As filed with the Securities and Exchange Commission on September 7, 2001
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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)
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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)
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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)
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Copies to:
Francis J. Morison
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
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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. |_|
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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
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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)
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(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)
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* 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
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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.
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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
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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
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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.
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