Re: International Paper Company (the "Company") Zero Coupon Convertible Debentures due June 20, 2021 Ladies and Gentlemen: Please be advised that _____________________ has transferred $___________ aggregate principal amount of the above-referenced Debentures pursuant to an effective Registration Statement on Form S-3 (File No. 333-____) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the transferred securities is named as a "Selling Securityholder" in the Prospectus dated ____________ or in supplements thereto, and that the aggregate amount of the securities transferred are (or are included in) the securities listed in such Prospectus (or in supplements thereto) opposite such owner's name. Dated: Very truly yours, --------------------- (Name) By: ------------------ (Authorized Signature) 50 $2,105,000,000 Zero Coupon Convertible Debentures due June 20, 2021 and Common Stock issuable upon Conversion of Debentures International Paper Company [International Paper Company Logo] ----------------------- PROSPECTUS ----------------------- ________, 2001 51 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the costs and expenses payable in connection with the issuance and distribution of the securities being registered. All amounts are shown are estimates except the SEC registration fee. SEC registration fee...............................................$258,188.78 Printing expenses.................................................. Accounting fees and expenses....................................... Legal fees and expenses............................................ Transfer Agent expenses............................................ Miscellaneous expenses............................................. ----------- Total....................................................$ =========== Item 15. Indemnification of Directors and Officers. Section 721 of the New York Business Corporation Law ("B.C.L.") provides that, in addition to the indemnification provided in Article 7 of the B.C.L., a corporation may indemnify a director or officer by a provision contained in its certificate of incorporation or by-laws or by a duly authorized resolution of its shareholders or directors or by agreement provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and material to the cause of action, or that the director or officer personally gained in fact a financial profit or other advantage to which he was not legally entitled. Section 722(a) of the B.C.L. provides that a corporation may indemnify a director or officer made, or threatened to be made, a party to any action other than a derivative action, whether civil or criminal, against judgments, fines, amounts paid in settlement and reasonable expenses actually and necessarily incurred as a result of such action, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, has no reasonable cause to believe that his conduct was unlawful. Section 722(c) of the B.C.L. provides that a corporation may indemnify a director or officer, made or threatened to be made a party in a derivative action, against amounts paid in settlement and reasonable expenses actually and necessarily incurred by him in connection with the defense or settlement of such action or in connection with an appeal therein if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification will be available under Section 722(c) of the B.C.L. in respect of a threatened or pending action which is settled or otherwise disposed of or any claims as to which such director or officer will have been adjudged liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines, upon application, that, in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. Section 723 of the B.C.L. specifies the manner in which payment of indemnification under Section 722 of the B.C.L. or indemnification permitted under Section 721 of the B.C.L. may be authorized by the corporation. It provides that indemnification may be authorized by the corporation. It provides that indemnification by a corporation is mandatory in any case in which the director or officer has been successful, whether on the merits or otherwise, in defending an action. In the event that the director or officer has not been successful or the action is settled, indemnification must be authorized by the appropriate corporate action as set forth in Section 723. Section 724 of the B.C.L. provides that, upon application by a director or officer, indemnification may be awarded by a court to the extent authorized under Sections 722 and 723. Section 725 of the B.C.L. contains certain other miscellaneous provisions affecting the indemnification of directors and officers. II-1 Section 726 of the B.C.L. authorizes the purchase and maintenance of insurance to indemnify (1) a corporation for any obligation which it incurs as a result of the indemnification of directors and officers under the above sections, (2) directors and officers in instances in which they may be indemnified by a corporation under such sections, and (3) directors and officers in instances in which they may not otherwise be indemnified by a corporation under such sections, provided the contract of insurance covering such directors and officers provides, in a manner acceptable to the New York State Superintendent of Insurance, for a retention amount and for co-insurance. Article VII of the Restated Certificate of Incorporation, as amended, of the Registrant provides in part as follows: "Each Director of the Corporation shall be indemnified by the Corporation against expenses actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which he is made a party by reason of his being or having been a Director of the Corporation, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duties as such Director; provided that such right of indemnification shall not be deemed exclusive of any other rights to which a Director of the Corporation may be entitled, under any by-law, agreement, vote of stockholders or otherwise." Article IX of the By-laws, as amended, of the Registrant provides as follows: "The Corporation shall indemnify each Officer or Director who is made, or threatened to be made, a party to any action by reason of the fact that he or she is or was an Officer or Director of the Corporation, or is or was serving at the request of the Corporation in any capacity for the Corporation or any other enterprise, to the fullest extent permitted by applicable law. The Corporation may, so far as permitted by law, enter into an agreement to indemnify and advance expenses to any Officer or Director who is made, or threatened to be made, a party to any such action." International Paper has purchased certain liability insurance for its officers and directors as permitted by Section 726 of the B.C.L., has entered into indemnity agreements with its directors and certain officers providing indemnification in addition to that provided under the B.C.L., as permitted by Section 721 of the B.C.L. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Reference is made to Section 4 of the Registration Rights Agreement incorporated by reference as Exhibit 4.4 hereto for a description of the indemnification arrangements in connection with the registration of the debentures under the Securities Act of 1933. Item 16. Exhibits. Exhibit Description - ------- ----------- * 1.1 Purchase Agreement dated June 13, 2001 between International Paper Company and Credit Suisse First Boston Corporation. 4.1 Indenture, dated as of April 12, 1999, between International Paper and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to International Paper's Report on Form 8-K filed on June 29, 2000). * 4.2 Convertible Debentures Supplemental Indenture dated as of June 20, 2001, between International Paper Company and the Bank of New York, as Trustee. * 4.3 Form of Debenture (included in Exhibit 4.2) II-2 * 4.4 Registration Rights Agreement dated as of June 20, 2001 between International Paper Company and Credit Suisse First Boston Corporation. * 5.1 Opinion of Davis Polk & Wardwell * 12.1 Computation of ratio of earnings to fixed charges. * 23.1 Consent of Arthur Andersen LLP. * 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). * 24.1 Powers of Attorney (included on the signature page of the Registration Statement). * 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York, as Trustee - --------- * Filed herewith. Item 17. Undertakings. A. Undertaking Pursuant to Rule 415 The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of this offering. B. Undertaking Regarding Filings Incorporating Subsequent Exchange Act Documents by Reference The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Undertaking in Respect of Indemnification Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the II-3 Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on the Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 7th day of September, 2001. INTERNATIONAL PAPER COMPANY By /s/ BARBARA L. SMITHERS -------------------------------- Name: Barbara L. Smithers Title: Vice President and Secretary POWER OF ATTORNEY Each person whose signature appears below appoints BARBARA L. SMITHERS and WILLIAM B. LYTTON, and each of them, each of whom may act without the joinder of the others, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and her in his or her name, place and stead, in any and all capacities to sign (i) any and all amendments (including post-effective amendments) to this registration statement and (ii) any registration statement of the type contemplated by Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated. NAME TITLE DATE ---- ----- ---- /S/ JOHN T. DILLON - ----------------------------- Chairman of the Board, Chief Executive Officer and September 6, 2001 John T. Dillon Director /S/ C. WESLEY SMITH - ----------------------------- Executive Vice President and Director August 9, 2001 C. Wesley Smith /S/ ROBERT J. EATON - ----------------------------- Director August 23, 2001 Robert J. Eaton /S/ SAMIR G. GIBARA - ----------------------------- Director August 13, 2001 Samir G. Gibara /S/ JAMES A. HENDERSON - ------------------------------ Director September 6, 2001 James A. Henderson II-5 NAME TITLE DATE ---- ----- ---- - ------------------------------ Director John R. Kennedy /S/ ROBERT D. KENNEDY - ------------------------------ Director September 6, 2001 Robert D. Kennedy /S/ W. CRAIG MCCLELLAND - -------------------------------Director September 6, 2001 W. Craig Mcclelland /S/ DONALD F. MCHENRY - ------------------------------ Director September 6, 2001 Donald F. Mchenry /S/ PATRICK F. NOONAN - ------------------------------ Director September 6, 2001 Patrick F. Noonan /S/ JANE C. PFEIFFER - ------------------------------ Director September 6, 2001 Jane C. Pfeiffer /S/ JEREMIAH J. SHEEHAN - ------------------------------ Director September 6, 2001 Jeremiah J. Sheehan /S/ CHARLES R. SHOEMATE - ------------------------------ Director August 9, 2001 Charles R. Shoemate /S/ JOHN V. FARACI - ------------------------------ Executive Vice President and Chief Financial Officer September 6, 2001 John V. Faraci /S/ ANDREW R. LESSIN - -------------------------------Vice President -- Finance and Chief Accounting Officer September 6, 2001 Andrew R. Lessin
II-6 EXHIBIT INDEX Exhibit Number Description - -------- ----------- * 1.1 Purchase Agreement dated June 13, 2001 between International Paper Company and Credit Suisse First Boston Corporation. 4.1 Indenture, dated as of April 12, 1999, between International Paper and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to International Paper's Report on Form 8-K filed on June 29, 2000). * 4.2 Convertible Debentures Supplemental Indenture dated as of June 20, 2001, between International Paper Company and the Bank of New York, as Trustee. * 4.3 Form of Debenture (included in Exhibit 4.2) * 4.4 Registration Rights Agreement dated as of June 20, 2001 between International Paper Company and Credit Suisse First Boston Corporation. * 5.1 Opinion of Davis Polk & Wardwell. * 12.1 Computation of ratio of earnings to fixed charges. * 23.1 Consent of Arthur Andersen LLP. * 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). * 24.1 Powers of Attorney (included on the signature page of the Registration Statement). * 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York, as Trustee - --------- * Filed herewith. II-7 EX-1.1 3 aug2901_ex0101.txt Exhibit 1.1 EXECUTION COPY $2,105,000,000 INTERNATIONAL PAPER COMPANY Zero Coupon Convertible Debentures due June 20, 2021 PURCHASE AGREEMENT June 13, 2001 CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue, New York, NY 10010-3629 Ladies and Gentlemen: 1. International Paper Company, a corporation duly organized and existing under the laws of the State of New York (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the initial purchasers named in Schedule A hereto (the "Purchasers") $2,105,000,000 principal amount at maturity of its Zero Coupon Convertible Debentures due June 20, 2021 (the "Firm Securities") and also proposes to grant the Purchasers an option, exercisable from time to time by Credit Suisse First Boston Corporation ("CSFBC"), to purchase an aggregate of up to an additional $315,750,000 principal amount at maturity of its Zero Coupon Convertible Debentures due June 20, 2021 (the "Optional Securities" and, with the Firm Securities, the "Offered Securities"). The Offered Securities will be issued under an indenture, dated as of April 12, 1999 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"), as supplemented by the Convertible Debentures Supplemental Indenture, to be dated as of the Closing Date (as defined herein) (the "Supplemental Indenture"), between the Company and the Trustee. The United States Securities Act of 1933 is herein referred to as the "Securities Act." The holders of the Offered Securities will be entitled to the benefits of a registration rights agreement, to be dated as of the Closing Date (the "Registration Rights Agreement"), among the Purchasers and the Company. The Company hereby agrees with the Purchasers as follows: 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Purchasers that: (a) An offering circular relating to the Offered Securities has been prepared by the Company (the "Offering Circular"). Such Offering Circular, together with the documents incorporated therein (the "Incorporated Documents") and any other document approved by the Company for use in connection with the contemplated resale of the Offered Securities are hereinafter collectively referred to as the "Offering Document." On the date of this Agreement, the Offering Document does not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. Except as disclosed in the Offering Document, on the date of this Agreement, the Company's Annual Report on Form 10-K most recently filed with the Securities and Exchange Commission (the "Commission") and all subsequent reports (collectively, the "Exchange Act Reports") that have been filed by the Company with the Securities and Exchange Commission or sent to stockholders pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. (b) Neither the Company nor any of its subsidiaries is in violation of its corporate charter or by-laws or in default under any agreement, indenture, mortgage, lease, note or instrument, which violation or default would have a material adverse effect on the assets, operations, condition (financial and otherwise) or the prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"); the execution, delivery and performance of this Agreement, the Indenture, the Supplemental Indenture and the Registration Rights Agreement and compliance by the Company with the provisions of the Offered Securities, the Indenture, the Supplemental Indenture and the Registration Rights Agreement, will not (1) conflict with, result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its subsidiaries pursuant to the terms of, or constitute a default under, any agreement, indenture or instrument, or result in a violation of the corporate charter or by-laws of the Company or any of its subsidiaries or any order, rule, statute or regulation of any court or governmental agency or body having jurisdiction over the Company, any of its subsidiaries or their respective properties or (2) have a Material Adverse Effect; and except as required by the Securities Act, the Trust Indenture Act, the Exchange Act and applicable state securities or Blue Sky laws, no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement, the Indenture or the Supplemental Indenture. (c) Except as described in or contemplated by the Offering Document, since the dates as of which information is given in the Offering Document, no Material Adverse Effect has occurred. 2 (d) This Agreement has been duly authorized, executed and delivered by the Company and constitutes legally binding obligations of the Company. (e) Each of the accountants whose reports are incorporated by reference in the Offering Document are independent public accountants as required by the Securities Act and the applicable rules and regulations thereunder. (f) On the Closing Date (i) each of the Indenture, the Supplemental Indenture and the Registration Rights Agreement will have been validly authorized, executed and delivered by the Company and will constitute the legally binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, and other laws of general applicability relating to or affecting creditors' rights and to general equity principles, (ii) the Offered Securities will have been validly authorized and, upon payment therefor as provided in this Agreement, will be validly issued and outstanding, and will constitute legally binding obligations of the Company entitled to the benefits of the Indenture and the Supplemental Indenture, and (iii) the Offered Securities, the Indenture and the Supplemental Indenture will conform to the descriptions thereof contained in the Offering Document. (g) The Company and each of its Significant Subsidiaries (as such term is defined in Rule 1-02(w) of Regulation S-X under the Securities Act) have been duly incorporated, are validly existing and in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and in good standing as foreign corporations in each jurisdiction in which their respective ownership of property or the conduct of their respective business requires such qualification and where the failure to be so qualified would have a Material Adverse Effect, and have corporate power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged. (h) Except as disclosed in the Offering Document, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Purchaser for a brokerage commission, finder's fee or other like payment in connection with sales to the Purchasers by the Company of the Offered Securities. (i) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement or the Registration Rights Agreement in connection with the issuance and sale of the Offered Securities by the Company except for the order of the Commission declaring the Registration Statement (as defined in the Registration Rights Agreement) effective. (j) The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Indenture, the Supplemental Indenture and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any Significant Subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such Significant 3 Subsidiary is a party or by which the Company or any such Significant Subsidiary is bound or to which any of the properties of the Company or any such Significant Subsidiary is subject, or the charter or by-laws of the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (k) Except as disclosed in the Offering Document, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, except where the failure to have such good and marketable title could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and except as disclosed in the Offering Document, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases except where the failure to hold such valid and enforceable leases could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (l) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (m) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a Material Adverse Effect. (n) Except as disclosed in the Offering Document or in any Exchange Act Report, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company has not received notice of any pending investigation which might lead to such a claim. (o) Except as described in the Offering Document or any Exchange Act Report, there is no material litigation or governmental proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries which might result in any Material Adverse Effect. (p) The Company is not, and after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Circular, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. 4 (q) There are no contracts or other documents which were required to be filed as exhibits to any Company document incorporated by reference in the Offering Document by the Securities Act or the rules and regulations thereunder, which have not been filed as exhibits to such document or incorporated therein by reference as permitted by such rules and regulations. (r) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. (s) Assuming the accuracy of the representations and warranties contained in Section 4 of the Agreement, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and it is not necessary in connection with the offer and sale of the Offered Securities to the Purchasers to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (t) The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement and the Registration Rights Agreement. (u) All outstanding shares of capital stock of the Company have been duly authorized; all outstanding shares of capital stock of the Company are, and, when the Underlying Shares (as defined below) have been delivered and paid for upon conversion of the Offered Securities in accordance with the Supplemental Indenture, such Underlying Shares will have been validly issued, fully paid and nonassessable, and will conform to the description thereof contained in the Offering Document; and the stockholders of the Company have no preemptive or similar rights with respect to the Offered Securities or the Underlying Shares. The Company does not have outstanding, and at the Closing Date (as defined below) the Company will not have outstanding, any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, (i) any Offered Securities or the Underlying Shares, or (ii) any shares of capital stock held by it in any subsidiary, or any such warrants, convertible securities or obligations (except shares issued or issuable pursuant to employee or director benefit plans after the date as of which information with respect thereto is given in the Offering Document), except in each case as described in the Offering Document. (v) Except for the Registration Rights Agreement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act to include shares of the Company's stock in the securities registered pursuant to a registration statement filed by the Company under the Securities Act, except as previously disclosed to CSFBC in writing. (w) When the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date, such Offered Securities will be convertible into shares ("Underlying Shares") of the Company's common stock, par value $1.00 per share, in accordance with the Supplemental Indenture; the Underlying Shares issuable upon conversion of such Offered Securities have been 5 duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and nonassessable. (x) The Company and its affiliates have not taken and will not take, directly or indirectly, any action designed to cause, or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Company's stock to facilitate the sale or resale of the Offered Securities. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 46.853% of the principal amount thereof, the respective principal amounts of Firm Securities set forth opposite the names of the Purchasers in Schedule A hereto. The Company will deliver against payment of the purchase price the Offered Securities in the form of one or more permanent global securities in definitive form (the "Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Document. Payment for the Offered Securities shall be made by the Purchasers in federal (same day) funds by official check or checks or wire transfer to an account previously designated by the Company for such purpose at a bank reasonably acceptable to CSFBC at 10:30 A.M. (New York City time), on June 20, 2001, such time being herein referred to as the "First Closing Date", against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Offered Securities. The Global Securities will be made available for checking at the offices of Milbank, Tweed, Hadley & McCloy LLP or its designated custodian not later than 2:00 p.m., New York City time, on the business day prior to the Closing Date. In addition, upon written notice from CSFBC given to the Company from time to time not more than 13 days subsequent to the date of this Agreement, the Purchasers may purchase all or less than all of the Optional Securities at the purchase price per principal amount of Offered Securities (including any accreted value thereon to the related Optional Closing Date (as defined below)) to be paid for the Firm Securities. The Company agrees to sell to the Purchasers the principal amount of Optional Securities specified in such notice and the Purchasers agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased from the Company for the account of each Purchaser in the same proportion as the principal amount of Firm Securities set forth opposite such Purchaser's name in Schedule A hereto bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions). No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Company. 6 Each time for the delivery of a payment for the Optional Securities, being herein referred to as the "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be determined by CSFBC on behalf of the several Purchasers but shall not be later than seven full business days, nor prior to two full business days except in the case of the First Closing Date, after written notice of election to purchase Optional Securities is given. The certificates for the Securities evidencing the Optional Securities being purchased on each Optional Closing Date will be in such denominations and registered in such names as CSFBC requests and will be made available for checking and packaging at the offices of Milbank, Tweed, Hadley & McCloy LLP at a reasonable time in advance of such Optional Closing Date. Payment for the Optional Securities being purchased on each Optional Closing Date shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFBC drawn to the order of the Company at 10:00 A.M. (New York time) on such Optional Closing Date against delivery to the Trustee as custodian for DTC of a permanent global security in definitive form without coupons representing all of the Optional Securities being purchased on such Optional Closing Date. 4. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Offered Securities, and will offer and sell the Offered Securities only in accordance with Rule 144A under the Securities Act ("Rule 144A"). (c) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, or by means of a public offering within the meaning of Section 4(2) of the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. 5. Certain Agreements of the Company. The Company agrees with the several Purchasers that: 7 (a) The Company will advise CSFBC promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without CSFBC's consent, which consent shall not be unreasonably withheld. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, any event occurs as a result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company promptly will notify CSFBC of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither CSFBC's consent to, nor the Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (b) The Company will furnish to the Purchasers copies of any preliminary offering circular, the Offering Document and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC reasonably requests. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act and any Offered Securities are outstanding, upon request of holders and prospective purchasers of the Offered Securities the Company will furnish or cause to be furnished, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and distributing to the Purchasers all such documents. (c) The Company will endeavor in good faith in cooperation with the Purchasers to arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as CSFBC designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation or to file a general consent to service of process or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (d) During the period of five years hereafter, the Company will furnish to CSFBC and, upon request, to the other Purchaser, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to CSFBC and, upon request, to the other Purchaser from time to time, such information concerning the Company as CSFBC may reasonably request. (e) During the period of two years after the Closing Date or, if earlier, until such time as the Offered Securities are no longer restricted securities (as defined in Rule 144 under the Securities Act), the Company will, upon request, furnish to CSFBC, the other Purchaser and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. 8 (f) During the period of two years after the Closing Date or, if earlier, until such time as the Offered Securities are no longer restricted securities (as defined in Rule 144 under the Securities Act), the Company will not, and will use its reasonable efforts to cause its affiliates (as defined in Rule 144 under the Securities Act) not to, resell any of the Offered Securities that have been reacquired by any of them. (g) During the period of two years after the Closing Date, the Company will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture, the Supplemental Indenture and the Registration Rights Agreement, including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and, as applicable, the Registration Statement (as defined in the Registration Rights Agreement), the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture, the Supplemental Indenture, the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities and as applicable, the Registration Statement; (iii) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities; (iv) any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Registration Statement for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto; (v) for any fees charged by investment rating agencies for the rating of the Offered Securities or the Registration Statement; and (vi) for expenses incurred in distributing preliminary offering circulars and the Offering Document (including any amendments and supplements thereto) to the Purchasers. The Company will also pay or reimburse the Purchasers (to the extent incurred by them) for all travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities from the Purchasers. (i) In connection with the offering, until CSFBC shall have notified the Company and the other Purchaser of the completion of the resale of the Offered Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (j) For a period of 60 days after the date hereof, the Company will not offer, sell, pledge or otherwise dispose of, directly or indirectly any shares of common stock of the Company or other securities convertible into or exchangeable or exercisable for shares of common stock of the Company or warrants or other rights to purchase shares of common stock of the Company, or publicly disclose the intention to make any such offer, sale, pledge or disposition, in each case without the prior written consent of CSFBC, except issuances of Offered Securities or common 9 stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof, grants of employee stock options, restricted stock awards or other equity-based compensation pursuant to the terms of a plan in effect on the date hereof, and issuances of Offered Securities pursuant to the exercise of such options, restricted stock awards or other equity-based compensation. The Company will not at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offer and sale of the Offered Securities. 6. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers to purchase and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated the date of this Agreement, of Arthur Andersen LLP in agreed form confirming that they are independent public accountants certified with respect to International Paper Company under rule 101 of the American Institute of Certified Public Accountants (the "AICPA") Code of Professional Conduct, and its interpretations and rulings and to the effect that: (i) in their opinion the consolidated financial statements examined by them and incorporated by reference in the Offering Document and in the Exchange Act Reports comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations; (ii) they have performed the procedures specified by the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited consolidated financial statements incorporated by reference in the Offering Document and in the Exchange Act Reports; (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available unaudited interim consolidated financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited consolidated financial statements incorporated by reference in the Offering Document or in the Exchange Act Reports do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations or any material modifications should be made to such unaudited consolidated financial statements for them to be in conformity with generally accepted accounting principles; 10 (B) the unaudited pro forma condensed consolidated financial statements incorporated by reference into the Offering Circular do not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X and that the pro forma adjustments have not been properly applied to historical amounts in the compilation of those statements; (C) at the date of the latest available balance sheet read by such accountants, or at a subsequent date specified therein, there was any change in the capital stock or any increase in long-term debt of the Company and its consolidated subsidiaries, as compared with amounts shown on the latest unaudited consolidated balance sheet incorporated by reference in the Offering Document; (D) for the period from the closing date of the latest unaudited consolidated statement of earnings incorporated by reference in the Offering Document to the closing date of the latest available unaudited consolidated statement of earnings read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated net sales or in total or per share amounts of earnings before extraordinary items or net earnings; except in all cases set forth in clauses 6(a)(iii)(C) and 6(a)(iii)(D) above for changes, increases or decreases which the Offering Document discloses have occurred or may occur or which are described in such letter; and (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Document and the Exchange Act Reports (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (A) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries, taken as one enterprise, which, in the judgment of a majority in interest of the Purchasers including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (B) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or 11 review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (C) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; or (E) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including CSFBC, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities. (c) You shall have received opinions, dated the Closing Date, of each of Davis Polk & Wardwell, counsel to the Company, and Barbara Smithers, Vice President and Secretary of the Company, in each case in form and substance reasonably satisfactory to CSFBC. In giving such opinion, (i) each of Davis Polk & Wardwell and Barbara Smithers may limit such opinion to the laws of the State of New York and the Federal laws of the United States and (ii) Davis Polk & Wardwell may rely, as to matters of fact, upon the representations and warranties of the Company contained herein and upon certificates of officers of the Company and of public officials. Such opinion may also be subject to such assumptions and qualifications as are satisfactory to counsel for the Purchasers. (d) The Purchaser shall have received from Milbank, Tweed, Hadley & McCloy, counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the validity of the Offered Securities, the Offering Document, the exemption from registration for the offer and sale of the Offered Securities by the Company to the several Purchasers and the resales by the several Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (e) The Company shall have furnished to the Purchasers on the Closing Date, a certificate, dated as of such Closing Date, of an authorized executive officer of the Company stating that: (i) The representations, warranties and agreements of the Company herein are true and correct in all material respects as of such Closing Date; the Company has complied in all material respects with its agreements contained herein; and there shall have been no material adverse change in the condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole, or in the earnings or business affairs of the Company and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business, from that set forth in the Offering Circular; and (ii) Such officer has carefully examined the Offering Circular and, in such officer's opinion, (A) as of the date of the Offering Circular, the Offering Circular did not include an untrue statement of a material fact or omit to state a material fact required to 12 be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (B) since the date of the Offering Circular, no event has occurred which should have been set forth in a supplement to or amendment of the Offering Circular which has not been set forth in such a supplement or amendment. (f) The Purchasers shall have received a letter, dated the Closing Date, of Arthur Andersen LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than five days prior to the Closing Date for the purposes of this subsection. The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of the Purchasers hereunder. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser, its partners, directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below and, provided, further, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary offering circular the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Purchaser that sold Offered Securities to the person asserting any such losses, claims, damages or liabilities, to the extent that such sale was an initial resale by such Purchaser and any such loss, claim, damage or liability of such Purchaser results from the fact that there were not given to such person, at or prior to the written confirmation of the sale such Offered Securities to such person, a copy of the Offering Document (exclusive of any material included therein but not attached thereto) if the Company had previously furnished copies thereof to such Purchaser and 13 the untrue statement or omission or alleged untrue statement or omission was corrected in the Offering Circular. (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of the following information in the Offering Document: under the caption "Plan of Distribution": the information in the table and the third, ninth and tenth paragraphs; provided, however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 5(a) of this Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above, except to the extent that the failure to so notify has materially prejudiced the rights of the indemnifying party under this Agreement. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party which consent shall not be unreasonably withheld, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action 14 and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 8. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to purchase Offered Securities hereunder and the aggregate principal amount of Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% 15 of the total principal amount of the Offered Securities, CSFBC may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of the Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of the Offered Securities and arrangements satisfactory to CSFBC and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 9. As used in this Agreement, the term "Purchaser" includes any persons substituted for a Purchaser under this Section 8. Nothing herein will relieve a defaulting Purchaser from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (C), (D) or (E) of Section 6(b), the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at International Paper Company, 400 Atlantic Street, Stamford, Connecticut 06921, Attention: Secretary; provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Purchaser. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties thereto. 16 12. Representation of Purchasers. CSFBC will act for the Purchasers in connection with this purchase, and any action under this Agreement taken by CSFBC will be binding upon all the Purchasers. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. 17 If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Purchasers in accordance with its terms. Very truly yours, INTERNATIONAL PAPER COMPANY By: ------------------------------------ Name: Title: The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. By: CREDIT SUISSE FIRST BOSTON CORPORATION Acting on behalf of themselves and as the Representative of the Purchasers By ----------------------------------- Name: Title: 18 SCHEDULE A Principal Amount of Firm Initial Purchaser Securities ----------------- ------------------------ CREDIT SUISSE FIRST BOSTON CORPORATION $1,789,250,000 GOLDMAN, SACHS & CO. 315,750,000 -------------- Total $1,000,000,000 EX-4.2 4 aug2901_ex0402.txt Exhibit 4.2 EXECUTION COPY ---------------------------------------------------------- INTERNATIONAL PAPER COMPANY, Issuer and THE BANK OF NEW YORK, Trustee CONVERTIBLE DEBENTURES SUPPLEMENTAL INDENTURE Dated as of June 20, 2001 TO INDENTURE Dated as of April 12, 1999 ---------------------------------------------------------- CONVERTIBLE DEBENTURES SUPPLEMENTAL INDENTURE, dated as of June 20, 2001 (herein called the "Supplemental Indenture"), between INTERNATIONAL PAPER COMPANY, a corporation duly organized and existing under the laws of New York and having its principal executive office at 400 Atlantic Street, Stamford, Connecticut 06921 (hereinafter referred to as the "Company") and THE BANK OF NEW YORK, a New York banking corporation (hereinafter referred to as the "Trustee"), under the Indenture dated as of April 12, 1999, between the Company and the Trustee (hereinafter referred to as the "Original Indenture"). RECITALS WHEREAS, the Company has duly authorized the issuance from time to time of its securities, in one or more series, evidencing its unsecured indebtedness (the "Securities") pursuant to the Original Indenture; WHEREAS, in accordance with Section 9.1 of the Original Indenture, the Company and the Trustee may enter into supplemental indentures to the Original Indenture without the consent of the Holders of Securities to, among other things, issue and establish the form and terms of any series of Securities; WHEREAS, the Company desires to issue and establish the form and terms of a series of Securities under the Original Indenture to be designated as the "Zero Coupon Convertible Debentures due June 20, 2021" (hereinafter referred to as the "Debentures") and to otherwise amend and supplement the Original Indenture in accordance with the terms thereof; and WHEREAS, the Company has determined that the requirements of the Original Indenture have been satisfied and has requested the Trustee to join with it in the execution and delivery of this Supplemental Indenture; all requirements necessary to make this Supplemental Indenture a valid instrument in accordance with its terms have been met; and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, for good and valuable consideration the sufficiency of which is hereby acknowledged, the Company covenants and agrees with the Trustee as follows: ARTICLE ONE TERMS AND ISSUANCE OF THE DEBENTURES SECTION 1.01. Issuance and Designation. A series of Securities which shall be designated as the Company's "Zero Coupon Convertible Debentures due June 20, 2021" is hereby duly established and shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, the terms, conditions and covenants of, the Original Indenture and this Supplemental Indenture. The aggregate principal amount at maturity of the Debentures which may be authenticated and delivered under this Supplemental Indenture shall not, except as permitted by the provisions of the Original Indenture, exceed $2,420,750,000, as the same may be increased from time to time in connection with an increased accretion rate pursuant to paragraph 1 of the Debentures. The Debentures are "Original Issue Discount Securities" within the meaning of the Original Indenture. If an Event of Default with respect to the Debentures occurs and is continuing, then, upon a declaration of acceleration pursuant to Section 5.2 of the Original Indenture, the amount of principal that shall become due and payable shall equal the Accreted Principal Amount; provided, however, that if the Company exercises its option to pay cash interest instead of accreting the principal amount of the Debentures following a Tax Event, the Debentures shall no longer be considered "Original Issue Discount Securities" within the meaning of the Original Indenture and the principal amount of the Debentures, commencing on the date on which the principal of the Debentures is restated in accordance with the terms of the Debentures, shall equal the Restated Principal Amount. SECTION 1.02. Form and Other Terms of Debentures; Incorporation of Terms. The Debentures shall be substantially in the form attached hereto as Exhibit A. The terms of such Debentures are herein incorporated by reference and form a part of this Supplemental Indenture. ARTICLE TWO AMENDMENTS TO TERMS OF THE ORIGINAL INDENTURE SECTION 2.01. Certain Definitions. (a) Section 1.1 of the Original Indenture is hereby amended with respect to the Debentures only to add the following definitions in alphabetical order : "Accreted Conversion Price" has the meaning specified in the Debentures. "Accreted Principal Amount" has the meaning specified in the Debentures. "Accreted Value Conversion" has the meaning specified in the Debentures. "Accretion Rate" has the meaning specified in the Debentures. "Accretion Rate Measurement Date" has the meaning specified in the Debentures. "Administrative Action" has the meaning specified in the Debentures. "Applicable Percentage" has the meaning specified in the Debentures. "Average Sale Price" has the meaning specified in Section 15.7. "Capital Stock" for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation. "cash" has the meaning specified in Section 11.7(b). "Change in Control" has the meaning specified in Section 11.8(a). "Change in Control Purchase Date" has the meaning specified in Section 11.8(a). "Change in Control Purchase Notice" has the meaning specified in Section 11.8(c). "Change in Control Purchase Price" has the meaning specified in Section 11.8(a). 2 "Closing Sales Price" has the meaning specified in Section 11.7(d). "Common Stock" shall mean the shares of common stock, $1.00 par value per share, of the Company existing on the date of the issuance of the Debentures or any other shares of Capital Stock of the Company into which such common stock shall be reclassified or changed. "Company Notice" has the meaning specified in Section 11.7(e). "Company Notice Date" has the meaning specified in Section 11.7(e). "Conversion Agent" means the office or agency where Debentures may be presented for conversion, and shall initially be The Bank of New York. "Conversion Date" has the meaning specified in Section 15.2. "Conversion Rate" has the meaning specified in Section 15.1. "Debentures" means any of the Company's Zero Coupon Convertible Debentures due 2021, as amended or supplemented from time to time, issued under this Indenture. "Ex-Dividend Time" has the meaning specified in Section 15.7. "Extraordinary Cash Dividends" has the meaning specified in Section 15.8. "Five-Year Rate" has the meaning specified in the Debentures. "Interest Payment Date" has the meaning specified in the Debentures. "Issue Price" of any Debenture means, in connection with the original issuance of such Debenture, the initial issue price at which the Debenture is issued as set forth on the face of the Debenture. "Market Price" has the meaning specified in Section 11.7(d). "NYSE" means The New York Stock Exchange, Inc. "Purchase Date" has the meaning specified in Section 11.7(a). "Purchase Notice" has the meaning specified in Section 11.7(a). "Purchase Price" has the meaning specified in Section 11.7(a). "Redemption Price" has the meaning specified in the Debentures. "Reset Rate" has the meaning specified in the Debentures. "Reset Rate Agent" has the meaning specified in the Debentures. "Reset Rate Determination Date" has the meaning specified in the Debentures. 3 "Restated Principal Amount" means, if a Tax Event occurs and the Company thereafter elects to pay cash interest on the Debentures, the amount equal to the Accreted Principal Amount on the date of restatement of the principal amount of the Debentures in connection therewith. "Spin-off" has the meaning specified in Section 15.8. "Subsidiary" means any person of which at least a majority of the outstanding Voting Stock shall at the time directly or indirectly be owned or controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. "Tax Event" has the meaning specified in the Debentures. "Time of Determination" has the meaning specified in Section 15.7. "trading day" means a day during which trading in securities generally occurs on the NYSE or, if the Common Stock is not listed on the NYSE, on the principal other national or regional securities exchange on which the Common Stock then is listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Common Stock is then traded. "trading price" has the meaning specified in the Debentures. "Two-Year Rate" has the meaning specified in the Debentures. "Valuation Condition" has the meaning specified in the Debentures. "Voting Stock" of a person means Capital Stock of such person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). (b) For all purposes of this Supplemental Indenture: (i) capitalized terms used herein without definition shall have the meanings specified in the Original Indenture; (ii) all references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of the Original Indenture; (iii) the terms "herein", "hereof", "hereunder" and other words of similar import refer to this Supplemental Indenture; (iv) in the event of a conflict between any definition set forth in the Original Indenture and any definition set forth in this Supplemental Indenture, the definition set forth in this Supplemental Indenture shall control. (c) For the avoidance of doubt, terms defined in this Section 2.01 shall not be deemed to apply to any other series of debt securities issued under the Original Indenture. 4 SECTION 2.02. Amendments. Section 9.2 of the Original Indenture is hereby amended in its entirety, with respect to the Debentures only, to read as follows: SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS The Company and the Trustee, with the written consent of the Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding, may amend the Indenture or the Debentures. However, without the consent of each Holder affected, an amendment or supplement to the Indenture or the Debentures may not: (1) reduce the principal of or premium on or change the Stated Maturity of any Debenture; (2) reduce the rate of or change the time for payment of cash interest on, or reduce the accretion rate of, any Debenture; (3) reduce or alter the method of computation of the Redemption Price, Purchase Price or Change in Control Purchase Price of any Debenture or the time when such Redemption Price, Purchase Price or Change in Control Purchase Price is payable; (4) make the principal of, or cash interest on, any Debenture payable in money or securities other than that stated in the Debenture or change the price of payment; (5) make any change that would impair any of the rights granted in Section 5.8 of the Indenture in any material respect; or (6) reduce the percentage of principal amount of the outstanding Debentures required to amend or supplement the Indenture or waive any of its provisions. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.2 becomes effective, the Trustee shall mail to each Holder a notice briefly describing the amendment. SECTION 2.03. Redemption and Purchases. Article Eleven of the Original Indenture is hereby amended in its entirety, with respect to the Debentures only, to read as follows: ARTICLE XI REDEMPTION AND PURCHASES OF DEBENTURES 5 SECTION 11.1. COMPANY'S RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at its option, may redeem the Debentures in accordance with the provisions of Paragraph 5 of the Debentures. If the Company elects to redeem Debentures pursuant to Paragraph 5 of the Debentures, it shall notify the Trustee in writing of the Redemption Date, the principal amount of Debentures to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 11.1 by a Company Order at least 35 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). SECTION 11.2. SELECTION OF DEBENTURES TO BE REDEEMED. If less than all the Debentures are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall select the Debentures to be redeemed by lot, on a pro rata basis or by another method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Debentures are then listed). The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from outstanding Debentures not previously called for redemption. The Trustee may select for redemption portions of the principal amount at maturity of Debentures that have denominations larger than $1,000. Debentures and portions of Debentures that the Trustee selects shall be in principal amounts at maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Debentures called for redemption also apply to portions of Debentures called for redemption. The Trustee shall notify the Company promptly of the Debentures or portions of the Debentures to be redeemed. If any Debenture selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Debenture so selected, the converted portion of such Debenture shall be deemed (so far as may be) to be the portion selected for redemption. Debentures which have been converted during a selection of Debentures to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. SECTION 11.3. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Debentures to be redeemed. The notice shall identify the Debentures to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the Conversion Rate; (4) the name and address of the Paying Agent and Conversion Agent; 6 (5) that Debentures called for redemption may be converted at any time before the close of business one Business Day prior to the Redemption Date; (6) that Holders who want to convert their Debentures must satisfy the requirements set forth in Paragraph 7 of the Debentures; (7) that Debentures called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (8) if fewer than all of the outstanding Debentures are to be redeemed, the certificate numbers, if any, and principal amounts of the particular Debentures to be redeemed; (9) that, unless the Company defaults in making payment of such Redemption Price, cash interest, if any, on Debentures called for redemption will cease to accrue and the Debentures will not accrete in value on and after the Redemption Date; and (10) the CUSIP number(s) of the Debentures. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense, provided that the Company makes such request at least 10 Business Days (unless a shorter period shall be acceptable to the Trustee) prior to the date by which such notice of redemption must be given to Holders in accordance with this Section 11.3. SECTION 11.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is given, Debentures called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice except for Debentures which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Debentures shall be paid on the Redemption Date at the Redemption Price stated in the notice. SECTION 11.5. DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 a.m. (New York City time), on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust as provided in Section 6.4) money sufficient to pay the Redemption Price of all Debentures to be redeemed on that date other than Debentures or portions of Debentures called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Debentures pursuant to Article Fifteen. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust. SECTION 11.6. DEBENTURES REDEEMED IN PART. Upon surrender of a Debenture that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Debenture in an authorized denomination equal in principal amount to the unredeemed portion of the Debenture surrendered. 7 SECTION 11.7. PURCHASE OF DEBENTURES BY THE COMPANY AT OPTION OF THE HOLDER. (a) Debentures shall be purchased by the Company pursuant to Paragraph 6 of the Debentures at the option of the Holder on June 20, 2004, June 20, 2006, June 20, 2011 and June 20, 2016 (each, a "Purchase Date"), at a purchase price equal to the Accreted Principal Amount plus accrued and unpaid cash interest through the Purchase Date or, if the Company has previously exercised its option to pay cash interest instead of accreting the principal amount of the Debentures following a Tax Event, at a purchase price equal to the Restated Principal Amount plus any accrued and unpaid cash interest through the Purchase Date (the "Purchase Price"). Purchases of Debentures hereunder shall be made, at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") during the period beginning at any time from the opening of business on the date that is 20 Business Days prior to the relevant Purchase Date until five Business Days prior to such Purchase Date stating: (A) if Definitive Securities have been issued, the certificate number of the Debenture which the Holder will deliver to be purchased or, if Definitive Securities have not been issued, such Purchase Notice must comply with appropriate Depositary procedures, (B) the portion of the principal amount at maturity of the Debenture which the Holder will deliver to be purchased, which portion must be in principal amounts at maturity of $1,000 (subject to upward adjustment in the event of an increase in the Accretion Rate) or an integral multiple thereof (or such increased amount), (C) that such Debenture shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in Paragraph 6 of the Debentures and in this Indenture, and (D) in the event the Company elects, pursuant to Section 11.7(b), to pay the Purchase Price in shares of Common Stock, in whole or in part, but such portion of the Purchase Price is ultimately to be paid to such Holder entirely in cash because any of the conditions specified in this Indenture to payment of the Purchase Price or portion of the Purchase Price in shares of Common Stock is not satisfied prior to the close of business on the fifth Business Day prior to the Purchase Date, as set forth in Section 11.7(d), whether such Holder elects (i) to withdraw such Purchase Notice as to some or all of the Debentures to which such Purchase Notice relates (stating the principal amount and certificate numbers, if any, of the Debentures as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Purchase Price for all Debentures or portions of Debentures subject to the Purchase Notice to which such Purchase Notice relates; and (2) delivery of such Debenture to the Paying Agent prior to or on the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 11.7 only if the Debenture so delivered to the Paying Agent shall conform in all 8 respects to the description thereof in the related Purchase Notice, as determined by the Company. If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 11.9, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 11.7(a)(1), such Holder shall be deemed to have elected to receive cash in respect of the entire Purchase Price for all Debentures subject to such Purchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 11.7, a portion of a Debenture, if the principal amount at maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Debenture also apply to the purchase of such portion of such Debenture. Any purchase by the Company contemplated pursuant to the provisions of this Section 11.7 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Debenture. Unless the Company defaults in making payment on Debentures for which a Purchase Notice has been submitted when due, cash interest, if any, on such Debentures will cease to accrue and the Debentures will cease to accrete in value on the Purchase Date. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 11.7(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the fifth Business Day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 11.9. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price for Payment. The Debentures to be purchased on any Purchase Date pursuant to Section 11.7(a) may be paid for, in whole or in part, at the election of the Company, in U.S. legal tender ("cash") or, subject to the conditions set forth in Section 11.7(d), shares of Common Stock, or in any combination of cash and shares of Common Stock; provided that the Company will pay cash for fractional interests in shares of Common Stock. The cash payment for fractional shares will be based on the Market Price. For purposes of determining the existence of potential fractional interests, all Debentures subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Debentures are purchased pursuant to this Section 11.7 shall receive the same percentage of cash or shares of Common Stock in payment of the Purchase Price for such Debentures, except (i) as provided in Section 11.7(d) with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Debentures of a Holder or Holders for shares of Common Stock because any necessary qualifications or registrations of the shares of Common Stock under applicable federal or state securities laws cannot be obtained, the Company shall purchase the Debentures of such Holder or Holders for cash. If the Company elects to pay the Purchase Price of the Debentures with shares of Common Stock or a combination of cash and shares of Common Stock, the Company will deliver the Company Notice required by Section 11.7(e) by the Company Notice Date. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Holders, except pursuant 9 to Section 11.7(d) in the event of a failure to satisfy, prior to the close of business on the last day prior to the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in shares of Common Stock. At least three Business Days before each Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company, (ii) the information required by Section 11.7(e) in the Company Notice, (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in shares of Common Stock, that the conditions to such manner of payment set forth in Section 11.7(d) have been or will be complied with, and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 11.7(e). (c) Purchase with Cash. At the option of the Company, the Purchase Price of Debentures in respect of which a Purchase Notice pursuant to Section 11.7(a) has been given may be paid by the Company with cash equal to the aggregate Purchase Price of such Debentures. (d) Payment by Delivery of Shares of Common Stock. At the option of the Company, the Purchase Price of Debentures in respect of which a Purchase Notice pursuant to Section 11.7(a) has been given, or a specified percentage thereof, may be paid by the Company by the delivery of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the portion of the Purchase Price to be paid in shares of Common Stock by (ii) the Market Price of one share of Common Stock as determined by the Company in the Company Notice; provided that the Company will pay cash for fractional shares of Common Stock as provided in Section 11.7(b). If the Company elects to purchase the Debentures by the issuance of shares of Common Stock, the Company Notice, as provided in Section 11.7(e), shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date. The Company's right to exercise its election to purchase Debentures through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company's timely giving of the Company Notice of an election to purchase all or a specified percentage of the Debentures with shares of Common Stock as provided herein; (ii) the registration of such shares of Common Stock under the Securities Act, or the Exchange Act, in each case, if required; (iii) the listing of such shares of Common Stock on the principal national securities exchange on which the shares of Common Stock are listed; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and 10 (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that the shares of Common Stock to be delivered by the Company in payment of the Purchase Price in respect of Debentures are validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the conditions in clauses (i) through (iv) above have been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 principal amount at maturity of the Debentures. The Company may pay the Purchase Price (or any portion thereof) in shares of Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation or other widely disseminated public source. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Business Day prior to the Purchase Date, and the Company has elected to purchase the Debentures pursuant to this Section 11.7 through the issuance of shares of Common Stock, the Company shall pay the entire Purchase Price of the Debentures of such Holder or Holders in cash. The "Market Price" means the average of the Closing Sales Prices of the Common Stock for the five trading day period ending on the third Business Day prior to the applicable Purchase Date (if the third Business Day prior to the applicable Purchase Date is a trading day, or if not, then on the last trading day prior to the third Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of the trading days during the five trading day period and ending on the Purchase Date, of any event described in Sections 15.6, 15.7, 15.8 or 15.9 that would require adjustment of the Conversion Rate in respect of the Common Stock; subject, however, to the conditions set forth in Sections 15.10 and 15.11. The "Closing Sales Price" of any security, including the Common Stock, on any date means the closing per share sale price (or, if no closing sales price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on such date as reported in composite transactions for the principal U.S. securities exchange on which the security is traded or, if the security is not listed on a U.S. national or regional securities exchange, as reported by the Nasdaq system. In the absence of such quotations, the Company shall be entitled to determine the Closing Sales Price on the basis of such quotations as it considers appropriate. Upon determination of the actual number of shares of Common Stock to be issued upon repurchase of Debentures, the Company will disseminate a press release through Reuters Economic Services or Bloomberg Business News containing this information or publish the information on the Company's web site or through such other public medium as the Company may use at that time. (e) Notice of Election. If the Company elects to pay the Purchase Price of Debentures to be purchased pursuant to Section 11.7(a) with shares of Common Stock or a combination of cash and shares of Common Stock, the Company shall give notice to Holders setting forth information specified in this Section 11.7(e) (the "Company Notice"). The Company Notice shall: (1) state that each Holder will receive shares of Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to the 11 Purchase Price of the Debentures held by such Holder or a specified percentage thereof (except any cash amount to be paid in lieu of fractional shares); (2) set forth the method of calculating the Market Price of the shares of Common Stock; (3) state that because the Market Price of shares of Common Stock will be determined prior to the Purchase Date, Holders of the Debentures will bear the market risk with respect to the value of the shares of Common Stock to be received from the date such Market Price is determined to the Purchase Date; and (4) set forth the procedures that a Holder must follow to exercise its put rights under this Section 11.7 and the procedures for withdrawing a Purchase Notice (including, without limitation, a conditional withdrawal pursuant to the terms of Section 11.7(a)(1)(D) or Section 11.9). The Company Notice shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to the Purchase Date (the "Company Notice Date"). At the Company's written request (delivered at least three Business Days prior to the Company Notice Date (unless a shorter period shall be acceptable to the Trustee)), the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company. Simultaneously with such Company Notice, the Company shall disseminate a press release through Reuters Economic Services or Bloomberg Business News containing this information or publish the information on the Company's web site or through such other public medium as the Company may use at that time. (f) Covenants of the Company. All shares of Common Stock delivered upon purchase of the Debentures shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. (g) Procedure upon Purchase. The Company shall deposit cash (in respect of cash purchases under this Section 11.7 or for fractional interests, as applicable) or shares of Common Stock, or a combination thereof, as applicable, at the time and in the manner as provided in Section 11.10, sufficient to pay the aggregate Purchase Price of all Debentures to be purchased pursuant to this Section 11.7. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive shares of Common Stock through the Paying Agent, a certificate for the number of full shares of Common Stock issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate for the shares of Common Stock is registered shall be treated as a holder of record of Common Stock on the Business Day following the Purchase Date. Subject to Section 11.7(d), no payment or adjustment will be made for dividends on the shares of Common Stock the record date for which occurred on or prior to the Purchase Date. (h) Taxes. If a Holder of a purchased Debenture is paid in shares of Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of Common Stock. However, the Holder shall pay any such tax which is due because the Holder 12 requests the Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 11.8. PURCHASE OF DEBENTURES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL. (a) If a Change in Control occurs, the Debentures not previously purchased by the Company or any portion of the principal amount thereof shall be purchased by the Company, at the option of the Holder thereof, at a purchase price equal to the Accreted Principal Amount plus any accrued and unpaid cash interest to the date that is 45 days after the date the Company shall have mailed notice of the occurrence of a Change in Control pursuant to Section 11.8(b) (the "Change in Control Purchase Date") or, if the Company has previously exercised its option to pay cash interest instead of accreting the principal amount of the Debentures following a Tax Event, at a purchase price equal to the Restated Principal Amount plus any accrued and unpaid cash interest to the Change in Control Purchase Date (the "Change in Control Purchase Price"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 11.8(c). A "Change in Control" shall be deemed to have occurred at such time after the Debentures are originally issued as either of the following events shall occur: (1) any person or group (other than the Company and its Subsidiaries) after the date Debentures are first issued hereunder becomes the beneficial owner of the Company's voting stock representing more than 50% of the total voting power of all of the Company's classes of voting stock entitled to vote generally in the election of members of the Company's board of directors; or (2) the Company consolidates with or merges into another Person (other than a Subsidiary), sells, conveys, transfers or leases its properties and assets substantially as an entirety to a Person (other than a Subsidiary), or any Person (other than a Subsidiary) consolidates with or merges with or into the Company, and the Company's outstanding common stock is reclassified into, exchanged for or converted into the right to receive any other property or security, provided that none of these circumstances will constitute a Change in Control if, after a transaction, the Persons that beneficially owned the Company's voting stock immediately prior to the transaction beneficially own, in substantially the same proportion, shares with a majority of the total voting power of all outstanding voting securities of the surviving or transferee Person that are entitled to vote generally in the election of that Person's board of directors. For purposes of this Section 11.8, whether a person is a "beneficial owner" shall be determined in accordance with Rule 13d-3 under the Exchange Act and "person" includes any syndicate or group that would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act. (b) No later than 30 days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: 13 (1) briefly, the events causing a Change in Control and the date of such Change in Control; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 11.8 must be given; (3) the Change in Control Purchase Date; (4) the Change in Control Purchase Price; (5) the name and address of the Paying Agent; (6) that the Debentures as to which a Change in Control Purchase Notice has been given may be converted if they are otherwise convertible pursuant to Article Fifteen hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (7) the procedures for withdrawing a Change in Control Purchase Notice; (8) that the Debentures must be surrendered to the Paying Agent to collect payment; (9) that the Change in Control Purchase Price for any Debenture as to which a Change in Control Purchase Notice has been duly given and not withdrawn will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Debenture; (10) that, unless the Company defaults in making payment of such Change in Control Purchase Price when due, cash interest, if any, on Debentures surrendered for purchase by the Company will cease to accrue and the Debentures will cease to accrete in value on and after the Change in Control Purchase Date; and (11) the CUSIP number(s) of the Debentures. (c) In order to exercise its rights specified in Section 11.8(a), a Holder must deliver a written notice requesting purchase of all or a portion of its Debentures (a "Change in Control Purchase Notice") to the Paying Agent at any time on or prior to the 30th day after the date the Company delivers its written notice of the occurrence of a Change in Control, stating: (1) the certificate number(s) of the Debentures which the Holder will deliver to be purchased or, if Definitive Securities have not been issued, such information as shall be provided pursuant to appropriate Depositary procedures; (2) the portion of the principal amount of the Debenture which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (3) that such Debenture shall be purchased pursuant to the terms and conditions specified in Paragraph 6 of the Debentures. 14 The timely delivery to the Paying Agent of the Change in Control Purchase Notice and the delivery of such Debenture (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that, in the case of delivery of such Debenture to the Paying Agent, such Change in Control Purchase Price shall be so paid pursuant to this Section 11.8 only if the Debenture so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 11.8, a portion of a Debenture if the principal amount at maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Debenture also apply to the purchase of such portion of such Debenture. Any purchase by the Company contemplated pursuant to the provisions of this Section 11.8 shall be consummated by the delivery of the consideration to be received by the Holder on the Change of Control Purchase Date. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 11.8(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business one Business Day prior to the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 11.9. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. SECTION 11.9. EFFECT OF PURCHASE NOTICE OR CHANGE IN CONTROL PURCHASE NOTICE. Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 11.7(a) or Section 11.8(c), as applicable, the Holder of the Debenture in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Debenture. Such Purchase Price shall be paid to such Holder, subject to receipts of funds and/or securities by the Paying Agent, promptly following, but in no event more than five days after, the later of (x) the Purchase Date with respect to such Debenture (provided that the conditions in Section 11.7(a) have been satisfied) and (y) the time of delivery of such Debenture to the Paying Agent by the Holder thereof in the manner required by Section 11.7(a), and such Change in Control Purchase Price shall be paid to such Holder, subject to receipts of funds and/or securities by the Paying Agent, on the later of (x) the Change in Control Purchase Date with respect to such Debenture (provided that the conditions in Section 11.8(c) have been satisfied) and (y) the time of delivery of such Debenture to the Paying Agent by the Holder thereof in the manner required by Section 11.8(c). Debentures in respect of which a Purchase Notice or Change in Control Purchase Notice has been given by the Holder thereof may not be converted pursuant to Article Fifteen hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice unless such Purchase Notice or Change in Control Purchase Notice has first been validly withdrawn as specified in the following paragraph. 15 A Purchase Notice or Change in Control Purchase Notice may be withdrawn by the Holder by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business five Business Days prior to the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: (1) the certificate number, if any, of the Debenture in respect of which such notice of withdrawal is being submitted or, if Definitive Securities have not been issued, such information as shall be provided pursuant to appropriate Depositary procedures, (2) the principal amount at maturity of the Debenture with respect to which such notice of withdrawal is being submitted, and (3) the principal amount at maturity, if any, of such Debenture which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. There shall be no purchase of any Debentures pursuant to Section 11.7 or 11.8 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Debentures, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Debentures). The Paying Agent will promptly return to the respective Holders thereof any Debentures (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Debentures) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. SECTION 11.10. DEPOSIT OF PURCHASE PRICE OR CHANGE IN CONTROL PURCHASE PRICE. Prior to 10:00 a.m. (local time in The City of New York) on the Purchase Date or prior to 10:00 a.m. (local time in the City of New York) on the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 6.4) an amount of cash (in immediately available funds if deposited on such Purchase Date or Change in Control Purchase Date) or Common Stock, if permitted hereunder, or both, sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of all the Debentures or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. SECTION 11.11. DEBENTURES PURCHASED IN PART. Any Debenture which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Debenture, 16 without service charge, a new Debenture or Debentures, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Debenture so surrendered which is not purchased. SECTION 11.12. REPAYMENT TO THE COMPANY. The Paying Agent and the Trustee shall return to the Company any cash or shares of Common Stock that remain unclaimed for two years, subject to applicable unclaimed property laws, held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 11.10 exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of the Debentures or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Paying Agent and the Trustee shall return any such excess to the Company upon written request therefor. SECTION 2.04. Conversion. Article Fifteen of the Original Indenture is hereby amended in its entirety, with respect to the Debentures only, to read as follows (provided, however, that Section 15.10 of the Original Indenture shall remain in full force and effect with respect to the Debentures and shall be incorporated by reference into this Supplemental Indenture as if such Section were restated in its entirety): ARTICLE XV CONVERSION OF DEBENTURES SECTION 15.1. CONVERSION PRIVILEGE. A Holder of a Debenture may convert such Debenture into shares of Common Stock at any time during the periods stated in paragraph 7 of the Debentures. The number of shares of Common Stock issuable upon conversion of a Debenture per $1,000 (subject to upward adjustment as provided herein) of principal amount at maturity thereof (the "Conversion Rate") shall be that set forth in paragraph 7 in the Debentures, subject to adjustment as herein set forth. A Holder may convert a portion of the principal amount at maturity of a Debenture if the portion is $1,000 (subject to upward adjustment as provided herein) or an integral multiple of $1,000 (or such increased amount). Provisions of this Indenture that apply to conversion of all of a Debenture also apply to conversion of a portion of the Debenture. SECTION 15.2. CONVERSION PROCEDURE. To convert a Debenture, a Holder must satisfy the requirements in paragraph 7 of the Debentures. The first Business Day on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). As soon as practicable after the Conversion Date, the Company shall deliver to the Holder, through the Conversion Agent, a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 15.3. The Person in whose name the certificate is registered 17 shall be treated as the stockholder of record as of the close of business on the Conversion Date. Upon conversion of a Debenture, such Person shall no longer be a Holder of such Debenture. No payment or adjustment will be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article Fifteen. On conversion of a Debenture, no accrued and unpaid cash interest, if any, or amounts reflecting accretion of the Debentures included in the Accreted Principal Amount or the Restated Principal Amount (as the case may be), in each case through the Conversion Date, will be payable with respect to the converted Debenture and no such cash interest or amounts reflecting accretion of the Debentures shall be deemed to be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the shares of Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Debenture being converted pursuant to the provisions hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for accrued and unpaid cash interest, if any, through the Conversion Date, and the balance, if any, of such fair market value of such shares of Common Stock (and any such cash payment) shall be treated as issued for the Accreted Principal Amount or the Restated Principal Amount (as the case may be) of the Debenture being converted pursuant to the provisions hereof. The Company will not adjust the conversion ratio to account for accrued and unpaid cash interest, if any, or for amounts reflecting accretion of the Debentures included in the Accreted Principal Amount or the Restated Principal Amount (as the case may be). If a Holder converts more than one Debenture at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total principal amount of the Debentures converted. If the last day on which a Debenture may be converted is a not a Business Day in a place where a Conversion Agent is located, the Debenture may be surrendered on the next succeeding day that is a Business Day. Upon surrender of a Debenture that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Debenture in an authorized denomination equal in principal amount to the unconverted portion of the Debenture surrendered. If a Holder submits a Debenture for conversion after the Company has elected to exercise its option to pay cash interest instead of accreting the principal amount of the Debentures following a Tax Event, or if the Company is required to make a cash payment pursuant to an increased accretion rate, in either case between a record date and the opening of business on the next Interest Payment Date (except for Debentures or portions of Debentures called for redemption on a Purchase Date occurring during the period from the close of business on a record date and ending on the close of business on the next Interest Payment Date, or if such Interest Payment Date is not a Business Day, the next Business Day after the Interest Payment Date), such Holder shall pay to the Company an amount equal to cash interest payable on the converted principal amount. SECTION 15.3. FRACTIONAL SHARES. Holders will not receive fractional shares upon conversion of a Debenture. Instead, the Holder will receive a cash payment for fractional shares based on the Closing Sales Price of the Common Stock on the trading day immediately preceding the Conversion Date. 18 SECTION 15.4. TAXES ON CONVERSION. If a Holder submits a Debenture for conversion, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the delivery of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be registered in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the shares of Common Stock being registered in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be registered in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. SECTION 15.5. COMMON STOCK. All shares of Common Stock delivered by the Conversion Agent on behalf of the Company upon conversion of the Debentures shall be duly and validly issued and fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Debentures, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the shares of Common Stock are then listed or quoted. SECTION 15.6. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the Issue Date of the Debentures, the Company: (1) pays a dividend or makes another distribution to all holders of the Common Stock on the Common Stock payable exclusively in shares of Common Stock; (2) subdivides the outstanding shares of Common Stock into a greater number of shares of Common Stock; (3) combines the outstanding shares of Common Stock into a smaller number of shares Common Stock; or (4) pays a dividend or makes other distributions to all holders of the Common Stock consisting of Capital Stock of the Company (other than those rights and warrants referred to in Section 15.11 relating to stockholders rights plans), then the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Debenture thereafter converted will receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Debenture immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Debenture upon conversion of such Debenture may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall 19 thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article Fifteen with respect to the shares of Common Stock, on terms comparable to those applicable to shares of Common Stock in this Article Fifteen. SECTION 15.7. ADJUSTMENT FOR RIGHTS ISSUE. If after the Issue Date of the Debentures, the Company distributes any rights or warrants to all holders of shares of its Common Stock entitling them to purchase shares of Common Stock at a price per share less than the Average Sale Price as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula: R' = R x (O + N) ------------------- (O + (N x P)/M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 15.7 is being applied. N = the number of additional shares of Common Stock offered pursuant to the distribution. P = the offering price per share of the additional shares. M = the Average Sale Price, minus, in the case of (i) a distribution to which Section 15.6(4) applies or (ii) a distribution to which Section 15.8 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 15.7 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 15.7 applies, the fair market value (on the record date for the distribution to which this Section 15.7 applies) of: (1) the Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 15.6(4) distribution; and (2) the assets of the Company or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 15.8 distribution. The Board of Directors shall determine fair market values for the purposes of this Section 15.7, except as Section 15.8 otherwise provides in the case of a Spin-off. "Average Sale Price" means the average of the Closing Sales Prices of the shares of Common Stock for the shorter of: 20 (i) 30 consecutive trading days ending on the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated; (ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the issuance of rights, warrants or options or (b) the distribution, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days); or (iii) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (a) issuance of rights, warrants or options or (b) distribution, in each case, for which an adjustment is required by the provisions of Section 15.6(4), 15.7, 15.8 or 15.9 and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days). In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 15.6(1), (2) or (3) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Closing Sales Price of the shares of Common Stock during such period. "Time of Determination" means the time and date of the earlier of (i) the determination of shareholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 15.7 or 15.8 applies and (ii) the Ex-Dividend Time. "Ex-Dividend Time" means the time immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on a national or regional exchange or market on which the shares of Common Stock are then listed or quoted. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 15.7 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 15.7 if the application of the formula stated above in this Section 15.7 would result in a value of R' that is equal to or less than the value of R. 21 SECTION 15.8. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If, after the Issue Date of the Debentures, the Company distributes to all holders of its shares of Common Stock any of its debt, securities or assets or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 15.6 and distributions of rights, warrants or options referred to in Section 15.7 and (y) cash dividends or other cash distributions unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 15.8, in accordance with the formula: R' = R x M ----- (M - F) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Sale Price, minus, in the case of a distribution to which Section 15.6(4) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 15.8 applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 15.8 applies, the fair market value (on the record date for the distribution to which this Section 15.8 applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 15.6(4) distribution. F = the fair market value (on the record date for the distribution to which this Section 15.8 applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 15.8 is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). In the event the Company distributes shares of Capital Stock of a Subsidiary, the Conversion Rate will be adjusted, if at all, based on the market value of the Subsidiary stock so distributed relative to the market value of the Common Stock, as discussed below. The Board of Directors shall determine fair market values for the purposes of this Section 15.8, except that in respect of a dividend or other distribution of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company (a "Spin-off"), the fair market value of the securities to be distributed shall equal the average of the daily Closing Sales Prices of those securities for the five consecutive trading days commencing on and including the sixth day of trading of those securities after the effectiveness of the Spin-off and the average of the Closing Sales Prices shall mean the average Closing Sales Prices for the Common Stock for the same five trading days. In the event, however, that an underwritten initial public offering of the securities in the Spin-off occurs simultaneously with the Spin-off, fair market value of the securities distributed in the Spin-off shall mean the initial public offering price of such securities and the Average Sale Price, for purposes of this sentence, shall mean the Closing Sales Price for the Common Stock on the same trading day. 22 Assuming that a distribution referred to in this Section 15.8 shall have occurred, the adjustment referred to in this Section 15.8 shall become effective as of a date and time immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 15.8 applies, except that an adjustment related to a Spin-off shall become effective at the earlier to occur of (i) 10 trading days after the effective date of the Spin-off and (ii) the initial public offering of the securities distributed in the Spin-off. For purposes of this Section 15.8, the term "Extraordinary Cash Dividend" shall mean any all-cash distributions in an aggregate amount that, together with (i) any cash and the fair market value of any other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for shares of Common Stock consummated within the preceding 12 months not triggering a Conversion Rate adjustment and (ii) all other all-cash distributions to all or substantially all holders of Common Stock made within the preceding 12 months not triggering a Conversion Rate adjustment, exceeds an amount equal to 15% of the market capitalization of Common Stock on the Business Day immediately preceding the day on which the Company declares the distribution. If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend on the shares of Common Stock, the aggregate amount of such cash dividend together with the amounts of all other cash dividends or cash distributions gives rise to an adjustment of the Conversion Rate pursuant to Section 15.6, then such cash dividend together with all such other cash dividends or cash distributions shall, for purposes of applying the formula set forth above in this Section 15.8, cause the value of "F" to equal (y) the aggregate amount of such cash dividend together with the amounts of such other cash dividends or cash distributions, minus (z) the aggregate amount of all cash dividends or cash distributions for which a prior adjustment in the Conversion Rate was previously made. In the event that, with respect to any distribution to which this Section 15.8 would otherwise apply, the difference "M-F" as defined in the above formula is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by this Section 15.8 shall not be made and in lieu thereof the provisions of Section 15.15 shall apply to such distribution. 23 SECTION 15.9. ADJUSTMENT FOR SELF-TENDER OFFER. If, after the Issue Date of the Debentures, the Company or any Subsidiary of the Company pays holders of the Common Stock in respect of a tender or exchange offer, other than an odd-lot offer, by the Company or any of its Subsidiaries for Common Stock to the extent that the offer involves aggregate consideration that, together with (i) any cash and the fair market value of any other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for shares of Common Stock consummated within the preceding 12 months not triggering a Conversion Rate adjustment and (ii) all-cash distributions to all or substantially all holders of Common Stock made within the preceding 12 months not triggering a Conversion Rate adjustment, exceeds an amount equal to 15% of the market capitalization of Common Stock on the expiration date of the tender offer, the Conversion Rate shall be adjusted in an equitable manner, as determined by the Company's Board of Directors in consultation with Credit Suisse First Boston Corporation or another nationally recognized investment banking institution satisfactory to the Company. SECTION 15.10. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article Fifteen shall be made to the nearest cent or to the nearest 1/10,000th of a share, as the case may be. SECTION 15.11. WHEN NO ADJUSTMENT IS REQUIRED. If the Company adopts a stockholders rights plan under which the Company issues rights providing that each share of Common Stock issued upon conversion of the Debenture at any time prior to the distribution of separate certificates representing the rights will be entitled to receive the rights, no adjustment need be made as a result of: (i) the issuance of the rights; (ii) the distribution of separate certificates representing the rights; (iii) the exercise or redemption of the rights in accordance with any rights agreement; or (iv) the termination or invalidation of the rights. No adjustment need be made for a transaction referred to in Section 15.7 if Holders of the Debentures may participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of shares of Common Stock participate in the transaction. No adjustment need be made for a transaction referred to in Section 15.8 if all Holders of the Debentures may participate in the transaction. No adjustment need be made for a change in the par value or no par value of the shares of Common Stock. To the extent the Debentures become convertible pursuant to this Article Fifteen in whole or in part into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. 24 SECTION 15.12. NOTICE OF ADJUSTMENT. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Holders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 15.13. VOLUNTARY INCREASE. The Company from time to time may increase the Conversion Rate by any amount at any time for at least 20 days, so long as the increase is irrevocable during such period. Whenever the Conversion Rate is increased, the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 15.6, 15.7, 15.8 or 15.9. SECTION 15.14. NOTICE OF CERTAIN TRANSACTIONS. If: (1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 15.6, 15.7, 15.8 or 15.9 (unless no adjustment is to occur pursuant to Section 15.11); or (2) the Company takes any action that would require a supplemental indenture pursuant to Section 15.15; or (3) there is a liquidation or dissolution of the Company; then the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 15.15. REORGANIZATION OF THE COMPANY. If the Company is a party to a transaction subject to Section 8.1 (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of shares of Common Stock immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other person) or a merger or binding share exchange which reclassifies or changes its outstanding shares of Common Stock, the person obligated to deliver securities, cash or other assets upon conversion of Debentures shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Debentures is an Affiliate of the successor company, that issuer shall join in the supplemental indenture. 25 The supplemental indenture shall provide that the Holder of a Debenture may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Debenture immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent person or an Affiliate of a constituent person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non-electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article Fifteen. The successor company shall mail to Holders a notice briefly describing the supplemental indenture. If this Section applies, neither Section 15.6 nor Section 15.7 applies. If the Company makes a distribution to all holders of its shares of Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of the last paragraph of Section 15.8, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 15.8, then, from and after the record date for determining the holders of shares of Common Stock entitled to receive the distribution, a Holder of a Debenture that converts such Debenture in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Debenture is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Debenture immediately prior to the record date for determining the holders of shares of Common Stock entitled to receive the distribution. SECTION 15.16. COMPANY DETERMINATION FINAL. Any determination that the Company or the Board of Directors must make pursuant to Section 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 15.15 or 15.17 is conclusive, absent manifest error. SECTION 15.17. SIMULTANEOUS ADJUSTMENTS. In the event that this Article Fifteen requires adjustments to the Conversion Rate under more than one of Sections 15.6(4), 15.7, 15.8 or 15.9, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 15.6(4), second, the provisions of Section 15.8, third, the provisions of Section 15.7, and fourth, the provisions of Section 15.9. SECTION 15.18. SUCCESSIVE ADJUSTMENTS. After an adjustment to the Conversion Rate under this Article Fifteen, any subsequent event requiring an adjustment under this Article Fifteen shall cause an adjustment to the Conversion Rate as so adjusted. SECTION 15.19. TAX DETERMINATION. Each Holder agrees, for U.S. federal income tax purposes, to treat the Debentures as "contingent payment debt instruments" and to be bound by the Company's application of the Treasury Regulations that govern contingent payment debt instruments, including the Company's 26 determination that the rate at which interest will be deemed to accrue for federal income tax purposes will be 6.28%, compounded semi-annually. SECTION 2.05. No Defeasance. Notwithstanding anything contained in the Indenture to the contrary, the provisions of Sections 4.3 and 10.11 of the Original Indenture shall not be applicable to the Debentures. ARTICLE THREE MISCELLANEOUS SECTION 3.01. Execution of Supplemental Indenture. This Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture and, as provided in the Original Indenture, this Supplemental Indenture forms a part thereof. The Original Indenture, as supplemented and amended by this Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed. SECTION 3.02. Conflict with Trust Indenture Act. If and to the extent that any provision hereof limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, as amended, such imposed duties shall control. SECTION 3.03. Successors and Assigns. All covenants and agreements in this Supplemental Indenture by the Company shall bind their respective successors and assigns, whether so expressed or not. SECTION 3.04. Separability Clause. In case any one or more of the provisions contained in this Supplemental Indenture, the Original Indenture or in the Debentures of any series shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture, the Original Indenture or of such Debentures, but this Supplemental Indenture, the Original Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 3.05. Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture or in the Original Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders (to the extent specified herein or therein), any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture. SECTION 3.06. Governing Law. This Supplemental Indenture shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. 27 SECTION 3.07. Execution and Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 3.08. Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing (which may be by facsimile) and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows: if to the Company: International Paper Company 400 Atlantic Street Stamford, Connecticut 06921 Facsimile: (203) 541-8263 Attention: Treasury Department if to the Trustee: The Bank of New York 101 Barclay Street Floor 21 West New York, New York 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Administration if to the Conversion Agent: The Bank of New York 101 Barclay Street Floor 21 West New York, New York 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Administration The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Holder shall be mailed to the Holder, by first-class mail, postage prepaid, at the Holder's address as it appears on the registration books of the Debenture Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Debenture Registrar, Paying Agent, Conversion Agent or co-registrar. 28 SECTION 3.09. Concerning the Trustee. The rights, privileges, protections, immunities and benefits given to the Trustee under the Original Indenture, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. 29 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Convertible Debentures Supplemental Indenture on behalf of the respective parties hereto as of the date first above written. INTERNATIONAL PAPER COMPANY By: -------------------------------- Name: Title: THE BANK OF NEW YORK By: -------------------------------- Name: Title: EXHIBIT A [FORM OF FACE OF DEBENTURE] THIS DEBENTURE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT AND IS SUBJECT TO THE RULES FOR DEBT INSTRUMENTS WITH CONTINGENT PAYMENTS UNDER TREASURY REGULATIONS ss. 1.1275-4(b). FOR INFORMATION REGARDING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, THE YIELD TO MATURITY, THE "COMPARABLE YIELD" AND PROJECTED PAYMENT SCHEDULE FOR THIS DEBENTURE, YOU SHOULD CONTACT: VICE PRESIDENT OF INVESTOR RELATIONS, INTERNATIONAL PAPER COMPANY, 400 ATLANTIC STREET, STAMFORD, CONNECTICUT 06921, TELEPHONE (203) 541-8000. [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL DEBENTURE SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL DEBENTURE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE THREE OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.] THIS DEBENTURE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS DEBENTURE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS DEBENTURE MAY NOT BE OFFERRED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS DEBENTURE IS HEREBY NOTIFIED THAT THE SELLER OF THIS DEBENTURE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS DEBENTURES AGREES FOR THE BENEFIT OF INTERNATIONAL PAPER THAT (A) THIS DEBENTURE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS DEBENTURE MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED, ONLY (I) TO INTERNATIONAL PAPER, (II) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR ANY OTHER AVAILABLE EXEMPTION FROM A-1 THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (II) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS DEBENTURE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER REPRESENTS THAT IT (1) IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT AND IS ACQUIRING THE DEBENTURES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT OR (2) ACQUIRED SUCH DEBENTURES IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (A)(III) ABOVE, THE COMPANY RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY RULE 144 EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS DEBENTURE, ANY SHARES OF COMMON STOCK OF INTERNATIONAL PAPER COMPANY ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS DEBENTURE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS DEBENTURE AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS DEBENTURE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT. The foregoing legend may be removed from this Debenture on satisfaction of the conditions specified in the Indenture. A-2 INTERNATIONAL PAPER COMPANY Zero Coupon Convertible Debentures due 2021 No. CUSIP: Issue Date: June 20, 2001 Issue Price: $475.66 (for each $1,000 principal amount at maturity) INTERNATIONAL PAPER COMPANY, a New York corporation, promises to pay to [IF GLOBAL DEBENTURE--Cede & Co.] [IF DEFINITIVE DEBENTURE--________________] or registered assigns, the principal amount of [ ($ )] on June 20, 2021, subject to adjustment as provided herein. This Debenture shall not bear cash interest except as specified on the other side of this Debenture. This Debenture is convertible as specified on the other side of this Debenture. Additional provisions of this Debenture are set forth on the other side of this Debenture. Dated: INTERNATIONAL PAPER COMPANY By: ------------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Debentures referred to in the within-mentioned Indenture. By: ----------------------------------- Authorized Signatory Dated: A-3 [FORM OF REVERSE OF DEBENTURE] Zero Coupon Convertible Debentures due June 20, 2021 1. Cash Interest and Accretion Rate. Except as provided in this paragraph 1, this Debenture shall not bear cash interest. This Debenture shall initially represent the Issue Price and shall accrete in value at the Accretion Rate. The "Accretion Rate" shall initially be 3.75% per annum, and shall be adjusted as provided in this Section 1. Beginning June 20, 2004, and on each one year anniversary thereafter (each, an "Accretion Rate Measurement Date"), the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) on the Debentures is subject to adjustment as set forth in this Section 1; provided, however, that the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall not be less than 3.75% per annum or more than 11% per annum. If the Closing Sales Price of the Common Stock is equal to or less than 60% of the Accreted Conversion Price for any 20 trading days out of the last 30 consecutive trading days ending six Business Days prior to an Accretion Rate Measurement Date (the "Valuation Condition"), then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset as described below. If, however, on any Accretion Rate Measurement Date, the Valuation Condition with respect to such Accretion Rate Measurement Date is not satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be 3.75%. On June 20, 2004, and/or June 20, 2005, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 16, 2004. On June 20, 2006, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) for the period beginning on June 20, 2006 and ending on the earlier to occur of (a) June 20, 2011 or (b) the next Accretion Rate Measurement Date on which the Valuation Condition is not satisfied shall be reset to the Five-Year Rate, as determined on June 15, 2006. Notwithstanding the next two paragraphs, the Five-Year Rate will continue to be in effect until June 20, 2011 if the Valuation Condition is satisfied on the Accretion Rate Measurement Dates in 2007, 2008, 2009 and 2010. On June 20, 2007, and/or June 20, 2008, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 15, 2007. A-4 On June 20, 2009, and/or June 20, 2010, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 17, 2009. On June 20, 2011, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) for the period beginning on June 20, 2011 and ending on the earlier to occur of (a) June 20, 2016 or (b) the next Accretion Rate Measurement Date on which the Valuation Condition is not satisfied shall be reset to the Five-Year Rate, as determined on June 16, 2011. Notwithstanding the next two paragraphs, the Five-Year Rate will continue to be in effect until June 20, 2016 if the Valuation Condition is satisfied on the Accretion Rate Measurement Dates in 2012, 2013, 2014 and 2015. On June 20, 2012, and/or June 20, 2013, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 15, 2012. On June 20, 2014, and/or June 20, 2015, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 17, 2014. On June 20, 2016, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) for the period beginning on June 20, 2016 and ending on the earlier to occur of (a) the Stated Maturity or (b) the next Accretion Rate Measurement Date on which the Valuation Condition is not satisfied shall be reset to the Five-Year Rate, as determined on June 15, 2016. Notwithstanding the next two paragraphs, the Five-Year Rate will continue to be in effect until June 20, 2016 if the Valuation Condition is satisfied on the Accretion Rate Measurement Dates in 2017, 2018, 2019 and 2020. On June 20, 2017, and/or June 20, 2018, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 15, 2017. On June 20, 2019, and/or June 20, 2020, if the Valuation Condition is satisfied, then the Accretion Rate (or the additional cash interest rate if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) shall be reset to the Two-Year Rate as determined on June 17, 2019. The Reset Rate determined as of each Reset Rate Determination Date will be equal to the rate that would in the sole judgment of the Reset Rate Agent, result in a trading price of par of a hypothetical issue of senior, nonconvertible, noncontingent, fixed-rate debt securities of the Company bearing interest semi-annually with (i) final maturity equal to, in the case of the Five-Year Rate, five years, and in the case of the Two-Year Rate, two years; (ii) an aggregate principal amount equal to the Accreted Principal Amount or the Restated Principal Amount, as applicable, of the Debentures; and (iii) covenants and other provisions that are, insofar as would be practicable for an issue of senior, nonconvertible, fixed-rate debt securities, substantially identical to those of the Debentures. If the Reset A-5 Rate Agent has not established the Reset Rate for the applicable annual period, or if the Reset Agent determines in its sole judgment that there is no suitable reference rate from which the Reset Rate may be determined, the Reset Rate for that period will be the Reset Rate most recently determined. If there is no Reset Rate most recently determined, the Reset Rate shall be a rate mutually agreed upon by the Reset Rate Agent and the Company reflecting current market conditions. In either case, such Reset Rate shall remain in effect until the Reset Rate Agent determines that there is a suitable reference rate, at which time the Reset Rate Agent will determine a new Reset Rate for the period ending on the next Reset Rate Determination Date. All dates above refer to such date, or if such date is not a Business Day, the next preceding Business Day. If an increased Accretion Rate is in effect for a particular annual period, the Company will pay a portion of the increased accretion rate as cash interest at an annualized rate of 0.25% per annum (or 0.125% per semi-annual period) on the Applicable Principal Amount (or the Restated Principal Amount, if the principal amount of the Debentures shall have been restated following the occurrence of a Tax Event) and the remaining increased Accretion Rate will be accrued and payable at Stated Maturity (except as provided herein if the principal amount of the Debentures has been restated following the occurrence of a Tax Event), any Redemption Date, Purchase Date or Change in Control Purchase Date. For the determination of the Reset Rate, the Reset Rate Agent shall seek indicative reference rates from three nationally recognized investment banks. The determination of any Reset Rate will be conclusive and binding upon the Reset Rate Agent, the Company, the Trustee and the Holders, in the absence of manifest error. The Reset Rate Agent may be removed at any time by the Company giving at least 60 days' written notice to the Reset Rate Agent. The Reset Rate Agent may resign at any time upon giving at least 30 days' written notice. For purposes of this Paragraph 1, the following defined terms shall have the respective meanings provided below. "Accreted Conversion Price" means, as of any date, the Accreted Principal Amount of this Debenture divided by the Conversion Rate (as defined in the Indenture). "Accreted Principal Amount" means, for any date, the Issue Price (as defined in the Indenture) of the Debentures adjusted to reflect the accretion of the Debentures at the applicable accretion rate to such date. "Applicable Principal Amount" means, for any semi-annual period, the Issue Price of the Debentures adjusted to reflect the accretion of the Debentures at the applicable accretion rate to the beginning of such semi-annual period (excluding any accrued and unpaid cash interest). "Reset Rate Agent" means a nationally recognized financial institution to be appointed by the Company to establish the applicable Reset Rate as of each Reset Rate Determination Date. "Reset Rate Determination Date" means June 16, 2004, June 15, 2006, June 15, 2007, June 17, 2009, June 16, 2011, June 15, 2012, June 17, 2014, June 15, 2016, June 15, 2017 and June 17, 2019. A-6 In the event of an increased accretion rate, the Company will disseminate a press release through Reuters Economic Services or Bloomberg Business News containing this information or publish the information on the Company's web site on the world wide web or through such other public medium as the Company may use at that time. Tax Event. From and after the date of the occurrence of a Tax Event, the Company will have the irrevocable option to pay cash interest on the Debentures at the Accretion Rate instead of accreting the principal amount thereof. On the date of the Company's election to pay cash interest following a Tax Event (the "Option Exercise Date"), the principal amount on which cash interest is payable will be restated and will equal the Restated Principal Amount, and cash interest will accrue from the Option Exercise Date. The Restated Principal Amount at the Accretion Rate shall be the amount due at maturity of the Debentures. Cash interest will be paid on the Restated Principal Amount from the Option Exercise Date and will be subject to reset as provided in Section 1 of this Debenture. A "Tax Event" means that the Company shall have received an opinion from experienced independent tax counsel to the effect that, as a result of: (i) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of the United States or any political subdivision thereof, or (ii) any amendment to or change in the administrative position or interpretation or any administrative action, in each case, by any legislative body, court, government agency or regulatory authority, irrespective of the manner in which such amendment or change is made known, which amendment or change is effective or such administrative action or decision is announced, in each case, on or after the Issue Date; there is more than an insubstantial risk that interest payable on this Debenture, including amounts reflecting accretion of the Debentures included in the Accreted Principal Amount and any cash interest payable pursuant to an increased accretion rate, either: (i) would not be deductible on a current accrual basis; or (ii) would not be deductible under any other method, in either case in whole or in part, by the Company for United States federal income tax purposes. Any cash interest payable hereunder and any accretion of the Debentures will be computed based on a 360-day year of twelve 30-day months. Cash interest, if any, will be payable semi-annually in arrears on each June 20 and December 20 (each an "Interest Payment Date") through maturity; provided that, in the event the Company elects to pay cash interest upon the occurrence of a Tax Event as of a date less than 60 days prior to any Interest Payment Date, the first payment of cash interest shall be made on the Interest Payment Date next succeeding such Interest Payment Date. The record date for the payment of cash interest to Holders will be the close of business on June 5 and December 5 of each year (whether or not a Business Day); provided that cash interest payable at Stated Maturity or upon redemption or repurchase will be payable to the person to whom principal is payable. The Company will give notice to the Holders, no later than 15 days prior to each record date, of the amount of cash interest to be paid as of the next Interest Payment Date. Cash interest on the Debentures will be paid to registered holders of the Debentures as of the record date. A-7 2. Method of Payment at Redemption, Repurchase or Maturity. Subject to the terms and conditions of the Indenture, the Company will make payments (1) in cash in respect of a Redemption Price, Change in Control Purchase Price and at Stated Maturity and (2) in cash, shares of Common Stock or a combination thereof in respect of a Purchase Price, in each case to Holders who surrender Debentures to a Paying Agent to collect such payments in respect of the Debentures. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay such cash amounts by check payable in such money. 3. Paying Agent, Conversion Agent, Debenture Registrar and Reset Rate Agent. The Bank of New York (the "Trustee") will initially act as Paying Agent, Conversion Agent and Debenture Registrar. Credit Suisse First Boston Corporation will initially act as Reset Rate Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Debenture Registrar or Reset Rate Agent without notice, other than notice to the Trustee; provided that the Company will maintain at least one Paying Agent in the State of New York, The City of New York, The Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Debenture Registrar or Reset Rate Agent. 4. Indenture. The Company issued the Debentures under an Indenture dated as of April 12, 1999, as amended (the "Original Indenture"), among the Company and the Trustee, as supplemented by the Convertible Debentures Supplemental Indenture dated June 20, 2001 (the "Supplemental Indenture" and, together with the Original Indenture, the "Indenture"). The terms of the Debentures include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Debentures are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of those terms. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Debentures are general unsecured obligations of the Company initially limited to $2,420,750,000 aggregate principal amount at maturity, subject to upward adjustment from time to time in the event there is an increased accretion rate in effect pursuant to paragraph 1 hereof. The Indenture does not limit other indebtedness of the Company, secured or unsecured. 5. Redemption at the Option of the Company. No sinking fund is provided for in the Debentures. Prior to June 20, 2006, the Company may not redeem the Debentures. On or after June 20, 2006, and prior to June 20, 2008, the Company may redeem the Debentures for cash, but only if the Closing Sale Price of the Common Stock exceeds 120% of the Accreted Conversion Price for at least 20 trading days in the last 30 consecutive trading days ending on the date we make public a notice of our intention to redeem the Debentures. On or after June 20, 2008, the Company may redeem for cash all or part of the Debentures at any time, upon not less than 30 nor more than 60 days' notice by mail to Holders of the Debentures, for a price equal to the then Accreted Principal Amount (or, if applicable, the Restated Principal Amount) plus any accrued and unpaid cash interest to the redemption date. A-8 The table below shows Redemption Prices of the Debentures at June 20, 2006, at each following June 20 prior to maturity and the price at maturity on June 20, 2021, assuming that the rate has not been reset as provided in Section 1 hereof and that a Tax Event has not occurred. The prices reflect the Accreted Principal Amount calculated through each date. The Redemption Price of Debentures redeemed between these dates would include an additional increase in the accreted principal amount accrued from the immediately preceding date in the table to the actual redemption date (or accrued but unpaid interest if the Debentures shall have been restated following a Tax Event). Accrued Redemption Redemption Date Interest Price --------------- -------- ----- June 20, 2006 $ 97.10 $ 572.76 June 20, 2007 $118.78 $ 594.44 June 20, 2008 $141.28 $ 616.94 June 20, 2009 $164.63 $ 640.29 June 20, 2010 $188.87 $ 664.53 June 20, 2011 $214.02 $ 689.68 June 20, 2012 $240.13 $ 715.79 June 20, 2013 $267.22 $ 742.88 June 20, 2014 $295.34 $ 771.00 June 20, 2015 $324.52 $ 800.18 June 20, 2016 $354.81 $ 830.47 June 20, 2017 $386.25 $ 861.91 June 20, 2018 $418.87 $ 894.53 June 20, 2019 $452.73 $ 928.39 June 20, 2020 $487.87 $ 963.53 June 20, 2021 (maturity) $524.34 $1,000.00 If the Trustee selects a portion of a Holder's Debentures for redemption and such Holder converts a portion of the same Debentures, the converted portion will be deemed to be from the portion selected for redemption. Each of the Debentures will be redeemed in whole. 6. Purchase By the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the Debentures held by such Holder on June 20, 2004, June 20, 2006, June 20, 2011 and June 20, 2016 (each, a "Purchase Date"), at a Purchase Price per Debenture equal to the Purchase Price (provided that, if the Purchase Date is on or after an interest record date, if any, but on or prior to the Interest Payment Date, if any, interest shall be payable to Holders in whose names the Debentures are registered at the close of business on the relevant Record Date). To exercise such right, a Holder shall deliver to the Company a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the fifth day prior to such Purchase Date, and shall deliver the Debentures to the Paying Agent as set forth in the Indenture. The Purchase Price may be paid, at the option of the Company, in cash or by delivery of shares of Common Stock, or in any combination thereof. If the Company elects to pay the Purchase Price in shares of Common Stock or a combination of Common Stock and cash, the Company shall notify Holders of such election 20 Business Days prior to the Purchase Date. Subject to the terms and conditions of the Indenture, if a Change in Control occurs, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the A-9 Debentures held by such Holder, at a purchase price equal to the Accreted Principal Amount plus any accrued and unpaid cash interest to the Change in Control Purchase Date or, if the Company has previously exercised its option to pay cash interest instead of accreting the principal amount of the Debentures following a Tax Event, at a purchase price equal to the Restated Principal Amount plus any accrued and unpaid cash interest to the Change in Control Purchase Date. To exercise such right, a Holder shall deliver to the Company a Change in Control Purchase Notice containing the information set forth in the Indenture, at any time until the close of business on the 30th day after the date the Company delivers its written notice of the occurrence of a Change in Control, and shall deliver the Debentures to the Paying Agent as set forth in the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or Common Stock if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of all Debentures or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent prior to 10:00 a.m. (local time in the City of New York) on the Purchase Date or the Change in Control Purchase Date and cash interest ceases to accrue on such Debentures (or portions thereof) and the Debentures cease to accrete in value immediately after such Purchase Date or Change in Control Purchase Date, the Holder thereof shall have no other rights as such other than the right to receive the Purchase Price or Change in Control Purchase Price upon surrender of such Debenture. 7. Conversion. Holders may surrender Debentures for conversion into shares of Common Stock if the Closing Sales Price of the Common Stock for at least 20 trading days in the 30 consecutive trading days ending on the day prior to the Conversion Date is more than the Applicable Percentage then in effect of the Accreted Conversion Price on the first day of such conversion Period. The Applicable Percentage shall initially be initially be 120% and shall decline by 0.256% at the end of each semi-annual period over the life of the Debentures to 110% (the "Applicable Percentage") of the Accreted Conversion Price. Applicable Semi-annual Period Beginning Percentage ---------------------------- ---------- June 20, 2001........................................ 120.00% December 20, 2001.................................... 119.74% June 20, 2002........................................ 119.49% December 20, 2002.................................... 119.23% June 20, 2003........................................ 118.97% December 20, 2003.................................... 118.72% June 20, 2004........................................ 118.46% December 20, 2004.................................... 118.21% June 20, 2005........................................ 117.95% December 20, 2005.................................... 117.69% June 20, 2006........................................ 117.44% December 20, 2006.................................... 117.18% June 20, 2007........................................ 116.92% December 20, 2007.................................... 116.67% June 20, 2008........................................ 116.41% A-10 Applicable Semi-annual Period Beginning Percentage ---------------------------- ---------- December 20, 2008.................................... 116.15% June 20, 2009........................................ 115.90% December 20, 2009.................................... 115.64% June 20, 2010........................................ 115.38% December 20, 2010.................................... 115.13% June 20, 2011........................................ 114.87% December 20, 2011.................................... 114.62% June 20, 2012........................................ 114.36% December 20, 2012.................................... 114.10% June 20, 2013........................................ 113.85% December 20, 2013.................................... 113.59% June 20, 2014........................................ 113.33% December 20, 2014.................................... 113.08% June 20, 2015........................................ 112.82% December 20, 2015.................................... 112.56% June 20, 2016........................................ 112.31% December 20, 2016.................................... 112.05% June 20, 2017........................................ 111.79% December 20, 2017.................................... 111.54% June 20, 2018........................................ 111.28% December 20, 2018.................................... 111.03% June 20, 2019........................................ 110.77% December 20, 2019.................................... 110.51% June 20, 2020........................................ 110.26% December 20, 2020.................................... 110.00% A Holder may also surrender Debentures for conversion into shares of Common Stock if at any time each of Moody's Investor Service, Inc. and Standard & Poor's Rating Services has downgraded the Company's senior long-term corporate credit rating to below Baa3 and BBB-, respectively. A Holder may also surrender for conversion a Debenture or portion of a Debenture which has been called for redemption pursuant to Paragraph 5 hereof, even if the foregoing provisions have not been satisfied. Such Debentures may be surrendered for conversion at any time following receipt of a notice of redemption until the close of business on the Business Day prior to the Redemption Date. In the event that (a) the Company distributes to all holders of Common Stock certain rights, for a period expiring within 60 days, as described in Section 15.7 of the Indenture, or (b) the Company distributed to all holders of Common Stock its assets, debt securities or certain rights to purchase its securities, which distribution has a per share value exceeding 15% of the Closing Sales Price of a share of Common Stock as of the trading day prior to the date of declaration for such distribution, then, in each case, the Debentures may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such right, which shall be not less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and Debentures may be surrendered for conversion any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such distribution will not take place. No adjustment to the ability of a Holder to convert will be made if such Holder will otherwise participate in the dividend or distribution without conversion. A-11 In addition, in the event the Company is a party to a consolidation, merger or binding share exchange pursuant to which the shares of Common Stock would be converted into cash, securities or other property as set forth in Section 15.15 of the Indenture, the Debentures may be surrendered for conversion at any time from and after the date which is 15 days prior to the date the Company announces as the anticipated effective time until 15 days after the actual date of such transaction. If the Company is a party to a consolidation, merger or binding share exchange pursuant to which the Common Stock is converted into cash, securities or other property, at the effective time of the transaction, the right to convert a Debenture into shares of Common Stock will be changed into a right to convert it into the kind and amount of cash, securities or other property which the Holder would have received if the Holder had converted its Debentures immediately prior to the transaction. A Debenture in respect of which a Holder has delivered a Purchase Notice or a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Debenture may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. The Conversion Rate is initially 9.5111 shares of Common Stock per $1,000 principal amount at maturity, subject to adjustment in certain events described in the Indenture. A Holder which surrenders Debentures for conversion will receive cash in lieu of any fractional share of Common Stock. To convert a Debenture, a Holder must (1) complete and manually sign the irrevocable conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) furnish appropriate endorsements and transfer documents, (3) pay any transfer or similar tax, if required, and (4) surrender the Debenture to the Conversion Agent. A Holder may convert a portion of a Debenture if the principal amount at maturity of such portion is $1,000 at maturity or an integral multiple of $1,000 at maturity, subject to an upward adjustment in the event there is an increased accretion rate. No payment or adjustment will be made for dividends on the shares of Common Stock except as provided in the Indenture. Except as provided herein and in the Indenture, on conversion of a Debenture, the Holder will not receive any cash payment representing the Accreted Principal Amount with respect to the converted Debentures. Instead, upon conversion the Company will deliver to the Holder a fixed number of shares of Common Stock and any cash payment to account for fractional shares. The cash payment for fractional shares will be based on the Closing Sales Price of the Common Stock on the trading day immediately prior to the Conversion Date. Delivery of shares of Common Stock will be deemed to satisfy the Company's obligation to pay the principal amount of the Debentures, including accrued cash interest. Accrued cash interest will be deemed paid in full rather than canceled, extinguished or forfeited. The Company will not adjust the Conversion Rate to account for accrued interest. The Conversion Rate will be adjusted as provided in Article Fifteen of the Indenture. The Company may increase the Conversion Rate for at least 20 days, so long as the increase is irrevocable during such period. No adjustment in the Accreted Conversion Price will be required unless the adjustment would require an increase or decrease of at least 1% of the Accreted Conversion Price. If the adjustment is not made because the adjustment does not change the Accreted Conversion Price by more than 1%, then the adjustment that is not made will be carried forward and taken into account in any future adjustment. Except as specifically described above, the Accreted Conversion Price will not be subject to adjustment in the case of the issuance of any Common Stock or securities convertible into or exchangeable into Common Stock. 8. Denominations; Transfer; Exchange. A-12 The Debentures are in fully registered form, without coupons, in denominations of $1,000 of principal amount at maturity (subject to upward adjustment in the event of a rate reset pursuant to Section 1 hereof) and integral multiples of $1,000 (or such increased amount). A Holder may transfer or exchange Debentures in accordance with the Indenture. The Debenture Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Debenture Registrar need not transfer or exchange any Debentures selected for redemption (except, in the case of a Debenture to be redeemed in part, the portion of the Debenture not to be redeemed) or any Debentures in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Debenture to be purchased in part, the portion of the Debenture not to be purchased) or any Debentures for a period of 15 days before the mailing of a notice of redemption of Debentures to be redeemed. 9. Persons Deemed Owners. The registered Holder of this Debenture may be treated as the owner of this Debenture for all purposes. 10. Unclaimed Money or Debentures. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Debentures that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look only to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 11. Amendment; Waiver. The Company and the Trustee, with the written consent of the Holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding, may amend the Indenture or the Debentures. However, without the consent of each Holder affected, an amendment or supplement to the Indenture or the Debentures may not: (1) reduce the principal of or premium on or change the Stated Maturity of any Debenture; (2) reduce the rate of or change the time for payment of cash interest on, or reduce the accretion rate of, any Debenture; (3) reduce or alter the method of computation of the Redemption Price, Purchase Price or Change in Control Purchase Price of any Debenture or the time when such Redemption Price, Purchase Price or Change in Control Purchase Price is payable; (4) make the principal of, or cash interest on, any Debenture payable in money or securities other than that stated in the Debenture or change the price of payment; (5) make any change that would impair any of the rights granted in Section 5.8 of the Indenture in any material respect; (6) reduce the percentage of principal amount of the outstanding Debentures of a series required to amend or supplement the Indenture or waive any of its provisions. A-13 It shall not be necessary for the consent of the Holders under this paragraph 11 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this paragraph 11 becomes effective, the Trustee will mail to each Holder a notice briefly describing such amendment. 12. Defaults and Remedies. Under the Indenture, Events of Default include: (1) default for 30 days in the payment of any interest on the Debentures (after any election by the Company to pay cash interest on the Debentures following a Tax Event) or in the payment of any additional interest due under the Registration Rights Agreement; (2) default in payment of principal of or any premium on the Debentures at maturity (or, if the Company has elected to pay cash interest on the Debentures following a Tax Event, the Restated Principal Amount), original Issue Price, accrued original issued discount, Redemption Price, Purchase Price or Change In Control Purchase Price, when the same becomes due and payable; (3) our failure to comply with any of our covenants or agreements in the Debentures or in the Indenture (other than an agreement or covenant that we have included in the Indenture solely for the benefit of other series of debt securities) for 60 days after written notice by the trustee or by the Holders of at least 25% in principal amount of all outstanding debt securities affected by that failure; or (4) certain events in bankruptcy, insolvency or reorganization involving us. Holders may not enforce the Indenture or the Debentures except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Debentures unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Debentures at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default under the Indenture (except a default in payment of amounts specified in clauses (1) or (2) above) if it determines that withholding notice is in their interests; and provided, further, that in the case of any default of the character specified in clause (3) above no such notice to Holders shall be given until at least 60 days after the occurrence thereof. 13. Trustee Dealings with the Company. Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Debentures and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 14. No Recourse Against Others. A director, officer, employee or shareholder, as such, of either the Company shall not have any liability for any obligations of the Company under the Debentures or the Indenture or for any A-14 claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debenture, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Debentures. 15. Authentication. This Debenture shall not be valid until an authorize signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Debenture. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 17. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS DEBENTURE. 18. Registration Rights. The Holders of the Debentures are entitled to the benefits of a Registration Rights Agreement, dated as of June 20, 2001, among Company and Credit Suisse First Boston Corporation and Goldman, Sachs & Co., including the receipt of liquidated damages upon a registration default (as defined in such agreement). 19. Further Issues. The Company may, without notice to or the consent of the Holders of the Debentures, issue additional Debentures of the same tenor as the Debentures, so that such additional Debentures and the Debentures shall form a single series under the Indenture. A-15 - ----------------------------------------------------------------------------------------------- ASSIGNMENT FORM CONVERSION NOTICE - ----------------------------------------------------------------------------------------------- To assign this Debenture, fill in the form To convert this Debenture into Common below: Stock, check the box [ ] - ----------------------------------------------------------------------------------------------- I or we assign and transfer this Debenture to To convert only part of this Debenture, _________________________ state the principal amount to be converted _________________________ (which must be $1,000 or an integral (Insert assignee's soc. sec. or tax ID no.) multiple of $1,000): _________________________ _________________________ If you want the stock certificate made out _________________________ in another person's name fill in the form (Print or type assignee's name, address and zip below: code) _________________________ _________________________ and irrevocably appoint (Insert the other person's soc. sec. tax ID no.) ____________________ agent to transfer this Debenture on the books of the Company. The __________________________ agent may substitute another to act for him. __________________________ __________________________ __________________________ __________________________ (Print or type other person's name, address and zip code) - -----------------------------------------------------------------------------------------------
Date: _____________ Your Signature: _________________________________ ______________________________________________________________________ (Sign exactly as your name appears on the other side of this Debenture) Signature Guaranteed _____________________________________ Participant in a Recognized Signature Guarantee Medallion Program By:__________________________________ Authorized Signatory A-16 SCHEDULE OF INCREASES AND DECREASES OF GLOBAL DEBENTURE Initial Principal Amount of Global Debenture: ____________($___________). - --------------------------------------------------------------------------------------------------------------------- Date Amount of Increase Amount of Decrease in Principal Amount of Notation by in Principal Amount Principal Amount of Global Debenture Debenture Registrar of Global Debenture Global Debenture After Increase or or Debenture Decrease Custodian - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
A-17 Zero Coupon Convertible Debentures due 2021 Transfer Certificate In connection with any transfer of any of the Debentures within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") (or any successor provision), the undersigned registered owner of this Debenture hereby certifies with respect to $____________ principal amount at maturity of the above-captioned Debentures presented or surrendered on the date hereof (the "Surrendered Debentures") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Debentures for the reason checked below: [_] A transfer of the Surrendered Debentures is made to the Company or any subsidiaries; or [_] The transfer of the Surrendered Debentures complies with Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"); or [_] The transfer of the Surrendered Debentures is pursuant to an effective registration statement under the Securities Act, or [_] The transfer of the Surrendered Debentures is pursuant to another available exemption from the registration requirement of the Securities Act. and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Debentures are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate"). [_] The transferee is an Affiliate of the Company. DATE: __________________________________ Signature(s) (If the registered owner is a corporation, partnership or fiduciary, the title of the person signing on behalf of such registered owner must be stated.) Signature Guaranteed _____________________________________ Participant in a Recognized Signature Guarantee Medallion Program By:__________________________________ Authorized Signatory A-18 EX-4.4 5 aug2901_ex0404.txt Exhibit 4.4 EXECUTION COPY $2,105,000,000 INTERNATIONAL PAPER COMPANY Zero Coupon Convertible Debentures due June 20, 2021 REGISTRATION RIGHTS AGREEMENT June 20, 2001 CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: International Paper Company, a corporation duly organized and existing under the laws of the State of New York (the "Company"), proposes to issue and sell to Credit Suisse First Boston Corporation ("CSFBC") and Goldman Sachs & Co. (the initial "Purchasers"), upon the terms set forth in a purchase agreement dated June 13, 2001 (the "Purchase Agreement"), $2,105,000,000 aggregate principal amount at maturity of its Zero Coupon Convertible Debentures due June 20, 2021 (the "Firm Debentures"), and also proposes to grant the Purchasers an option, exercisable from time to time by CSFBC to purchase an aggregate of up to an additional $315,750,000 aggregate principal amount at maturity of its Zero Coupon Convertible Debentures due June 20, 2021 (the "Optional Debentures" and, with the Firm Debentures, the "Debentures"). The Debentures will be issued pursuant to an Indenture, dated as of April 12, 1999 (the "Indenture"), between the Company and The Bank of New York, as trustee (the "Trustee"), as supplemented by the Zero Coupon Convertible Debentures Supplemental Indenture, dated as of June 20, 2001 (the "Supplemental Indenture" and, together with the Base Indenture, the "Indenture"). Under the terms of the Indenture, the Debentures are convertible, in whole or in part, into shares of the Company's common stock, par value $1.00 (the "Underlying Shares", and together with the Debentures, the "Securities"). As an inducement, the Company agrees with the Purchasers, for the benefit of the holders of the Debentures (including, without limitation, the Purchasers) and Underlying Shares (collectively the "Holders"), as follows: 1. Shelf Registration. (a) The Company shall promptly (but in no event more than 90 days of the First Closing Date (as defined in the Purchase Agreement), such 90th day being a "Filing Deadline") use its reasonable best efforts to file with the Securities and Exchange Commission (the "Commission") and thereafter use its reasonable best efforts to cause to be declared effective no later than 210 days after the First Closing Date (such 210th day being an "Effectiveness Deadline") a registration statement (the "Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), relating to the offer and sale of the Registrable Securities (as defined in Section 5 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than a Purchaser) shall be entitled to have the Securities held by it covered by such Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its reasonable best efforts to keep the Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 2(h) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Registration Statement (i) have been sold pursuant thereto, (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act) (in any such case, such period being called the "Shelf Registration Period") or (iii) such time as, in the opinion of counsel to the Company, all the Registrable Securities held by the Company's non-affiliates (from the time of issuance) are eligible for sale pursuant to Rule 144(k) under the Securities Act. The Company shall be deemed not to have used its best efforts to keep the Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law. (c) Notwithstanding subsections (a) and (b) of this Section 1, the Company may delay preparation of any post-effective amendment to the Registration Statement or suspend the use of the prospectus that is part of the Registration Statement in connection with an acquisition or financing if the Company's board of directors determines, in good faith, that such post-effective amendment or suspension (i) would require disclosure with respect to such acquisition or financing that is not in the Company's best interest or (ii) would interfere with or affect the negotiation or completion of such acquisition or financing, provided that: (i) the Company has provided to each Holder, in advance of such delay or suspension, written notice of such delay or suspension; (ii) any such delay or suspension shall not exceed 45 consecutive days at any one time; (iii) the aggregate number of days during which such delay or suspension is in effect during any three-month period shall not exceed 75 days; and (iv) the aggregate number of days during which such delay or suspension is in effect during any twelve-month period shall not exceed 120 days. (d) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Registration Procedures. In connection with the Shelf Registration contemplated by Section 1 hereof the following provisions shall apply: (a) The Company shall (i) furnish to each Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that a Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as such Purchaser reasonably may propose; and (ii) subject to paragraph (l) of this Section 2, include the names of the Holders who propose to sell Securities pursuant to the Registration Statement as selling securityholders. (b) The Company shall give written notice to the Purchasers and the Holders of the Securities (which notice pursuant to clauses (ii)-(vi) hereof shall be accompanied by an instruction, subject to the provisions of Section 1(c), to suspend the use of the prospectus until the requisite changes have been made): (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective; (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement and Prospectus or for additional information after the Registration Statement has become effective; 2 (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iv) if, after the effective date of a Registration Statement, the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding fur such purpose, (v) of the happening of any event during the period a Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate. (c) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment and provide prompt notice to each Holder of the withdrawal of any such order. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one conformed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Registration Statement. (f) Prior to any public offering of the Securities pursuant to any Registration Statement the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (g) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends (unless required by applicable securities laws) and in such denominations and registered in such names as the Holders may request at least two business days prior to sales of the Securities pursuant to such Registration Statement. (h) Upon the occurrence of any event contemplated by paragraphs (ii), (v) and (vi) of Section 2(b) above, the Company shall use its best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein in the light of the circumstances under which they were made, not misleading. The Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event 3 and the Holders hereby agree to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. (i) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Debentures and the Underlying Shares registered under the Registration Statement and provide the Trustee with printed certificates for the Debentures in a form eligible for deposit with The Depository Trust Company. (j) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939 as amended (the "Trust Indenture Act"), in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (l) The Company may require each Holder of Securities to be sold pursuant to the Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within 30 days after written request. (m) The Company shall enter into such customary agreements and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (o) The Company shall (i) make reasonably available for inspection by the Holders of the Securities and any attorney, accountant or other agent retained by the Holders of the Securities all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such attorney, accountant or agent in connection with the Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 3 hereof. (p) The Company will use its reasonable best efforts to (a) if the Debentures have been rated prior to the initial sale of such Debentures, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Debentures were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement. (q) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 4 hereof with respect to the indemnification of the 4 Holders of the Securities if requested by such Holders, and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. (r) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by the Registration Statement contemplated hereby. 3. Registration Expenses. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation; (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing, messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Securities on a national securities exchange; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Purchasers and the Holders of Registrable Securities who are selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Registration Statement for the reasonable fees and disbursements of not more than one counsel, who shall be Milbank, Tweed, Hadley & McCloy LLP unless another firm shall be chosen by the Holders of a majority in principal amount of the Registrible Securities for whose benefit such Registration Statement is being prepared. 4. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Registration Statement, the indemnity 5 agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Securities, pursuant to the Shelf Registration, or (ii) if allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged 6 untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 5. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Debentures shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below being herein called a "Registration Default"): (i) If the Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline; (ii) If the Registration Statement has not been declared effective by the Commission on or before the Effectiveness Deadline; or (iii) If the Registration Statement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Registrable Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission . Additional Interest shall accrue on the Debentures and any Underlying Shares into which any Debentures had been converted previously over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, (A) at a rate of 0.25% per annum in the case of clause (i) above and (B) at a rate of 0.50% per annum in the case of clause (ii) and clause (iii) above (the "Additional Interest Rate"). (b) A Registration Default referred to in Section 5(a)(iii) hereof shall be deemed not to have occurred and be continuing in relation to a Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other 7 material events, with respect to the Company that would need to be described in the Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement the Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured. (c) Any amounts of Additional Interest due pursuant to Section 5(a) will be payable in cash on the regular interest payment dates with respect to the Debentures. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the aggregate issue price plus accrued original issue discount of the outstanding Registrable Securities and, if applicable, the aggregate Applicable Conversion Price of any issued Underlying Shares into which any Debentures have been converted previously and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. The term "Applicable Conversion Price" means the original issue discount to the date of calculation divided by the conversion rate as then in effect. (d) "Registrable Securities" means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Registration Statement or (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 6. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Debentures may reasonably request, all to the extent required from time to time to enable such Holder to sell Debentures without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Debentures identified to the Company by the Purchasers upon request. Upon the request of any Holder of Debentures, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 7. Miscellaneous. (a) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (b) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Purchasers; Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 8 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group (3) if to the Company, at its address as follows: International Paper Company 400 Atlantic Street Stamford, Connecticut 06921 Fax No.: (203) 541-8208 Attention: The Secretary All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (d) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (e) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (i) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 9 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Purchasers and the Company in accordance with its terms. INTERNATIONAL PAPER COMPANY By:______________________________ Name: Title: Theforegoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. By: CREDIT SUISSE FIRST BOSTON CORPORATION By:______________________________ Name: Title: EX-5.1 6 aug2901_ex0501.txt Exhibit 5.1 [Letterhead of Davis Polk & Wardwell] September 7, 2001 International Paper Company 400 Atlantic Street Stamford, Connecticut 06921 Ladies and Gentlemen: We have acted as counsel for International Paper Company, a corporation organized and existing under the laws of the State of New York (the "Company") in connection with the preparation and filing of a Registration Statement on Form S-3 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Registration Statement") and the accompanying prospectus (the "Prospectus") pertaining to the offer and sale by the selling securityholders named or to be named therein of up to $2,105,000,000 aggregate principal amount at maturity of the Company's Zero Coupon Convertible Debentures due June 20, 2021 (the "Debentures") and the shares of common stock of the Company issuable upon conversion of the Debentures (the "Common Stock"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion. Upon the basis of the foregoing and subject to the qualifications set forth below, we are of the opinion that: (i) the Debentures have been legally and validly issued and are binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity; and (ii) with respect to Common Stock, when certificates representing the Common Stock have been duly executed, countersigned, registered and delivered upon conversion of the Debentures as contemplated in the Registration Statement, the Common Stock will be duly authorized, validly issued, fully paid and non-assessable. We hereby consent to the reference to us under the caption "Legal Matters" in the Prospectus forming a part of the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Davis Polk & Wardwell EX-12.1 7 aug2901_ex1201.txt Exhibit 12.1 INTERNATIONAL PAPER COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in millions) (Unaudited) Six Months Ended For the Years Ended December31, June 30, ---------------------------------------------------- ------------------- 1996 1997 1998 1999 2000 2000 2001 ---- ---- ---- ---- ---- ---- ---- TITLE A) Earnings (loss) before income taxes minority interest, extraordinary items and accounting change $939.0 $143.0 $429.0 $448.0 $723.0 $915.0 $(345.0) B) Minority interest expense, net of taxes (180.0) (140.0) (87.0) (163.0) (238.0) (123.0) (79.0) C) Fixed charges excluding capitalized interest 802.1 826.6 866.7 820.9 1,151.5 430.1 652.9 D) Amortization of previously capitalized interest 34.2 37.0 38.8 17.0 23.5 10.1 14.4 E) Equity in undistributed earnings of affiliates 6.2 (40.4) 23.7 (41.6) 5.6 (5.1) 8.7 --- ----- ---- ----- --- ---- --- F) Earnings before income taxes, extraordinary items, accounting change and fixed charges $1,601.5 $826.2 $1,271.1 $1,081.3 $1,665.6 $1,227.1 $252.0 ======== ====== ======== ======== ======== ======== ====== Fixed Charges G) Interest and amortization of debt expense $699.5 $720.0 $716.9 $611.5 $938.1 $326.4 $546.6 H) Interest factor attributable to rentals 79.0 83.0 80.7 76.3 72.8 34.0 38.5 I) Preferred dividends of subsidiaries 23.6 23.6 69.1 133.1 140.6 69.7 67.8 J) Capitalized interest 71.2 71.6 53.4 29.3 25.2 12.6 6.6 ---- ---- ---- ---- ---- ---- --- K) Total fixed charges $873.3 $898.2 $920.1 $850.2 $1176.7 $442.7 $659.5 ====== ====== ====== ====== ======= ====== ====== L) Ratio of earnings to fixed charges 1.83 1.38 1.27 1.42 2.77 ==== ==== ==== ==== ==== M) Deficiency in earnings necessary to cover fixed charges $(72.0) $(407.5) ====== =======
EX-23.1 8 aug2901_ex2301.txt Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our reports dated February 13, 2001 included or incorporated by reference in International Paper's Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this Registration Statement. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP New York, New York September 5, 2001 EX-25.1 9 aug2901_ex2501.txt = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |_| --------------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) --------------------------- INTERNATIONAL PAPER COMPANY (Exact name of obligor as specified in its charter) New York 13-0872805 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 400 Atlantic Street Stamford, Connecticut 06921 (Address of principal executive offices) (Zip code) --------------------------- Zero Coupon Convertible Debentures due June 20, 2021 (Title of the indenture securities) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - ------------------------------------------------------------------------------- Name Address - ------------------------------------------------------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, N.Y. of New York 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - 2 - SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 30th day of August, 2001. THE BANK OF NEW YORK By: /s/ THOMAS E. TABOR ------------------------------------- Name: THOMAS E. TABOR Title: VICE PRESIDENT - 3 - EXHIBIT 7 - ------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.. $2,811,275 Interest-bearing balances........................... 3,133,222 Securities: Held-to-maturity securities......................... 147,185 Available-for-sale securities....................... 5,403,923 Federal funds sold and Securities purchased under agreements to resell................................ 3,378,526 Loans and lease financing receivables: Loans and leases held for sale...................... 74,702 Loans and leases, net of unearned income..................................37,471,621 LESS: Allowance for loan and lease losses...............................599,061 Loans and leases, net of unearned income and allowance.............................. 36,872,560 Trading Assets........................................ 11,757,036 Premises and fixed assets (including capitalized leases)............................................. 768,795 Other real estate owned............................... 1,078 Investments in unconsolidated subsidiaries and associated companies................................ 193,126 Customers' liability to this bank on acceptances outstanding......................................... 592,118 Intangible assets..................................... Goodwill............................................ 1,300,295 Other intangible assets............................. 122,143 Other assets.......................................... 3,676,375 ----------- Total assets........................................... $70,232,359 =========== LIABILITIES Deposits: In domestic offices.................................. $25,962,242 Noninterest-bearing........................10,586,346 Interest-bearing...........................15,395,896 In foreign offices, Edge and Agreement subsidiaries, and IBFs............................. 24,862,377 Noninterest-bearing...........................373,085 Interest-bearing...........................24,489,292 Federal funds purchased and securities sold under agreements to repurchase............................. 1,446,874 Trading liabilities.................................... 2,373,361 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)........................... 1,381,512 Bank's liability on acceptances executed and outstanding.......................................... 592,804 Subordinated notes and debentures...................... 1,646,000 Other liabilities...................................... 5,373,065 ----------- Total liabilities...................................... $63,658,235 =========== EQUITY CAPITAL Common stock........................................... 1,135,284 Surplus................................................ 1,008,773 Retained earnings...................................... 4,426,033 Accumulated other comprehensive income................. 4,034 Other equity capital components........................ 0 - ----------------------------------------------------------------------------- Total equity capital................................... 6,574,124 ----------- Total liabilities and equity capital................... $70,232,359 =========== I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ] Gerald L. Hassell ] Directors Alan R. Griffith ] - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----