Filed Pursuant to Rule 424(b)(5)
Registration No. 333-132259

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

PROSPECTUS SUPPLEMENT

(TO PROSPECTUS DATED MARCH 7, 2006)

 

 

$3,000,000,000

International Paper Company

 

$1,000,000,000 of 7.400% Notes due 2014

$1,700,000,000 of 7.950% Notes due 2018

$300,000,000 of 8.700% Notes due 2038

 

 

 

 

The 2014 notes will bear interest at the rate of 7.400% per year. The 2018 notes will bear interest at the rate of 7.950% per year. The 2038 notes will bear interest at the rate of 8.700% per year. Interest on the notes will be payable on June 15 and December 15 of each year, beginning on December 15, 2008. Interest on the notes of each series will be subject to adjustment upon the occurrence of the events discussed under the caption “Description of the Notes — Interest Rate Adjustment.” The 2014 notes will mature on June 15, 2014, the 2018 notes will mature on June 15, 2018 and the 2038 notes will mature on June 15, 2038. We may redeem some or all of the notes at any time at the redemption prices discussed under the caption “Description of the Notes — Optional Redemption.” We must redeem all of the notes under the circumstances and at the redemption price described under the caption “Description of the Notes — Special Mandatory Redemption.” If we experience a Change of Control Triggering Event with respect to the notes of a series, we will be required to offer to repurchase such notes from holders at 101% of the principal amount thereof. See “Description of the Notes — Change of Control Triggering Event.”

 

The notes will be our unsecured senior obligations and will rank equally with all of our other unsecured senior indebtedness from time to time outstanding.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

Investing in the notes involves risks. See “Risk Factors” beginning on page S-9 of this prospectus supplement.

 

 

 

 

 

Interest on the notes will accrue from June 4, 2008.

 

 

 

 

The notes will not be listed on any securities exchange. Currently, there is no public market for the notes.

 

The underwriters expect that the notes will be ready for delivery in book-entry form only through The Depository Trust Company, including Euroclear and Clearstream, Luxembourg, as participants, on or about June 4, 2008.

 

 

 

 

Joint Book-Running Managers

 

 

 

 

 

 

 

May 28, 2008

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

 

PROSPECTUS

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free writing prospectus with respect to the offering filed by us with the Securities and Exchange Commission, or the SEC. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus and any free writing prospectus with respect to the offering filed by us with the SEC, as well as information we previously filed with the SEC and incorporated by reference, is accurate as of the date on the front cover of this prospectus supplement only. Our business, financial condition, results of operations and prospects may have changed since that date.

 

We are offering to sell, and are seeking offers to buy, the notes only in jurisdictions where offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of the notes and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any notes offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

 

These offering materials consist of two documents: (A) this prospectus supplement, which describes the terms of the notes that we are currently offering, and (B) the accompanying prospectus, which provides, among other things, general information about our debt securities, some of which may not apply to the notes that we are currently offering. The information contained or incorporated by reference in this prospectus supplement supersedes any inconsistent information included or incorporated by reference in the accompanying prospectus.

 

In various places in this prospectus supplement and the accompanying prospectus, we refer you to other sections of such documents for additional information by indicating the caption heading of such other sections. The page on which each principal caption included in this prospectus supplement and the accompanying prospectus can be found is listed in the table of contents above. All such cross references in this prospectus supplement are to captions contained in this prospectus supplement and not in the accompanying prospectus, unless otherwise stated.

 

As used in this prospectus supplement, the terms “International Paper,” the “Company,” “we,” “us” and “our” refer to International Paper Company and its subsidiaries, unless the context requires otherwise.

 

This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. These include statements concerning our financial condition, results of operations and business. These statements are often identified by the words “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” and words of similar import.

These forward looking statements reflect our current views with respect to future events and are subject to risks and uncertainties. A number of factors, including those discussed under “Risk Factors,” could cause our actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include, among other things, the following:

 

 

In view of such uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information concerning these and other factors is contained in our filings with the SEC, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2007 (as updated by our Current Report on Form 8-K filed on May 9, 2008) and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.

 

SUMMARY

Issuer		International Paper Company.
Notes Offered		$1,000,000,000 aggregate principal amount of 7.400% Notes due 2014 (referred to as the 2014 notes). $1,700,000,000 aggregate principal amount of 7.950% Notes due 2018 (referred to as the 2018 notes). $300,000,000 aggregate principal amount of 8.700% Notes due 2038 (referred to as the 2038 notes). We refer to the 2014 notes, the 2018 notes and the 2038 notes collectively as the notes.
Maturity Date		The 2014 notes will mature on June 15, 2014. The 2018 notes will mature on June 15, 2018. The 2038 notes will mature on June 15, 2038.
Interest Rate		7.400% per year in the case of the 2014 notes, 7.950% per year in the case of the 2018 notes and 8.700% per year in the case of the 2038 notes, each subject to adjustment as described below.
Interest Payment Dates		June 15 and December 15 of each year, beginning December 15, 2008.
Ranking		The notes will be senior unsecured debt and will rank equally with all of our existing and future senior unsecured debt. The notes will be effectively subordinated to all of our existing and future secured debt to the extent of the assets securing that debt. The notes will be structually subordinated to all indebtedness and other obligations of our subsidiaries.
Optional Redemption		We may redeem all or a portion of the notes, at our option, at any time or from time to time at a redemption price equal to the greater of (1) 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest to the redemption date, or (2) the sum of the present values of the remaining scheduled payments of principal and interest in respect of the notes being redeemed (exclusive of interest accrued to the redemption date) discounted to the redemption date, on a semi-annual basis, at the Treasury Rate (as defined in “Description of the Notes — Optional Redemption”) plus 50 basis points, plus accrued and unpaid interest on the principal amount of the notes being redeemed to the redemption date. See “Description of the Notes — Optional Redemption.”
Special Mandatory Redemption		If we do not consummate the Acquisition on or prior to September 30, 2008 or the purchase agreement related to the Acquisition is terminated at any time on or prior to such date, we must redeem the notes at a redemption price equal to 101% of the aggregate principal amount of the notes, plus accrued and unpaid interest to the redemption date. See “Description of the Notes — Special Mandatory Redemption.”

Offer to Repurchase Upon a Change of Control Triggering Event		Upon the occurrence of a Change of Control Triggering Event (as defined herein) with respect to the notes of a series, we will be required to make an offer to purchase the notes of such series at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase. See “Description of the Notes — Change of Control Triggering Event.”
Interest Rate Adjustment		The interest rate payable on the notes of a series will be subject to adjustment from time to time if either S&P or Moody’s downgrades (or subsequently upgrades) the debt rating assigned to the notes of such series, as described under “Description of the Notes — Interest Rate Adjustment.”
Sinking Fund		None.
Covenants		The indenture that will govern the notes contains covenants that, among other things, will limit our ability and the ability of our subsidiaries to:
		• create certain liens;
		• enter into certain sale and leaseback transactions; and
		• consolidate, merge or transfer all or substantially all of our assets.
		These covenants are subject to important exceptions and qualifications, which are described under “Description of the Notes — Certain Covenants.”
Form of Note		Global notes, held in the name of The Depository Trust Company.
Use of Proceeds		We estimate that the net proceeds, after deducting underwriters’ discounts and commissions and before deducting other estimated offering expenses payable by us, from the offering will be $2.976 billion. We intend to use the net proceeds from the offering of the notes, together with the Acquisition Credit Facilities and borrowings under existing credit facilities and/or available cash, to finance our acquisition of the CBPR business and fund related fees and expenses. See “— Recent Developments.” Pending that application of funds, we will invest the net proceeds from this offering in U.S. government obligations, bank deposits or other secure, short-term investments.
		If the Acquisition is not consummated on or prior to September 30, 2008 or the purchase agreement in connection with the Acquisition is terminated at any time on or prior to such date, we will use the net proceeds from this offering, together with available cash, to redeem the notes as described under “Description of the Notes — Special Mandatory Redemption.”

	•	our Annual Report on Form 10-K for the year ended December 31, 2007 (except for Items 7 and 8 of Part II, which have been revised in our Current Report on Form 8-K filed on May 9, 2008);
	•	our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008;
	•	our Current Report on Form 8-K filed on May 9, 2008; and
	•	our Current Report on Form 8-K dated as of and filed on May 28, 2008 containing, among other things, the historical combined financial statements of the CBPR business.

																						Pro Forma
																						For the
																						Three				For the
		Historical																				Months				Year
		For the Three Months																				Ended				Ended
		Ended March 31,								For the Year Ended December 31,												March 31,				December 31,
		2008				2007				2007				2006				2005				2008				2007
		(Dollar amounts in millions)
		(Unaudited)																				(Unaudited)
Statement of operations data:
Net sales		$	5,668			$	5,217			$	21,890			$	21,995			$	21,700			$	6,930			$	26,900
Costs and expenses:
Cost of products sold			4,261				3,851				16,060				16,248				16,334				5,260				20,044
Selling and administrative expenses			472				435				1,831				1,848				1,784				564				2,187
Depreciation, amortization and cost of timber harvested			286				262				1,086				1,158				1,274				403				1,563
Distribution expenses			285				256				1,034				1,075				1,025				285				1,034
Taxes other than payroll and income taxes			44				42				169				215				213				44				169
Other expenses (income)			41				(296	)			(241	)			(2,258	)			189				41				(240	)
Interest expense, net			81				61				297				521				595				193				766
Earnings from continuing operations before income taxes, equity earnings and minority interest			198				606				1,654	(c)			3,188	(f)			286	(h)			140				1,377
Income tax provision (benefit)			59				143				415				1,889				(407	)			33				302
Equity earnings, net of taxes(a)			16				—				—				—				—				16				—
Minority interest expense, net of taxes			5				6				24				17				9				5				24
Earnings from continuing operations			150				457				1,215				1,282				684				118				1,051
Discontinued operations, net of taxes and minority interest			(17	)			(23	)			(47	)			(232	)			416				(17	)			(47	)
Net earnings		$	133			$	434			$	1,168	(c-e)		$	1,050	(f-g)		$	1,100	(h-j)		$	101			$	1,004
Balance sheet data (at period end):
Working capital(b)		$	2,567			$	4,170			$	2,893			$	3,996			$	6,804			$	3,251			$	3,520
Plants, properties and equipment, net			10,290				9,992				10,141				8,993				9,073				15,517				15,272
Forestlands			778				637				770				259				2,127				778				770
Total assets			24,355				23,866				24,159				24,034				28,771				30,788				30,629
Long-term debt, including current maturities			6,764				6,900				6,620				7,223				12,197				12,760				12,616
Common shareholders’ equity			8,999				7,925				8,672				7,963				8,351				8,999				8,672
Other financial data:
Cash provided by operations – continuing operations		$	434			$	296			$	1,948			$	1,010			$	1,222
Cash (used for) provided by investment activities – continuing operations			(341	)			1,337				(434	)			1,107				328
Cash used for financing activities – continuing operations			(140	)			(827	)			(2,252	)			(2,325	)			(2,203	)
Capital expenditures			215				178				1,292				1,073				1,095
Ratio of earnings to fixed charges(k)			2.51				5.34				3.77				5.27				1.41

(a)		On October 5, 2007, we purchased 50% of Ilim Holding S.A., which we refer to as Ilim, for approximately $620 million. We account for our investment in Ilim using the equity method of accounting. Due to the complex organizational structure of Ilim’s operations, and the extended time required to prepare consolidated

		financial information in accordance with accounting principles generally accepted in the United States, we report our share of Ilim’s results of operations on a one-quarter lag basis.
(b)		Current assets minus current liabilities.
(c)		Includes restructuring and other charges of $95 million before taxes ($59 million after taxes), including a $30 million charge before taxes ($19 million after taxes) for organizational restructuring and other charges principally associated with our transformation plan to concentrate on two key global platform businesses, Uncoated Papers (including Distribution) and Packaging, which we refer to as the Transformation Plan, a charge of $60 million before taxes ($38 million after taxes) of accelerated depreciation charges, a $10 million charge before taxes ($6 million after taxes) for environmental costs associated with a mill closure, and a pre-tax gain of $5 million ($4 million after taxes) for other items. Also included are a $9 million pre-tax gain ($5 million after taxes) to reduce estimated transaction costs accrued in connection with the 2006 sale of U.S. forestlands included in our Transformation Plan; and a $327 million gain before taxes ($267 million after taxes) for net gains on sales and impairments of businesses including a pre-tax gain of $113 million ($102 million after taxes) on the sale of the Arizona Chemical business, a gain of $205 million before taxes ($159 million after taxes) related to the asset exchange for the Luiz Antônio mill in Brazil, and a pre-tax gain of $9 million ($6 million after taxes) for other items.
(d)		Includes a pre-tax gain of $20 million ($8 million after taxes) relating to the sale of the Wood Products business, a pre-tax loss of $30 million ($48 million after taxes) for adjustments to the loss on the sale of the Beverage Packaging business, a pre-tax gain of $6 million ($4 million after taxes) for adjustments to the loss on the sale of the Kraft Papers business, and a net $6 million pre-tax credit ($4 million after taxes) for payments received relating to our Weldwood of Canada Limited business, and the year-to-date operating results of the Beverage Packaging and Wood Products businesses.
(e)		Includes a $41 million tax benefit relating to the effective settlement of certain income tax audit issues.
(f)		Includes restructuring and other charges of $300 million before taxes ($184 million after taxes), including a $157 million charge before taxes ($95 million after taxes) for organizational restructuring and other charges principally associated with our Transformation Plan, a charge of $165 million before taxes ($102 million after taxes) for losses on early debt extinguishment, a $97 million charge before taxes ($60 million after taxes) for legal reserves, a $115 million gain before taxes ($70 million after taxes) for payments received relating to our participation in the U.S. Coalition for Fair Lumber Imports, and a credit of $4 million before taxes ($3 million after taxes) for other items. Also included are a $4.8 billion gain before taxes ($2.9 billion after taxes) from sales of U.S. forestlands included in our Transformation Plan; a charge of $759 million before and after taxes for the impairment of goodwill in the Coated Paperboard and Shorewood businesses; a $1.5 billion pre-tax charge ($1.4 billion after taxes) for net losses on sales and impairments of businesses including $1.4 billion before taxes ($1.3 billion after taxes) for the U.S. Coated and Supercalendered Papers business, $52 million before taxes ($37 million after taxes) for certain assets in Brazil, and $128 million before taxes ($84 million after taxes) for our Saillat mill in France to reduce the carrying value of net assets to their estimated fair value; the recognition of a previously deferred $110 million gain before taxes ($68 million after taxes) related to a 2004 sale of forestlands in Maine; and a pre-tax charge of $21 million (zero after taxes) for other smaller items.
(g)		Includes a gain of $100 million before taxes ($79 million after taxes) from the sale of the Brazilian Coated Papers business, and pre-tax charges of $116 million ($72 million after taxes) for the Kraft Papers business, $269 million ($234 million after taxes) for the Wood Products business and $121 million ($90 million after taxes) for the Beverage Packaging business to reduce the carrying value of these businesses to their estimated fair value, and the 2006 operating results of the Kraft Paper, Brazilian Coated Papers, Wood Products and Beverage Packaging businesses.
(h)		Includes restructuring and other charges of $340 million before taxes ($213 million after taxes), including a $256 million charge before taxes ($162 million after taxes) for organizational restructuring and other charges principally associated with our Transformation Plan, a $57 million charge before taxes ($35 million after taxes) for early extinguishment of debt, and a $27 million charge before taxes ($16 million after taxes) for legal reserves. Also included are a $258 million pre-tax credit ($151 million after taxes) for net insurance recoveries related to the hardboard siding and roofing litigation, a $4 million

		credit before taxes ($3 million after taxes) for the net reversal of restructuring reserves no longer required, a pre-tax charge of $111 million ($73 million after taxes) for net losses on sales and impairments of businesses sold or held for sale, and interest income of $54 million before taxes ($33 million after taxes), including $43 million before taxes ($26 million after taxes) related to a settlement with the U.S. Internal Revenue Service concerning the 1997 through 2000 U.S. federal income tax audit, and $11 million before taxes ($7 million after taxes) related to the collection of a note receivable from the 2001 sale of a business.

(i)		Includes a gain of $29 million before taxes ($361 million after taxes and minority interest) from the 2005 sale of Carter Holt Harvey Limited, as well as the 2005 operating results of the Carter Holt Harvey Limited, Kraft Papers, Brazilian Coated Papers, Wood Products and Beverage Packaging businesses.
(j)		Includes a $454 million reduction in the income tax provision, including a reduction of $627 million from a settlement reached with the U.S. Internal Revenue Service concerning the 1997 through 2000 U.S. federal income tax audit, a charge of $142 million for deferred taxes related to earnings repatriations under the American Jobs Creation Act of 2004, and $31 million of other tax charges.
(k)		For purposes of computing the ratio of earnings to fixed charges, earnings include pre-tax earnings before extraordinary items and the cumulative effect of accounting changes, interest expense, the estimated interest factor in rent expense (which, we believe, approximates one-third of rent expense), preferred dividends of subsidiaries, adjustments for undistributed equity earnings and the amortization of capitalized interest. Fixed charges include interest incurred (including amounts capitalized), amortized premiums, discounts and capitalized expenses related to indebtedness, the estimated interest factor in rent expense and preferred dividends of subsidiaries.

 

You should carefully consider the risks described below and in the documents incorporated by reference herein before making a decision to invest in the notes. Some of these factors relate principally to our business. Other factors relate principally to the Acquisition and your investment in the notes. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also have a material adverse effect on our business and operations.

 

If any of the matters included in the following risks were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected. In such case, you may lose all or part of your original investment.

 

Risks Relating to the Acquisition

 

We may not realize the expected benefits of the Acquisition because of integration difficulties and other challenges.

 

The success of the Acquisition will depend, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating the CBPR business with our existing businesses. The integration process may be complex, costly and time-consuming. The difficulties of integrating the operations of the CBPR business include, among others:

 

 

We may not accomplish the integration of the CBPR business smoothly, successfully or within the anticipated costs or timeframe. The diversion of the attention of management from its current operations to the integration effort and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from the Acquisition and could adversely affect our business.

 

Our substantial debt obligations upon closing of the Acquisition could adversely affect our business and limit our ability to plan for or respond to changes in our business.

 

As of March 31, 2008, our pro forma long-term debt would have been $12.8 billion. Our substantial debt obligations could have important consequences to our business, for example:

 

 

In addition, the restrictions in the Acquisition Credit Facilities and certain other of our credit agreements may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. For example, certain of our loan agreements require us to maintain a total debt-to-total capital ratio, as defined in those agreements, of not greater than 0.6 to 1.00. On a pro forma basis giving effect to the Acquisition, we would have had a total debt-to-total capital ratio, as calculated in accordance with these agreements, of 0.535 to 1.00 as of March 31, 2008.

 

We and our subsidiaries may also be able to incur substantial additional indebtedness in the future and the agreements governing such indebtedness might subject us to additional restrictive covenants that could affect our financial and operational flexibility. The terms of the indentures governing the notes do not prohibit us or our subsidiaries from doing so. If new indebtedness is added to our current indebtedness levels, the related risks that we now face would increase, and this may make it more difficult for us to satisfy our obligations with respect to the notes and may lead to a loss in the market value of your notes and a risk that the credit rating of the notes is lowered or withdrawn.

 

Increases in interest rates will increase the cost of servicing our debt and could reduce our profitability.

 

As of March 31, 2008, the net fair value liability of our financial instruments with exposure to interest rate risk (debt and interest rate swaps) was approximately $3.8 billion. In addition, the Acquisition Credit Facilities will also bear interest at variable rates. As a result, increases in interest rates will increase the cost of servicing our financial instruments with exposure to interest rate risk and could materially reduce our profitability and cash flows. As of March 31, 2008 on a pro forma basis giving effect to the Acquisition, each one percentage point change in interest rates would result in a $63 million change in the annual cash interest expense before any principal payment on our financial instruments with exposure to interest rate risk.

 

The carve out financial statements of the CBPR business incorporated by reference herein are not representative of the future financial position, future results of operations or future cash flows of the CBPR business as part of our company nor do they reflect what the financial position, results of operations or cash flows of the CBPR business would have been as a part of our company during the periods presented.

 

Prior to the closing of the Acquisition, the CBPR business was a fully integrated business unit of Weyerhaeuser Company. The financial position, results of operations and cash flows of the CBPR business presented may be different from those that would have resulted had the CBPR business been operated as part of our Company or from those that may result in the future from the CBPR business being operated as a part of our Company. This is primarily because:

 

 

The transition services to be provided by Weyerhaeuser Company for the CBPR business may be difficult for us to replace without operational problems and additional costs.

 

We intend to enter into a transition services agreement with Weyerhaeuser Company pursuant to which Weyerhaeuser Company will provide us certain transition services for the CBPR business for certain periods of time following the closing date of the Acquisition. These services include, among others, certain services

relating to finance and administration, human resources, payroll and information technology. If, after the expiration of the agreement, we are unable to perform these services for the CBPR business or replace them in a timely manner or on terms and conditions as favorable as those we receive from Weyerhaeuser Company, we may experience operational problems and an increase in its costs. In addition, the costs for such services may be higher than the allocated costs for such services when the CBPR business was operated as part of Weyerhaeuser Company.

 

We may not be able to generate sufficient cash flows to meet our substantial debt service obligations after the Acquisition.

 

We have considerable debt service obligations. We expect to incur substantial additional debt in connection with the Acquisition. On a pro forma basis giving effect to the Acquisition as of January 1, 2007, our pro forma interest expense, net would have been approximately $766 million for the year ended December 31, 2007. In addition, assuming that we borrow $2.0 billion under the Term Loan A Facility, we will be required to make quarterly principal repayments of $25.0 million in the first year of that facility. Further, the Term Loan X Facility will mature not later than 18 months after the closing of the Acquisition. Our ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our future operations. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

 

We may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all. If we are unable to sell $4.0 billion in aggregate principal amount of notes in this offering or together with another offering of notes prior to the closing of the Acquisition, we may borrow up to the amount of such shortfall under the Term Loan X Facility. As the Term Loan X Facility will mature not later than 18 months after the closing of the Acquisition, we would be required to repay or refinance the amount we borrow under the Term Loan X Facility at an earlier date than if we had been able to finance the full $4.0 billion aggregate principal amount through the sale of notes. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy for us or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, on commercially reasonable terms, or at all.

 

Risks Relating to the Notes

 

If we do not complete the Acquisition within the timeframes set out in the indenture governing the notes, we will be required to redeem the notes and as a result you may not obtain your expected return on the notes.

 

We may not be able to consummate the Acquisition within the timeframe specified under “Description of the Notes — Special Mandatory Redemption.” Our ability to consummate the Acquisition is subject to various closing conditions, including U.S. and foreign regulatory approvals and receipt of financing, many of which are beyond our control. If we are not able to consummate the Acquisition within the timeframe specified under “Description of the Notes — Special Mandatory Redemption,” we will be required to redeem all notes at a redemption price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the redemption date. We may not, however, have sufficient financial resources available to satisfy our obligations to repurchase the notes. This could be the case, for example, if we or any of our subsidiaries commence a bankruptcy or reorganization case, or such a case is commenced against us or one of our subsidiaries, before the date on which we are required to redeem the notes. In addition, even if we are able to redeem the notes pursuant to a mandatory redemption, you may not obtain your expected return on the notes. Your decision to invest in the notes is made at the time of the offering of the notes. Changes in our business or financial condition, or the terms of the Acquisition or the financing thereof, between the closing of this notes offering and the closing of the Acquisition will have no effect on your rights as a purchaser of the notes.

Downgrades in our credit ratings will increase our interest expense and may adversely affect your investment in the notes.

 

As described under “Description of the Notes — Interest Rate Adjustment,” we will increase the interest rate payable on the notes upon the occurrence of certain events relating to the credit ratings assigned to the notes. The interest rate adjustment may not fully protect noteholders upon the occurrence of events or transactions which would result in a deterioration of the credit ratings assigned to the notes. Any such deterioration of the credit ratings assigned to the notes or to our credit ratings in general could adversely impact the trading prices of, and the liquidity of any market for, the notes.

 

In addition, under the terms of the agreements governing $1,003 million of our outstanding debt as of March 31, 2008 and the Acquisition Credit Facilities, as under the indenture governing the notes, the applicable interest rate on each of these facilities will increase upon each downgrade in our credit ratings. As a result, a downgrade in our credit ratings will lead to an increase in our interest expense. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Any such downgrade of our credit ratings could adversely affect our cost of borrowing, limit our access to the capital markets or result in more restrictive covenants in indentures or other loan agreements governing the terms of any future indebtedness that we may incur.

 

The terms of the indentures and the notes provide only limited protection against significant events that could adversely impact your investment in the notes.

 

As described under “Description of the Notes — Change of Control Triggering Event,” upon the occurrence of a Change of Control Triggering Event with respect to a series of notes, holders are entitled to require us to repurchase their notes at 101% of their principal amount. However, the definition of the term “Change of Control Triggering Event” is limited and does not cover a variety of transactions (such as acquisitions by us or recapitalizations) which could negatively impact the value of your notes. As such, if we were to enter into a significant corporate transaction that would negatively impact the value of a series of notes, but which would not constitute a Change of Control Triggering Event with respect to such notes, you would not have any rights to require us to repurchase the notes prior to their maturity. In addition, if we experience a Change of Control Triggering Event with respect to a series of notes, we may not have sufficient financial resources available to satisfy our obligations to repurchase such notes. Our failure to repurchase a series of notes as required under the indenture governing that series of notes would result in a default under the indenture, which could have material adverse consequences for us and the holders of the notes.

 

Furthermore, the indenture for the notes does not:

 

 

As a result of the foregoing, when evaluating the terms of the notes, you should be aware that the terms of the indenture and the notes do not restrict our ability to engage in, or to otherwise be a party to, a variety of corporate transactions, circumstances and events that could have an adverse impact on your investment in the notes.

The notes are effectively junior to the existing and future liabilities of our subsidiaries and to our secured debt to the extent of the assets securing the same.

 

Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on the notes. In addition, any payment of dividends, loans, or advances by our subsidiaries could be subject to statutory or contractual restrictions. Our right to receive any assets of any of our subsidiaries upon their bankruptcy, liquidation or reorganization, and therefore the right of the holders of the notes to participate in those assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors. At March 31, 2008, our subsidiaries had $1.3 billion of debt outstanding.

 

The notes are our unsecured obligations and will rank equally in right of payment with all of our other existing and future unsecured, unsubordinated obligations. The notes are not secured by any of our assets. Claims of secured lenders with respect to assets securing their loans will be prior to any claim of the holders of the notes with respect to those assets. At March 31, 2008, we had no secured debt outstanding.

 

There is currently no market for the notes. We cannot assure you that an active trading market will develop.

 

Each series of notes is a new issue of securities with no established trading market. We do not intend to apply for listing of the notes of any series on any national securities exchange or for quotation of the notes of any series on any automated dealer quotation system. We have been advised by the underwriters that they presently intend to make a market in the notes of each series after completion of the offering. However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. We cannot assure the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an active public trading market for the notes does not develop, the market price and liquidity of the notes will be adversely affected. See “Underwriting.”

 

Risks Relating to Industry Conditions

 

Changes in the cost or availability of raw material and energy could adversely affect our profitability.

 

We rely heavily on certain raw materials (principally wood fiber, caustic soda and polyethylene) and energy sources (principally natural gas, coal and fuel oil) in our manufacturing process. Our ability to increase earnings has been, and will continue to be, affected by changes in the costs and availability of such raw materials and energy sources. We may not be able to fully offset the effects of higher raw material or energy costs through hedging arrangements, price increases, productivity improvements or cost reduction programs.

 

Changes in transportation availability or costs could negatively impact our results of operations and ability to provide products to our customers in a timely manner.

 

Our business depends on the transportation of a large number of products, both in the United States and internationally. In the United States, an increase in transportation rates or fuel surcharges could negatively impact our financial results, and/or a reduction in transport availability in truck and rail could negatively impact our ability to provide products to our customers in a timely manner. While we have benefited from supply chain initiatives that reduce usage and improve transportation availability, there is no assurance that such availability can continue to be effectively managed in the future.

 

The industries in which we operate are highly cyclical. Fluctuations in the prices of and the demand for our products could materially affect our financial condition, results of operations and cash flows.

 

Substantially all of our businesses have experienced, and are likely to continue to experience, cycles relating to industry capacity and general economic conditions. The length and magnitude of these cycles have varied over time and by product. As many of our products are widely available from other producers, competition is based primarily on price, which is affected by many factors outside of our control, including the production capacity and utilization rates of our competitors.

Competition in the United States and internationally could negatively impact our financial results.

 

We operate in a competitive environment, both in the United States and internationally, in all of our operating segments. Because our outlook depends on a forecast of our share of industry sales, an unexpected reduction in that share due to pricing or product strategies pursued by competitors could negatively impact our financial results.

 

A change in our product mix could adversely affect our results of operations.

 

Our results may be affected by a change in our sales mix. Our outlook assumes a certain volume mix of sales as well as a product mix of sales. If actual results vary from this projected volume and product mix of sales, our financial results could be negatively impacted.

 

Demand for our products may decline due to competing technologies or materials.

 

Our products may compete with nonfiber-based alternatives or with alternative products in certain market segments. Changes in prices for oil, chemicals and wood-based fiber can change the competitive position of our products relative to available alternatives and could increase substitution of those products for our products. If use of these alternatives grows, demand for our products may decline.

 

We may not be successful in implementing previously announced price increases.

 

Our outlook assumes that we will be successful in implementing previously announced price increases as well as other price increases that we may in the future deem necessary and/or appropriate. Delays in the realization of these price increases would negatively impact our financial results. Moreover, price discounting, if required to maintain our competitive position and our share of industry sales, could result in lower than anticipated price realizations.

 

General economic conditions could adversely affect the demand for our products.

 

Demand for our products is affected by general economic conditions in North America, Europe, Russia, Latin America, Asia and North Africa. Changes in industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white-collar employment levels, interest rates and currency exchange rates may adversely affect our businesses and our financial results.

 

Risks Relating to Market and Economic Factors

 

Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities.

 

Credit rating agencies rate our debt securities on factors that include our operating results, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by the rating agencies can include maintaining, upgrading, or downgrading the current rating or placing us on a watch list for possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a watch list for possible future downgrading would likely increase our cost of financing, limit our access to the capital markets and have an adverse effect on the market price of our securities.

 

Recent turmoil in the credit markets could adversely affect our customers and potential buyers of our remaining forestlands.

 

The recent turmoil in the credit markets and the limited availability of credit may have a negative financial impact on some of our customers and potential buyers of our remaining forestlands. This may affect the timing and amount of sales of our products and the timing of sales of our remaining forestlands.

Our pension and health care costs are subject to numerous factors which could cause these costs to change.

 

Our pension and health care costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns as well as changes in general interest rates may result in increased or decreased pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could also increase or decrease pension costs.

 

Changes in international conditions could adversely affect our business and results of operations.

 

Our financial results could be substantially affected by foreign market risks in the countries outside the United States in which we have manufacturing facilities or sell our products. Specifically, Brazil, Russia, Poland and China, where we have substantial manufacturing facilities, are countries that are exposed to economic and political instability in their respective regions of the world. Downturns in economic activity, adverse foreign tax consequences or any change in social, political or labor conditions in any of these countries or regions could negatively affect our financial results.

 

Changes in currency exchange rates could adversely affect our business and results of operations.

 

We are impacted by the movement of various currencies relative to the U.S. dollar. From time to time, we may hedge a portion of the risk from our transactions and commitments denominated in non-U.S. dollar currencies when we deem it appropriate to do so. There can be no assurance, however, that we will be able to fully protect ourselves against substantial foreign currency fluctuations.

 

Risks Relating to Legal Proceedings and Compliance Costs

 

Unanticipated expenditures related to the cost of compliance with environmental, health and safety laws and requirements could adversely affect our business and results of operations.

 

Our operations are subject to U.S. and non-U.S. laws and regulations relating to the environment, health and safety. There can be no assurance that compliance with existing and new laws and requirements, including with global climate change laws and regulations, will not require significant expenditures, or that existing reserves for specific matters will be adequate to cover future unanticipated costs.

 

Results of legal proceedings could have a material adverse effect on our consolidated financial statements.

 

The costs and other effects of pending litigation against us cannot be determined with certainty. Although we believe that the outcome of any pending or threatened lawsuits or claims, or all of them combined, will not have a material adverse effect on our consolidated financial statements, there can be no assurance that the outcome of any lawsuit or claim will be as expected.

 

Risks Relating to Our Operations

 

Material disruptions at one of our manufacturing facilities could negatively impact our financial results.

 

We operate our facilities in compliance with applicable rules and regulations and take measures to minimize the risks of disruption at our facilities. A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or negatively impact our financial results. Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including:

 

 

 

Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures. If one of these machines or facilities were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and having a negative effect on our financial results.

 

We may not be able to realize our profit improvement initiatives which could adversely affect our business and results of operations.

 

We intend to execute profit improvement initiatives, including ongoing manufacturing, supply chain and overhead cost reduction initiatives, as well as volume/mix improvements. There can be no assurance that any or all of these profit improvements will be achieved.

 

The net proceeds, after deducting underwriters’ discounts and commissions and before deducting other estimated offering expenses payable by us, from the sale of the notes offered hereby are estimated to be approximately $2.976 billion. If the Acquisition is consummated, we intend to use the net proceeds from the sale of the notes, together with the Acquisition Credit Facilities and borrowings under existing credit facilities and/or available cash, to finance our acquisition of the CBPR business and fund related fees and expenses. See “Summary — Recent Developments.” Pending that application of funds, we will invest the net proceeds from this offering in U.S. government obligations, bank deposits or other secure, short-term investments.

 

If the Acquisition is not consummated on or prior to September 30, 2008 or the purchase agreement in connection with the Acquisition is terminated at any time on or prior to such date, we will use the net proceeds from this offering, together with available cash, to redeem the notes as described under “Description of the Notes — Special Mandatory Redemption.”

 

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, 2007 and for the three months ended March 31, 2008.

 

 

For purposes of computing the ratio of earnings to fixed charges, earnings include pre-tax earnings before extraordinary items and the cumulative effect of accounting changes, interest expense, the estimated interest factor in rent expense (which, we believe, approximates one-third of rent expense), preferred dividends of subsidiaries, adjustments for undistributed equity earnings and the amortization of capitalized interest. Fixed charges include interest incurred (including amounts capitalized), amortized premiums, discounts and capitalized expenses related to indebtedness, the estimated interest factor in rent expense and preferred dividends of subsidiaries.

 

Set forth below is our (i) actual unaudited consolidated capitalization as of March 31, 2008 and (ii) pro forma unaudited combined capitalization as of March 31, 2008, giving effect to the Acquisition and the related transactions, including the closing of the Acquisition Credit Facilities and the issuance of the notes and the application of the proceeds therefrom. This information should be read in conjunction with our consolidated financial statements, including the notes thereto, and other financial information pertaining to us incorporated herein by reference as well as the unaudited pro forma combined financial information, including the notes thereto, included under the caption “Unaudited Pro Forma Condensed Combined Financial Information.”

 

 

 

 

The following unaudited pro forma condensed combined financial information presents the combined historical consolidated statements of operations and consolidated balance sheet of International Paper and the historical combined statements of operations and combined balance sheet of Weyerhaeuser Company’s CBPR business to reflect the Acquisition. The historical financial statements were prepared in conformity with accounting principles generally accepted in the United States of America, which we refer to as GAAP. The unaudited pro forma condensed combined financial information is presented in accordance with the rules specified by Article 11 of Regulation S-X promulgated by the SEC, and has been prepared using the assumptions described in the notes thereto. The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if it had occurred as of the balance sheet date. The unaudited pro forma condensed combined statements of operations give effect to the Acquisition as if it had occurred as of January 1, 2007.

 

The following unaudited pro forma condensed combined financial information is presented in this prospectus supplement:

 

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the notes thereto and the historical combined financial statements of the CBPR business, including the notes thereto, which were filed as an exhibit to International Paper’s Current Report on Form 8-K dated as of and filed on May 28, 2008, as well as in conjunction with International Paper’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2007 (as updated by its Current Report on Form 8-K filed on May 9, 2008) and its Quarterly Report on Form 10-Q for the three months ended March 31, 2008.

 

International Paper expects to finance the Acquisition with debt financing, consisting of a five-year term loan facility (the “Term Loan A Facility”) in an aggregate principal amount of up to $2.0 billion, a one-year term loan facility (the “Term Loan X Facility”) with a 6-month extension option in an aggregate principal amount of up to $1.0 billion (together, the “Acquisition Credit Facilities”) and the $2.976 billion in net proceeds, after deducting underwriters’ discounts and commissions and before deducting other estimated offering expenses payable by International Paper, from this offering. Under certain circumstances, the aggregate principal amount of the Term Loan A Facility and the aggregate principal amount of the Term Loan X Facility may be changed, so long as the aggregate principal amount of the Acquisition Credit Facilities is not changed.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations of the combined company. The unaudited pro forma condensed combined financial information does not give effect to any potential cost savings or other operational efficiencies that could result from the Acquisition. In addition, the preliminary estimated allocation of the purchase price to the assets and liabilities acquired was based on initial International Paper valuations and estimates since the Acquisition has not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been presented solely for the purpose of providing unaudited pro forma condensed combined financial information in this prospectus supplement.

INTERNATIONAL PAPER COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2008
(In millions)

 

INTERNATIONAL PAPER
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 2008
(In millions, except per share data)

 

INTERNATIONAL PAPER
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2007
(In millions, except per share data)

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

 

On March 17, 2008, International Paper announced that it had signed an agreement with Weyerhaeuser Company to purchase the CBPR business for approximately $6 billion in cash, subject to certain post-closing adjustments. International Paper expects to finance the Acquisition with debt financing. Upon completion of the Acquisition, International Paper will account for the Acquisition as a purchase in accordance with accounting principles generally accepted in the United States of America. Under the purchase method, International Paper will record the assets and liabilities of the CBPR business at their respective fair values as of the Acquisition date. The preliminary estimated allocation of the purchase price to the assets and liabilities acquired reflected in Note 2 below was based on initial valuations and estimates since the Acquisition has not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, these purchase price allocation pro forma adjustments are preliminary.

 

 

The following adjustments have been reflected in the unaudited pro forma condensed combined balance sheet:

 

(a) Represents the elimination of assets and liabilities related to locations included in the historical CBPR business financial information that will not be acquired by International Paper.

 

(b) Represents the elimination of a $76 million LIFO inventory reserve related to the CBPR business to value these inventories at preliminary estimated fair value as of the Acquisition date.

 

(c) Represents the payment of debt issuance costs and Acquisition costs in cash, and discounts on the notes offered in connection with the Acquisition.

 

(d) Represents an adjustment to value plants, properties and equipment acquired at the preliminary estimated fair value as of the Acquisition date.

 

(e) Represents the elimination of the CBPR business pre-Acquisition goodwill.

 

(f) Represents $5.996 billion of long-term debt to finance the Acquisition, including $3 billion in aggregate principal amount of notes from this offering, less discounts and before deducting other estimated offering expenses payable by us, and the capitalization of $63 million of related debt issuance costs.

 

(g) Represents the elimination of the CBPR business pre-Acquisition deferred taxes.

 

(h) Represents the assumption by International Paper of a liability from Weyerhaeuser Company for CBPR business workers’ compensation claims prior to the Acquisition.

 

(i) Represents the elimination of the CBPR business equity.

 

The following adjustments have been reflected in the respective unaudited pro forma condensed combined statements of operations:

 

(j) Represents the elimination of amounts related to locations included in the historical CBPR business financial information that will not be acquired by International Paper.

 

(k) Represents the elimination of sales between the CBPR business and International Paper.

 

(l) Represents additional depreciation resulting from the preliminary adjustment of the CBPR business’ plants, properties and equipment to estimated fair value as of the Acquisition date based on a preliminary estimated average useful life of 14 years.

 

(m) Represents preliminary estimated additional interest expense for debt incurred in connection with the Acquisition of approximately $105 million for the three months ended March 31, 2008 and $443 million for the year ended December 31, 2007. Interest on the $3 billion of aggregate principal amount of notes offered in connection with the Acquisition is based on the aggregate principal and applicable interest rates of the notes offered. Interest on the remaining $3 billion of long-term debt is based on LIBOR, adjusted quarterly, plus an assumed margin of 162.5 basis points. Amounts also include the straight-line amortization of debt issuance costs incurred to finance the Acquisition and discounts over the term of the related debt.

 

(n) Represents the tax effect of the above pro forma adjustments based upon a combined statutory federal and state tax rate of 38%.

 

The following description of the particular terms of the notes supplements the description of the general terms and provisions of the debt securities set forth under the heading “Description of Debt Securities” in the accompanying prospectus. If a particular term is inconsistent with the more general term described in the prospectus, the particular term replaces the more general term. The following description does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the indenture, the supplemental indenture relating to the notes and the notes. As used in this description of the notes, the words “IP”, “we”, “us” or “our” refer only to International Paper Company and do not include any current or future subsidiaries of International Paper Company.

 

General

 

We will issue the notes under an indenture, dated April 12, 1999, between us and The Bank of New York, as trustee, as supplemented by a supplemental indenture, to be dated as of June 4, 2008, between us and the trustee. We refer to the indenture, as supplemented, as the indenture. We will file the supplemental indenture as an exhibit to a Current Report on Form 8-K.

 

The notes will initially be limited to $3,000,000,000 aggregate principal amount, consisting of $1,000,000,000 aggregate principal amount of 7.400% Notes due 2014 (the “2014 notes”), $1,700,000,000 aggregate principal amount of 7.950% Notes due 2018 (the “2018 notes”) and $300,000,000 aggregate principal amount of 8.700% Notes due 2038 (the “2038 notes”, and with the 2014 notes and the 2018 notes, the “notes”). We may, without notice to or the consent of the holders of the notes, issue additional 2014 notes, 2018 notes and 2038 notes having identical terms and conditions as the notes of such series being issued in this offering, except for issue date, issue price and first interest payment date, in an unlimited aggregate principal amount. Any such additional 2014 notes, 2018 notes or 2038 notes will be part of the same series as the 2014 notes, 2018 notes or 2038 notes, respectively, issued in this offering and will be treated as one class with the respective notes being issued in this offering, including for purposes of voting and redemptions. References herein to the 2014 notes, the 2018 notes, the 2038 notes and the notes shall in each case include, unless the context otherwise requires, any such additional notes issued as described in this paragraph.

 

The notes will bear interest from June 4, 2008. Interest on the notes will be payable semiannually on June 15 and December 15 of each year, commencing December 15, 2008, to the Persons in whose names such notes are registered, subject to certain exceptions, at the close of business on June 1 or December 1 (whether or not a business day), as the case may be, next preceding such interest payment date.

 

The 2014 notes will mature on June 15, 2014. The 2014 notes will bear interest at the rate of 7.400% per annum, subject to adjustment as set forth under “— Interest Rate Adjustment.”

 

The 2018 notes will mature on June 15, 2018. The 2018 notes will bear interest at the rate of 7.950% per annum, subject to adjustment as set forth under “— Interest Rate Adjustment.”

 

The 2038 notes will mature on June 15, 2038. The 2038 notes will bear interest at the rate of 8.700% per annum, subject to adjustment as set forth under “— Interest Rate Adjustment.”

 

The notes will not be entitled to the benefit of any sinking fund.

 

The notes will be our senior unsecured obligations and will rank equal in right of payment with all of our other existing and future unsecured and unsubordinated debt. The notes will be effectively subordinated in right of payment to our existing and future senior secured indebtedness to the extent of the assets securing that indebtedness. The notes will be structurally subordinated to all existing and future indebtedness and other obligations of our subsidiaries, including trade payables. This means that holders of the notes will have a junior position to the claims of creditors of our direct and indirect subsidiaries on the assets and earnings of such subsidiaries. The indenture does not limit the amount of debt that we or our subsidiaries are permitted to incur.

 

The notes will be issued only in fully registered form, without coupons, in denominations of $2,000 and integral multiples of $1,000 in excess thereof. The notes will be payable at the principal corporate trust office

of the paying agent, which initially will be an office or agency of the trustee, or an office or agency maintained by us for such purpose, in the Borough of Manhattan, The City of New York. Notes may be presented for exchange or registration of transfer at the office of the security registrar.

 

Optional Redemption

 

We may redeem all or a portion of the notes, at our option, at any time or from time to time as set forth below. We will mail notice to registered holders of the notes of our intent to redeem on not less than 30 nor more than 60 days’ notice. We may redeem the notes at a redemption price equal to the greater of:

 

 

“Business Day” means any calendar day that is not a Saturday, Sunday or legal holiday in New York, New York and on which commercial banks are open for business in New York, New York.

 

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“Remaining Life”) of the applicable series of notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the notes of such series.

 

“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Quotations.

 

“Independent Investment Banker” means an independent investment banking institution of national standing appointed by us.

 

“Reference Treasury Dealer” means (i) each of Banc of America Securities LLC, J.P. Morgan Securities Inc., Deutsche Bank Securities Inc., Greenwich Capital Markets, Inc., UBS Securities LLC and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), we will substitute therefor another Primary Treasury Dealer and (ii) any other Primary Treasury Dealer selected by us.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.

 

“Treasury Rate” means, with respect to any redemption date, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release)

is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated on the third Business Day preceding such redemption date.

 

Special Mandatory Redemption

 

If, for any reason, (i) our proposed acquisition of the containerboard, packaging and recycling business of Weyerhaeuser Company is not completed on or prior to September 30, 2008, or (ii) the Purchase Agreement is terminated on or prior to September 30, 2008, we will redeem all of the notes on the Special Mandatory Redemption Date at the Special Mandatory Redemption Price. Notice of a special mandatory redemption will be mailed, with a copy to the trustee, promptly after the occurrence of the event triggering such redemption to each holder of notes at its registered address. If funds sufficient to pay the Special Mandatory Redemption Price of all of the notes to be redeemed on the Special Mandatory Redemption Date are deposited with the Paying Agent on or before such Special Mandatory Redemption Date, on and after such Special Mandatory Redemption Date, the notes will cease to bear interest and, other than the right to receive the Special Mandatory Redemption Price, all rights under the notes shall terminate.

 

For purposes of the foregoing discussion of a special mandatory redemption, the following definitions are applicable:

 

“Purchase Agreement” means the purchase agreement dated as of March 15, 2008, between Weyerhaeuser Company, as the seller, and us, as the purchaser.

 

“Special Mandatory Redemption Date” means the earlier to occur of (1) October 30, 2008 if the proposed acquisition has not been completed on or prior to September 30, 2008 or (2) the 30th day (or if such day is not a Business Day, the first Business Day thereafter) following the termination of the Purchase Agreement.

 

“Special Mandatory Redemption Price” means 101% of the aggregate principal amount of the notes together with accrued and unpaid interest from the date of initial issuance to but excluding the Special Mandatory Redemption Date.

 

Change of Control Triggering Event

 

Upon the occurrence of a Change of Control Triggering Event with respect to the notes of a series, unless we have exercised our right to redeem the notes of such series as described under “— Optional Redemption” by giving irrevocable notice to the trustee in accordance with the indenture, the indenture provides that each holder of notes of such series will have the right to require us to purchase all or a portion of such holder’s notes of such series pursuant to the offer described below (the “Change of Control Offer”), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the “Change of Control Payment”), subject to the rights of holders of notes of such series on the relevant record date to receive interest due on the relevant interest payment date.

 

Within 30 days following the date upon which the Change of Control Triggering Event occurred with respect to the notes of a series, or at our option, prior to any Change of Control but after the public announcement of the pending Change of Control, we will be required to send, by first class mail, a notice to each holder of notes of such series, with a copy to the trustee, which notice will govern the terms of the Change of Control Offer. Such notice will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the “Change of Control Payment Date”). The notice, if mailed prior to the date of consummation of the Change of Control, will state that the Change of Control Offer is conditioned on the Change of Control being consummated on or prior to the Change of Control Payment Date.

On the Change of Control Payment Date, we will, to the extent lawful:

 

 

We will not be required to make a Change of Control Offer with respect to the notes of a series if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for such an offer made by us and such third party purchases all notes of such series properly tendered and not withdrawn under its offer.

 

We will comply in all material respects with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes of such series as a result of a Change of Control Triggering Event. To the extent that the provisions of any such securities laws or regulations conflict with the Change of Control Offer provisions of the notes, we will comply with those securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control Offer provisions of the notes by virtue of any such conflict.

 

For purposes of the foregoing discussion of a Change of Control Offer, the following definitions are applicable:

 

“Change of Control” means the occurrence of any of the following after the date of issuance of the notes: (1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of IP and its subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) other than to IP or one of its subsidiaries; (2) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act, it being agreed that an employee of IP or any of its subsidiaries for whom shares are held under an employee stock ownership, employee retirement, employee savings or similar plan and whose shares are voted in accordance with the instructions of such employee shall not be a member of a “group” (as that term is used in Section 13(d)(3) of the Exchange Act) solely because such employee’s shares are held by a trustee under said plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of our Voting Stock representing more than 50% of the voting power of our outstanding Voting Stock; (3) we consolidate with, or merge with or into, any Person, or any Person consolidates with, or merge with or into, us, in any such event pursuant to a transaction in which any of our outstanding Voting Stock or Voting Stock of such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where our Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, Voting Stock representing more than 50% of the voting power of the Voting Stock of the surviving Person immediately after giving effect to such transaction; (4) during any period of 24 consecutive calendar months, the majority of the members of our board of directors shall no longer be composed of individuals (a) who were members of our board of directors on the first day of such period or (b) whose election or nomination to our board of directors was approved by individuals referred to in clause (a) above constituting, at the time of such election or nomination, at least a majority of our board of directors; or (5) the adoption of a plan relating to our liquidation or dissolution.

 

“Change of Control Triggering Event” means, with respect to the notes of a series, the notes of such series cease to be rated Investment Grade by each of the Rating Agencies on any date during the period

(the “Trigger Period”) commencing 60 days prior to the first public announcement by us of any Change of Control (or pending Change of Control) and ending 60 days following consummation of such Change of Control (which Trigger Period will be extended following consummation of a Change of Control for so long as any of the Rating Agencies has publicly announced that it is considering a possible ratings change). If a Rating Agency is not providing a rating for the notes of a series at the commencement of any Trigger Period, the notes of such series will be deemed to have ceased to be rated Investment Grade by such Rating Agency during that Trigger Period. Notwithstanding the foregoing, no Change of Control Triggering Event will be deemed to have occurred in connection with any particular Change of Control unless and until such Change of Control has actually been consummated.

 

“Investment Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating category of Moody’s) and a rating of BBB− or better by S&P (or its equivalent under any successor rating category of S&P), and the equivalent investment grade credit rating from any replacement rating agency or rating agencies selected by us under the circumstances permitting us to select a replacement agency and in the manner for selecting a replacement agency, in each case as set forth in the definition of “Rating Agency.”

 

“Moody’s” means Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation, and its successors.

 

“Rating Agency” means each of Moody’s and S&P; provided, that if any of Moody’s or S&P ceases to provide rating services to issuers or investors, we may appoint another “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act as a replacement for such Rating Agency; provided, that we shall give notice of such appointment to the trustee.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

 

“Voting Stock” of any specified Person as of any date means the capital stock of such Person that is at the time entitled to vote generally in the election of the board of directors of such Person.

 

For purposes of the notes, the following definition is applicable:

 

“Person” means any individual, corporation, partnership, limited liability company, business trust, association, joint-stock company, joint venture, trust, incorporated or unincorporated organization or government or any agency or political subdivision thereof.

 

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of IP and its subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise, established definition of the phrase under applicable law. Accordingly, the applicability of the requirement that we offer to repurchase the notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of IP and its subsidiaries taken as a whole to another Person or group may be uncertain.

 

Interest Rate Adjustment

 

The interest rate payable on the notes of each series will be subject to adjustments from time to time if either Moody’s or S&P (or, in either case, any Substitute Rating Agency thereof) downgrades (or subsequently upgrades) the debt rating assigned to the notes of that series, in the manner described below.

 

If the rating from Moody’s (or any Substitute Rating Agency thereof) of the notes of a series is decreased to a rating set forth in the immediately following table, the interest rate on the notes of that series will

increase from the interest rate payable on the notes of that series on the date of their issuance by the percentage points set forth opposite that rating:

 

 

 

 

If the rating from S&P (or any Substitute Rating Agency thereof) of the notes of a series is decreased to a rating set forth in the immediately following table, the interest rate on the notes of that series will increase from the interest rate payable on the notes of that series on the date of their issuance by the percentage points set forth opposite that rating:

 

 

 

 

If at any time the interest rate on the notes of a series has been adjusted upward and either Moody’s or S&P (or, in either case, a Substitute Rating Agency thereof), as the case may be, subsequently increases its rating of the notes of that series to any of the threshold ratings set forth above, the interest rate on the notes of that series will be decreased such that the interest rate for the notes of that series equals the interest rate payable on the notes of that series on the date of their issuance plus the percentage points set forth opposite the ratings from the tables above in effect immediately following the rating increase. If Moody’s (or any Substitute Rating Agency thereof) subsequently increases its rating of the notes of a series to Baa3 (or its equivalent, in the case of a Substitute Rating Agency) or higher, and S&P (or any Substitute Rating Agency thereof) increases its rating to BBB− (or its equivalent, in the case of a Substitute Rating Agency) or higher, the interest rate on the notes of that series will be decreased to the interest rate payable on the notes of that series on the date of their issuance. In addition, the interest rates on the notes of each series will permanently cease to be subject to any adjustment described above (notwithstanding any subsequent decrease in the ratings by either or both such rating agencies) if the notes of that series become rated A3 (stable or better) and A− (stable or better) (or the equivalent of either such rating, in the case of a Substitute Rating Agency) or higher by Moody’s and S&P (or, in either case, any Substitute Rating Agency thereof), respectively (or one of these ratings if the notes of such series are only rated by one such rating agency).

 

Each adjustment required by any decrease or increase in a rating set forth above, whether occasioned by the action of Moody’s or S&P (or, in either case, any Substitute Rating Agency thereof), shall be made independent of any and all other adjustments. In no event shall (1) the interest rate on the notes of a series be reduced to below the interest rate payable on the notes of such series on the date of their issuance or (2) the total increase in the interest rate on the notes of a series exceed 2.00 percentage points above the interest rate payable on the notes of such series on the date of their issuance.

 

No adjustments in the interest rate of the notes of a series shall be made solely as a result of a rating agency ceasing to provide a rating of such series of notes. If at any time less than two rating agencies provide a rating of the notes of a series for a reason beyond IP’s control, we will use our commercially reasonable efforts to obtain a rating of such series of notes from a Substitute Rating Agency, to the extent one exists, and if a Substitute Rating Agency exists, for purposes of determining any increase or decrease in the interest rate on the notes of a series pursuant to the tables above (a) such Substitute Rating Agency will be substituted for the last rating agency to provide a rating of such series of notes but which has since ceased to provide such

rating, (b) the relative ratings scale used by such Substitute Rating Agency to assign ratings to senior unsecured debt will be determined in good faith by an independent investment banking institution of national standing appointed by us and, for purposes of determining the applicable ratings included in the applicable table above with respect to such Substitute Rating Agency, such ratings will be deemed to be the equivalent ratings used by Moody’s or S&P, as applicable, in such table and (c) the interest rate on the notes of such series will increase or decrease, as the case may be, such that the interest rate equals the interest rate payable on the notes of such series on the date of their issuance plus the appropriate percentage points, if any, set forth opposite the rating from such Substitute Rating Agency in the applicable table above (taking into account the provisions of clause (b) above) (plus any applicable percentage points resulting from a decreased rating by the other rating agency). For so long as only one rating agency provides a rating of the notes of a series, any subsequent increase or decrease in the interest rate of such series of notes necessitated by a reduction or increase in the rating by the agency providing the rating shall be twice the percentage points set forth in the applicable table above. For so long as none of Moody’s, S&P or a Substitute Rating Agency provides a rating of the notes of a series, the interest rate on the notes of such series will increase to, or remain at, as the case may be, 2.00 percentage points above the interest rate payable on the notes of such series on the date of their issuance.

 

Any interest rate increase or decrease described above will take effect from the interest payment date immediately preceding a rating change which requires an adjustment in the interest rate.

 

If the interest rate payable on the notes is increased as described in this “— Interest Rate Adjustment,” the term “interest,” as used in this prospectus supplement, will be deemed to include any such additional interest unless the context otherwise requires. If we defease or discharge any series of notes in accordance with “Description of the Debt Securities — Defeasance” in the accompanying prospectus, there will be no further adjustment in the interest rate on such series of notes after such defeasance or discharge.

 

For purposes of the foregoing discussion of an interest rate adjustment, the following definition is applicable:

 

“Substitute Rating Agency” means a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by IP (as certified by a resolution of the board of directors of IP and delivered to the trustee) as a replacement agency for Moody’s, S&P or another Substitute Rating Agency, or all of them, as the case may be.

 

Certain Covenants

 

Limitation on Liens

 

We have covenanted in the indenture that with regard to the notes, we will not, nor will we permit any subsidiary (as defined below) to, issue, assume or guarantee any debt for money borrowed that is secured by a mortgage, pledge, security interest or lien (a “mortgage” or “mortgages”) upon any forestlands or principal manufacturing facility (each as defined below) now owned or hereafter acquired, without in any such case effectively providing, concurrently with the issuance, assumption or guarantee of such debt, that the notes are secured equally and ratably with, or with preference to, that debt. The foregoing restrictions will not apply to the following:

 

 

 

The following types of transactions, among others, will not be deemed to create debt secured by a mortgage:

 

 

However, we or any of our subsidiaries may, without securing the notes, issue, assume or guarantee secured debt which would otherwise be subject to the foregoing restrictions; provided, that the aggregate amount of secured debt that we may issue, assume or guarantee will not exceed 10% of the net tangible assets of us and our consolidated subsidiaries as of the latest fiscal year-end, when considered together with all other such secured debt and attributable debt (as defined below) then existing in respect of sale and lease-back transactions (as defined below) of us and our subsidiaries, other than sale or lease-back transactions whose proceeds were applied to the retirement of funded debt (as defined below).

 

The term “net tangible assets” means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities, excluding current maturities of long-term debt, commercial paper and other short-term indebtedness, and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense (to the extent included in such aggregate amount of assets) and other like intangibles, all as set forth on the most recent consolidated balance sheet of us and our consolidated subsidiaries and computed in accordance with generally accepted accounting principles.

 

Limitation on Sale and Lease-Back Transactions

 

We will not, nor will we permit any subsidiary to, lease from any Person any forestlands or principal manufacturing facility (except for temporary leases for a term of not more than three years) which was owned (and in the case of any such principal manufacturing facility, placed in commercial operation by us or a subsidiary for more than 180 days) and then sold or transferred to that Person by us or a subsidiary (a “sale and lease-back transaction”), unless either:

 

 

The term “forestlands” means at any time property in the United States which contains standing timber which is, or is expected upon completion of a growth cycle then in process to become, of a commercial quantity and merchantable quality. However, this does not include any land which at the time is held by, or has been, or after the date of this prospectus is, transferred to a subsidiary primarily for development and/or sale rather than for the production of lumber or other timber products.

 

The term “principal manufacturing facility” means any paperboard, paper or pulp mill, or paper converting plant of IP or any subsidiary which is located within the United States, other than any mill or plant or portion thereof which:

 

 

The term “subsidiary” means any corporation of which at least a majority of the outstanding stock having by its terms the ordinary voting power to elect a majority of its board of directors is at the time directly or indirectly owned or controlled by us, by any one or more subsidiaries, or by us and one or more subsidiaries, irrespective of whether any other class or classes of the corporation’s stock has or might have voting power by reason of the happening of any contingency.

 

The term “attributable debt” means the present value at the time of determination of the lessee’s net rental payment obligation over the term, including any extensions, of any lease entered into in connection with a sale and leaseback transaction. The present value will be determined by using a discount rate equal to the weighted average yield to maturity of the notes then outstanding, compounded semiannually. The average will be weighted by the principal amount of the notes.

 

The term “funded debt” means 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 the debt is created.

 

Consolidation, Merger and Sale of Assets

 

We shall not consolidate or merge with or into any other Person or sell, lease, transfer or otherwise dispose of our assets substantially as an entirety to any Person, and we shall not permit any Person to consolidate or merge with or into us or to sell, lease, transfer or otherwise dispose of its assets substantially as an entirety to us, unless:

 

 

 

Modification

 

The indenture will provide that modifications and amendments of the indenture may be made by us and the trustee under the indenture only with the consent of the holders of not less than a majority in aggregate principal amount of the notes issued under the indenture and affected by such modification or amendment. However, without the consent of any holders of notes, we and the trustee may supplement the indenture in respect of the matters described in the accompanying prospectus under “Description of Debt Securities — Meetings, Modification and Waiver.”

 

No such modification or amendment may, without the consent of each holder of the notes affected thereby:

 

 

Defeasance

 

The notes are subject to our ability to defease and/or discharge as described under the caption “Description of the Debt Securities — Defeasance” in the accompanying prospectus.

 

Book-Entry System

 

All interests in the notes will be subject to the operations and procedures of The Depository Trust Company (“DTC”), Euroclear Bank, S.A./N.V. (“Euroclear”) and Clearstream Luxembourg, société anonyme (“Clearstream Luxembourg”). The descriptions of the operations and procedures of DTC, Euroclear and Clearstream Banking set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. We obtained the information in this section and elsewhere in this prospectus supplement concerning DTC, Euroclear and Clearstream Luxembourg and their respective book-entry systems from sources that we believe are reliable, but we take no responsibility for the accuracy of any of this information.

The Depository Trust Company, New York, NY, will act as securities depository for the notes. The notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered note certificate will be issued for each issue of the notes, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.

 

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

 

Purchases of notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the notes on DTC’s records. The ownership interest of each actual purchaser of each note (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in notes, except in the event that use of the book-entry system for the notes is discontinued.

 

To facilitate subsequent transfers, all notes deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of notes with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

 

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the notes within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

 

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the notes unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).

 

Redemption proceeds, distributions, and dividend payments on the notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from us or our agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, our agent or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of IP, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

 

DTC may discontinue providing its services as securities depository with respect to the notes at any time by giving reasonable notice to us. Under such circumstances, in the event that a successor securities depository is not obtained, note certificates are required to be printed and delivered.

 

We may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, note certificates will be printed and delivered to DTC.

 

Euroclear.  Euroclear was created in 1968 to hold securities for participants of Euroclear (“Euroclear Participants”) and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the “Euroclear Operator”), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the “Cooperative”). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.

 

The Euroclear Operator is regulated and examined by the Belgian Banking Commission. Distributions of principal and interest with respect to notes held through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the relevant system’s rules and procedures, to the extent received by such system’s depositary.

 

Clearstream Luxembourg.  Clearstream Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream Luxembourg holds securities for its participating organizations (“Clearstream Luxembourg Participants”) and facilitates the clearance and settlement of securities transactions between Clearstream Luxembourg Participants through electronic book-entry changes in accounts of Clearstream Luxembourg Participants, thereby eliminating the need for physical movement of certificates. Clearstream Luxembourg provides Clearstream Luxembourg Participants with, among other things, services for safekeeping, administration, clearance and establishment of internationally traded securities and securities

lending and borrowing. Clearstream Luxembourg interfaces with domestic markets in several countries. As a professional depositary, Clearstream Luxembourg is subject to regulation by the Luxembourg Monetary Institute. Clearstream Luxembourg Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, and may include the underwriters. Indirect access to Clearstream Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Luxembourg Participant either directly or indirectly.

 

Distributions with respect to notes held beneficially through Clearstream Luxembourg will be credited to cash accounts of Clearstream Luxembourg Participants in accordance with its rules and procedures to the extent received by the U.S. depositary for Clearstream Luxembourg.

 

Links have been established among DTC, Clearstream Luxembourg and Euroclear to facilitate the initial issuance of the notes and cross-market transfers of the notes associated with secondary market trading. DTC will be linked indirectly to Clearstream Luxembourg and Euroclear through the DTC accounts of their respective U.S. depositaries.

 

Global Clearance and Settlement Procedures.  Initial settlement for the notes will be made in immediately available funds. Transfers between participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures.

 

Cross-market transfers between participants in DTC, on the one hand, and Euroclear or Clearstream Luxembourg participants, on the other hand, will be effected through DTC in accordance with DTC’s rules on behalf of Euroclear or Clearstream Luxembourg, as the case may be, by its respective depositary. However, those cross-market transactions will require delivery of instructions to Euroclear or Clearstream Luxembourg, as the case may be, by the counterparty in that system in accordance with the rules and procedures and within the established deadlines (Brussels time) of that system. Euroclear or Clearstream Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream Luxembourg participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream Luxembourg.

 

Because of time zone differences, the securities account of a Euroclear or Clearstream Luxembourg participant purchasing an interest in a note from a participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream Luxembourg participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream Luxembourg) immediately following the settlement date of DTC. DTC has advised us that cash received in Euroclear or Clearstream Luxembourg as a result of sales of interests in a note by or through a Euroclear or Clearstream Luxembourg participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream Luxembourg cash account only as of the business day for Euroclear or Clearstream Luxembourg following DTC’s settlement date.

 

Although we understand that DTC, Euroclear and Clearstream Luxembourg have agreed to the foregoing procedures to facilitate transfers of interests in the notes among participants in DTC, Euroclear and Clearstream Luxembourg, they are under no obligation to perform or to continue to perform those procedures, and those procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

Notices

 

Notices to holders of registered securities will be given by mail to the holder’s address as it appears in our security register.

Governing Law

 

The indenture and the notes will be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws.

 

Regarding the Trustee

 

The indenture contains specific limitations on the rights of the trustee, should it become a creditor of ours, to obtain payment of claims in specific cases, or to realize on specific property received in respect of a claim as security or otherwise. The trustee will be permitted to engage in other transactions. However, if the trustee acquires any conflicting interest when the notes are in default under specified circumstances, it must eliminate the conflict within 90 days or resign unless it satisfies specified conditions.

 

The Bank of New York acts as trustee under various indentures of ours. We and some of our subsidiaries at various times maintain deposit accounts and conduct our banking transactions with The Bank of New York in the ordinary course of business.

 

The following is a general discussion of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of notes to holders who purchase notes at their original offering price and hold the notes as capital assets. This discussion is based upon the Internal Revenue Code of 1986, as amended, which we refer to as the Code, Treasury Regulations (including proposed Treasury Regulations) issued thereunder, Internal Revenue Service, which we refer to as the IRS, rulings and pronouncements and judicial decisions now in effect, all of which are subject to change, possibly with retroactive effect.

 

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder in light of its particular circumstances, or to holders subject to special tax rules such as (1) banks, regulated investment companies, insurance companies, dealers in securities or currencies or tax-exempt organizations, (2) persons holding notes as part of a straddle, hedge, conversion or other integrated transaction, (3) persons who mark their securities to market for U.S. federal income tax purposes or whose functional currency is not the U.S. dollar, (4) U.S. expatriates, (5) persons subject to alternative minimum taxes or (6) persons treated as partnerships for U.S. federal income tax purposes. If an entity that is treated as a partnership for U.S. federal income tax purposes holds a note, the U.S. federal income tax treatment of a partner will generally depend on the status and the activities of the partner and the partnership. Holders that are treated as partnerships for U.S. federal income tax purposes should consult their own advisors regarding the U.S. federal income tax consequences to them and their partners of the purchase, ownership and disposition of notes.

 

This discussion also does not address estate taxes or state, local or foreign taxes. Prospective investors are urged to consult their own tax advisors with respect to the tax consequences of the purchase, ownership and disposition of notes in light of their own circumstances.

 

U.S. Holders

 

As used in this discussion, the term “U.S. holder” means a beneficial owner of the notes that is, for U.S. federal income tax purposes, (1) an individual citizen or resident of the United States, (2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (4) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or an electing trust that was in existence on August 19, 1996, and was treated as a domestic trust on that date.

 

Interest Income and Original Issue Discount

 

The notes will not be issued with an issue price that is less than their stated redemption price at maturity by more than the statutory de minimis amount. As a result, the notes will not be subject to the original issue discount, which we refer to as OID rules, so that, except as provided below, a U.S. holder will generally be taxed on the stated interest on the notes as ordinary income at the time it is paid or accrued in accordance with the U.S. holder’s regular method of accounting for U.S. federal income tax purposes.

 

Sale, Exchange, Retirement or Other Taxable Disposition of the Notes

 

Except as provided below, upon the sale, exchange, retirement or other taxable disposition of notes, a U.S. holder will generally recognize taxable gain or loss in an amount equal to the difference between the amount realized by such U.S. holder and such U.S. holder’s adjusted tax basis in the notes. Any gain or loss so recognized will generally be capital gain or loss and will be long-term capital gain or loss if the U.S. holder has held the notes for more than one year at the time of disposition. A reduced tax rate on long-term capital gain may apply to individual holders. The deductibility of capital losses is subject to limitations.

 

Interest Rate Adjustment

 

In certain circumstances, if the rating on the notes changes, we may be obligated to pay additional interest. See “Description of the Notes — Interest Rate Adjustment.” Under Treasury Regulations, if a debt instrument provides for alternative payment schedules applicable upon the occurrence of a contingency (other than a remote or incidental contingency), if the timing and amount of the payments that comprise each payment schedule are known as of the issue date, and if one of such schedules is significantly more likely than not to apply, the yield and maturity of the debt instrument are determined by assuming that the payments will be made according to that payment schedule. We intend to take the position that it is significantly more likely than not that interest payments on the notes will be made at the original issue interest rates. Therefore, we do not intend to treat the potential payment of additional interest as part of the yield to maturity of the notes. Our determination is not, however, binding on the IRS, which could challenge this position. If such challenge were successful, a U.S. holder might be required to accrue income on the notes in excess of stated interest, and to treat as ordinary income rather than capital gain any income realized on the taxable disposition of a note before the resolution of the contingencies. In the event a contingent payment actually occurs, it would affect the amount and timing of the income that a U.S. holder will recognize.

 

Repurchase Upon a Change of Control and Special Mandatory Redemption

 

It is possible that the IRS could assert that our redemption of the notes for an amount equal to 101% of the principal amount of the notes, under the circumstances described above under the headings, “Description of the Notes — Change of Control” and “Description of the Notes — Special Mandatory Redemption”, results in a “contingent payment.” Under Treasury Regulations, the possibility that any “contingent payment” will be made will not affect the amount or timing of interest income a U.S. holder will recognize if there is only a remote or incidental likelihood as of the date the notes were issued that such payment will be made. We intend to take the position for U.S. federal income tax purposes that the likelihood that the notes will be so redeemed is remote or incidental. Therefore, the possibility that such payments may be made should not affect the amount or timing of income a U.S. holder will recognize unless the U.S. holder actually becomes entitled to such payments. Our determination that these contingencies are remote or incidental is not, however, binding on the IRS, which could challenge this position. If such challenge were successful, a U.S. holder might be required to accrue income on the notes in excess of stated interest, and to treat as ordinary income rather than capital gain any income realized on the taxable disposition of a note before the resolution of the contingencies. In the event a contingent payment actually occurs, it would affect the amount and timing of the income that a U.S. holder will recognize.

 

Non-U.S. Holders

 

As used herein, a “non-U.S. holder” is a beneficial owner of a note that is, for U.S. federal income tax purposes, (i) an individual who is classified as a nonresident alien, (ii) a foreign corporation, or (iii) a foreign estate or trust.

 

Subject to the discussion of backup withholding below, payments of principal and interest (including OID, if any) on a note to, or on behalf of, a non-U.S. holder will not be subject to U.S. federal withholding tax, provided, that, in the case of interest:

 

 

The Treasury Regulations provide alternative methods for satisfying the requirement referred to in the third bullet above, as well as special rules for certain types of entities, including foreign partnerships.

 

If a non-U.S. holder cannot satisfy the requirements described above, payments of interest to such holder will be subject to 30% U.S. federal withholding tax, unless such holder provides us with a properly executed

(1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of an applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with such holder’s conduct of a trade or business in the United States. If a non-U.S. holder is engaged in a trade or business in the United States and interest on a note is effectively connected with the conduct of that trade or business, such holder will be subject to U.S. federal income tax on that interest on a net income basis (although such holder will be exempt from the 30% withholding tax, provided such holder satisfies the certification requirements described above) in the same manner as if such holder were a U.S. person as defined under the Code.

 

Any capital gain realized by a non-U.S. holder upon the sale, exchange, redemption or other disposition of a note generally will not be subject to U.S. federal income or withholding taxes if such gain is not effectively connected with a U.S. trade or business of the non-U.S. holder and, in the case of an individual, such non-U.S. holder is not present in the United States for 183 days or more in the taxable year of the sale or other disposition. Any capital gain effectively connected with the conduct of a U.S. trade or business of the non-U.S. holder is taxed in the same manner as if such person were a U.S. person as defined under the Code.

 

If a non-U.S. holder is engaged in a trade or business in the United States and is a foreign corporation, such holder may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are effectively connected with such holder’s conduct of a trade or business in the United States.

 

Backup Withholding and Information Reporting

 

U.S. Holders.  A U.S. holder of a note may be subject to backup withholding at applicable rates with respect to interest or principal paid on a note, unless the holder (a) is an entity (including corporations, tax-exempt organizations and certain qualified nominees) that is exempt from withholding and, when required, demonstrates this fact, or (b) provides its taxpayer identification number, which we refer to as a TIN (which for an individual would be the holder’s Social Security number), certifies that the TIN provided is correct and that the holder has not been notified by the IRS that it is subject to backup withholding due to underreporting of interest or dividends, and otherwise complies with applicable requirements of the backup withholding rules. In addition, such payments of principal and interest to U.S. holders that are not corporations, tax-exempt organizations or qualified nominees may be subject to information reporting requirements.

 

Non-U.S. Holders.  Under Treasury Regulations, backup withholding and information reporting on IRS Form 1099 do not apply to payments made to a non-U.S. holder if such non-U.S. holder has provided the required certification that it is a non-U.S. holder and the payor does not have actual knowledge that the holder is a U.S. holder. If the foreign office of a foreign “broker” (as defined in applicable Treasury Regulations) pays the proceeds of the sale of a note to the seller thereof, backup withholding and information reporting will not apply. Information reporting requirements (but not backup withholding) will apply, however, to any such payments by a foreign office of a broker that is, for U.S. federal income tax purposes, a U.S. person, or a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, or a “controlled foreign corporation” (generally, a foreign corporation controlled by certain U.S. shareholders) with respect to the United States, unless the broker has documentary evidence in its records that the holder is a non-U.S. holder and certain other conditions are met, or the holder otherwise establishes an exemption. Any such payments by a U.S. office of a custodian, nominee or agent of a U.S. office of a broker are subject to both backup withholding at applicable rates and information reporting unless the holder certifies under penalties of perjury that it is a non-U.S. holder or otherwise establishes an exemption and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person. Each non-U.S. holder should consult such holder’s tax advisor regarding the application to such holder of the backup withholding and reporting rules.

 

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

 

We and the underwriters named below have entered into an underwriting agreement relating to the offer and sale of the notes. In the underwriting agreement, we have agreed to sell to each underwriter severally, and each underwriter has agreed severally to purchase from us, the principal amount of notes that appears opposite the name of that underwriter below:

 

 

The obligations of the underwriters under the underwriting agreement, including their agreement to purchase the notes from us, are several and not joint. Those obligations are also subject to the satisfaction of certain conditions in the underwriting agreement. The underwriters have agreed to purchase all of the notes if any are purchased.

 

The underwriters have advised us that they propose to offer the notes to the public at the applicable public offering prices that appears on the cover page of this prospectus supplement. The underwriters may offer such notes to selected dealers at the public offering price minus a selling concession of up to 0.350% of the principal amount of the 2014 notes, 0.400% of the principal amount of the 2018 notes and 0.500% of the principal amount of the 2038 notes. In addition, the underwriters may allow, and those selected dealers may reallow, a selling concession of up to 0.250% of the principal amount of the 2014 notes, 0.250% of the principal amount of the 2018 notes and 0.250% of the principal amount of the 2038 notes to certain other dealers. After the initial public offering, the underwriters may change the public offering price and any other selling terms.

 

In the underwriting agreement, we have agreed that:

 

 

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State it has not made and will not make an offer of the notes which are the subject of the offering contemplated by this prospectus supplement to the public in that Relevant Member State other than:

 

 

 

For the purposes of this provision, the expression an offer of the notes to the public in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

 

Each series of notes is a new issue of securities with no established trading market. In addition, we have not applied and do not intend to apply to list the notes on any securities exchange or to have the notes quoted on a quotation system. The underwriters have advised us that they intend to make a market in the notes. However, they are not obligated to do so and may discontinue any market-making in any series of notes at any time in their sole discretion. Therefore, we cannot assure you that a liquid trading market for any series of notes will develop, that you will be able to sell your notes at a particular time or that the price you receive when you sell will be favorable.

 

In connection with this offering of the notes, the underwriters may engage in overallotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934. Overallotment involves sales in excess of the offering size, which create a short position for the underwriters. Stabilizing transactions involve bids to purchase the notes in the open market for the purpose of pegging, fixing or maintaining the price of the notes. Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the notes to be higher than it would otherwise be in the absence of those transactions. Penalty bids permit the managing underwriter to reclaim a selling concession from a syndicate member when the notes originally sold by that syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. If the underwriters engage in stabilizing, syndicate covering transactions or penalty bids, they may discontinue them at any time.

 

From time to time in the ordinary course of their respective businesses, certain of the underwriters and their affiliates have engaged in and may in the future engage in commercial banking, derivatives and/or financial advisory, investment banking and other commercial transactions and services with us and our affiliates, for which they have received and expect to continue to receive customary compensation. UBS Securities LLC is acting as our advisor in connection with the Acquisition and we expect that it will receive customary fees in connection therewith. An affiliate of J.P. Morgan Securities Inc. will be the administrative agent under the Acquisition Credit Facilities, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Deutsche Bank Securities Inc., RBS Securities Corporation d/b/a RBS Greenwich Capital (an affiliate of Greenwich Capital Markets, Inc.), UBS Securities LLC and/or their affiliates will be joint lead arrangers and lenders under the Acquisition Credit Facilities. All of the other underwriters or their affiliates will be lenders under the Acquisition Credit Facilities.

 

Mitsubishi UFJ Securities International plc is not a U.S. registered broker-dealer and, therefore, to the extent that it intends to effect any sales of the notes in the United States, it will do so through one or more U.S. registered broker-dealers as permitted by Financial Industry Regulatory Authority regulations.

 

We expect to deliver the notes against payment by the underwriters on or about the date specified in the last paragraph on the cover page of this prospectus supplement, which will be the fifth business day following the date of the pricing of the notes (such settlement being referred to as “T+5”). Since trades in the secondary market generally settle in three business days, purchasers who wish to trade notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact the notes initially will settle on T+5, to specify alternative settlement arrangements to prevent a failed settlement.

 

The validity of the notes will be passed upon for us by Debevoise & Plimpton LLP, New York, New York. Cahill Gordon & Reindel llp, New York, New York, will pass upon certain legal matters for the underwriters.

 

The consolidated financial statements included in International Paper Company’s Current Report on Form 8-K filed on May 9, 2008, and the related financial statement schedule included in International Paper Company’s Annual Report on Form 10-K for the year ended December 31, 2007, each incorporated in this Prospectus Supplement by reference, and the effectiveness of International Paper Company’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which report on the consolidated financial statements expresses an unqualified opinion and includes an explanatory paragraph regarding the Company’s adoption of Financial Accounting Standards board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109, effective January 1, 2007, and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R),” effective December 31, 2006 and Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment”, effective January 1, 2006 and which reports on the financial statement schedule and on the effectiveness of internal control over financial reporting express an unqualified opinion), which are incorporated herein by reference. Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

The combined financial statements of Weyerhaeuser Containerboard, Packaging and Recycling Business (a Business Unit of Weyerhaeuser Company) as of December 30, 2007 and December 31, 2006, and for each of the years in the three-year period ended December 30, 2007, included in International Paper Company’s Current Report on Form 8-K dated May 28, 2008, have been incorporated by reference herein and in the registration statement of which this prospectus supplement is a part in reliance upon the report of KPMG LLP, an independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

 

With respect to the unaudited interim financial information of Weyerhaeuser Containerboard, Packaging and Recycling Business (a Business Unit of Weyerhaeuser Company) for the thirteen week periods ended March 30, 2008, and April 1, 2007, KPMG LLP has reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 8, 2008, included in International Paper Company’s Current Report on Form 8-K dated May 28, 2008, incorporated by reference herein and in the registration statement of which this prospectus supplement is a part, states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. KPMG LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended for their report on the unaudited interim financial information because that report is not a “report” or a “part” of the registration statement of which this prospectus supplement is a part prepared or certified by KPMG LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933, as amended.

 

We file annual, quarterly and special reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy statements, information statements and other information about issuers who file electronically with the SEC. The address of the web site is http://www.sec.gov.

This prospectus supplement is part of a registration statement that we have filed with the SEC relating to the securities to be offered. This prospectus supplement 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 supplement 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 do not describe all exceptions and qualifications contained in those contracts, agreements or documents. You should read those contracts, agreements or documents for information that may be important to you. 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 supplement 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 supplement and later information that we file with the SEC will automatically update and supersede that information. This prospectus supplement 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 (Commission File Number: 1-3157) are incorporated by reference:

 

 

All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus supplement and prior to the termination of the offering of the notes shall also be deemed to be incorporated herein by reference.

 

You can obtain any of the filings incorporated by reference herein through us or from the SEC through the SEC’s web site or at the addresses listed above. You may request orally or in writing, without charge, a copy of any or all of 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, 6400 Poplar Avenue, Memphis, Tennessee 38197, Attention: Investor Relations Department (Telephone: (901) 419-4250).

 

PROSPECTUS

 

International Paper Company

 

Debt Securities
Preferred Stock
Common Stock
Depositary Shares
Warrants
Stock Purchase Contracts
Stock Purchase Units

 

International Paper Capital Trust IV
International Paper Capital Trust VI

 

Trust Preferred Securities Fully and Unconditionally
Guaranteed by International Paper Company

 

By this prospectus, we may offer from time to time the securities described in this prospectus separately or together in any combination, and the trusts may offer from time to time trust preferred securities.

 

We will provide specific terms of any securities to be offered in a supplement to this prospectus. You should read this prospectus and any applicable prospectus supplement carefully before you invest.

 

Our common stock is listed on the New York Stock Exchange under the symbol “IP.”

 

We may offer and sell these securities to or through one or more agents, underwriters, dealers or other third parties or directly to one or more purchasers, on a continuous or delayed basis.

 

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.

 

The date of this prospectus is March 7, 2006.

 

TABLE OF CONTENTS

 

 

This prospectus is part of a registration statement filed by International Paper Company and the trusts with the Securities and Exchange Commission using a “shelf” registration process. Under this shelf process, we are registering an unspecified amount of each class of the securities described in this prospectus, and we may sell any combination of the securities described in this prospectus in one or more offerings. In addition, selling security holders may sell securities under our shelf registration statement. This prospectus provides you with a general description of the securities we, the trusts or any selling security holders may offer. Each time we, the trusts or any selling security holders sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. If there is any inconsistency between the information in this prospectus and any applicable prospectus supplement, you should rely on the information in the applicable prospectus supplement. You should read both this prospectus and any applicable prospectus supplement, together with 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, the trusts and the securities to be offered. 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 prospectus and the information to which we have referred you. We have not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this document.

 

All references to “we,” “us,” “our,” or “International Paper” in this prospectus are to International Paper Company.

 

This prospectus, including the documents that we incorporate by reference, contains both historical and forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are not historical facts, but only predictions and generally can be identified by use of statements that include phrases such as “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “appear,” “project,” “estimate,” “intend,” or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated. Factors that could materially affect these forward-looking statements can be found in our periodic reports filed with the SEC. Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date of this prospectus, and we undertake no obligation to update publicly these forward-looking statements to reflect new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events might or might not occur. We cannot assure you that projected results or events will be achieved.

 

We are a global forest products, paper and packaging company that is complemented by an extensive North American Merchant distribution system, with primary markets and manufacturing operations in the United States, Europe, South America and Asia. 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. Our principal executive offices are located at 400 Atlantic Street, Stamford, Connecticut 06921 and our telephone number is (203) 541-8000.

 

Unless otherwise indicated in an applicable prospectus supplement, we will use the net proceeds from the sale of the offered securities for general corporate purposes. Unless otherwise indicated in an applicable prospectus supplement, the trusts will use all proceeds from the sale of trust preferred securities to purchase our debt securities. We may provide additional information on the use of the net proceeds from the sale of securities in an applicable prospectus supplement.

 

We may issue, from time to time, debt securities directly to the public, to the trusts or as part of a stock purchase unit. The debt securities offered by this prospectus and any applicable prospectus supplement will be our unsecured obligations and will be either senior or subordinated debt. Senior debt will be issued under a senior debt indenture. Subordinated debt will be issued under a subordinated debt indenture. The senior debt indenture and the subordinated debt indenture are sometimes referred to in this prospectus individually as an “indenture” and collectively as the “indentures.” Forms of the indentures have been filed as exhibits to, or incorporated by reference in, the registration statement of which this prospectus is part.

 

We have summarized the material provisions of the indentures and the debt securities. You should read the more detailed provisions of the applicable indenture, including the defined terms, for provisions that may be important to you. You should also read the particular terms of a series of debt securities, which will be described in more detail in an applicable prospectus supplement. Copies of the indentures may be obtained from us or the applicable trustee. So that you may easily locate the more detailed provisions, the numbers in parentheses below refer to sections in the applicable indenture or, if no indenture is specified, to sections in each of the indentures. Wherever particular sections or defined terms of the applicable indenture are referred to, the sections or defined terms are incorporated by reference into this prospectus.

General

 

The indentures do not limit the amount of debt securities that we may issue under the indentures, nor do they limit us from incurring or issuing other secured or unsecured debt.

 

Unless otherwise specified in an applicable prospectus supplement, the debt securities issued under the senior indenture will rank equally with all of our other unsecured and unsubordinated obligations. The debt securities issued under the subordinated indenture will be subordinate and junior in right of payment, as more fully described in the subordinated indenture, to all of our senior indebtedness. See “Description of Debt Securities — Subordination of Subordinated Debt Securities.”

 

The applicable prospectus supplement will describe the following terms and provisions as they relate to the particular series of debt securities:

 

 

 

We may also issue debt securities under the indentures upon the exercise of warrants. See “Description of Warrants.”

 

We may also issue debt securities as original issue discount securities, which are securities, including zero-coupon securities, which are issued at a price significantly lower than the amount payable upon their stated maturity. These securities provide that upon redemption or acceleration of the stated maturity, an amount less than the amount payable upon the stated maturity, determined in accordance with the terms of the debt securities, will become due and payable. Specific United States federal income tax considerations applicable to original issue discount securities will be described in any applicable prospectus supplement.

 

In addition, specific United States federal income tax or other considerations applicable to any debt securities denominated other than in United States dollars, and to any debt securities which provide for application of an index to determine principal and interest, will be described in any applicable prospectus supplement.

 

We may, in certain circumstances, without notice to or consent of the holders of the debt securities, issue additional debt securities having the same terms and conditions as the debt securities issued under this prospectus and any applicable prospectus supplement, so that such additional debt securities and the debt securities offered under this prospectus and any applicable prospectus supplement, form a single series, and references in this prospectus and any applicable prospectus supplement to the debt securities shall include, unless the context otherwise requires, any further debt securities issued as described in this paragraph. We refer to such issuance of additional debt securities as a further issue.

 

Purchasers of debt securities after the date of any further issue will not be able to differentiate between the debt securities sold as part of the further issue and previously issued debt securities. If we were to issue debt securities with a greater amount of original issue discount, persons that are subject to United States federal income taxation, who purchase debt securities after such further issue, may be required to accrue greater amounts of original issue discount than they would otherwise have accrued with respect to the debt securities. This may affect the price of outstanding debt securities as a result of a further issue.

 

Form, Exchange, Registration and Transfer

 

We may issue debt securities of a series in definitive form solely as registered securities, solely as bearer securities, or both. Interest coupons will be attached to bearer securities, unless otherwise indicated in an applicable prospectus supplement. (Section 2.1) The applicable indenture may also provide that debt securities of a series may be issued in temporary or permanent global form or as book-entry securities that will be deposited with, or on behalf of, The Depository Trust Company, or DTC, or another depositary named by us and identified in an applicable prospectus supplement for such series. (Sections 2.1 and 2.4).

 

Any bearer security, including any debt security that is exchangeable for a bearer security or that is in global form and is either a bearer security or exchangeable for bearer securities, will not be mailed or otherwise delivered to any location in the United States (as defined under “Limitations on Issuance of Bearer Securities”). A bearer security, other than temporary global debt securities and bearer securities that satisfy the requirements of United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(3)(iii), may not be delivered in definitive form, and no interest will be paid on them, unless the person entitled to receive it furnishes written certification of the beneficial ownership of the bearer security, as required by Treasury Regulation Sections 1.163-5(c)(2)(i)(D)(3)(i) or an electronic certificate described in Treasury Regulations

Section 1.163-5(c)(2)(i)(D)(3)(ii). For bearer securities issued in permanent global form, certification must be given in connection with notation of a beneficial owner’s interest in it upon the original issuance of the debt security. (Section 3.3) See “— Global and Book-Entry Debt Securities” and “Limitations on Issuance of Bearer Securities” below.

 

Registered securities of any series will be exchangeable for other registered securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. In addition, if debt securities of any series are issuable as both registered securities and bearer securities, at the option of the holder, upon request confirmed in writing, and subject to the terms of the applicable indenture, bearer securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of such series will be exchangeable into registered securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor.

 

Bearer securities surrendered in exchange for registered securities between a regular or special record date and the relevant date for payment of interest will be surrendered without the coupon relating to that interest payment. Interest accrued at the time the bearer securities are exchanged for the registered security will be payable only to the holder of the applicable coupon when due, in accordance with the terms of the applicable indenture. Accrued interest will not be payable in respect of the registered security that is exchanged for the bearer security. Bearer securities will not be issued in exchange for registered securities. (Section 3.5)

 

Each bearer security, other than a temporary global bearer security, and any coupon attached thereto, will bear the following legend:

 

“Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in sections 165(j) and 1287(a) of the Internal Revenue Code.”

 

A book-entry security may not be registered for transfer or exchange, other than as a whole by DTC to a nominee or by a nominee to the depositary, unless:

 

 

Debt securities may be presented for exchange as provided above, and registered securities may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the security registrar or at the office of any transfer agent designated by us for such purposes regarding any series of debt securities and referred to in an applicable prospectus supplement, without service charge and upon payment of any taxes and other governmental charges as described in the applicable indenture. Such transfer or exchange will be effected upon the security registrar or transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request.

 

We have appointed the trustee as security registrar. (Section 3.5) If an applicable prospectus supplement refers to any transfer agents, in addition to the security registrar, initially designated by us regarding any series of debt securities, we may at any time rescind the designation or may change the location through which the transfer agent acts. However, if debt securities of a series are issuable solely as registered securities, we must maintain a transfer agent in each place of payment for such series. If debt securities of a series are issuable as bearer securities, we must maintain, in addition to the security registrar, a transfer agent in a place of payment for such series that is located outside of the United States. We may at any time designate additional transfer agents regarding any series of debt securities. (Section 10.2)

Upon any redemption in part, unless otherwise indicated in an applicable prospectus supplement, we will not be required to:

 

 

 

 

Payment and Paying Agents

 

Unless otherwise indicated in an applicable prospectus supplement, payment of any principal, premium, if any, and interest on bearer securities will be made, subject to any applicable laws and regulations, at the offices of the paying agents located outside the United States that we designate at various times. The paying agent may make payment by check, or by transfer to an account maintained by the payee with a bank located outside of the United States.

 

Unless otherwise indicated in an applicable prospectus supplement, payment of interest on bearer securities at any interest payment date will be made only upon surrender of the applicable coupon to the paying agent. (Section 10.1) No payment regarding any bearer security will be made at any of our offices or agencies in the United States, by check mailed to any address in the United States, or by transfer to an account maintained with a bank located in the United States. However, payments of any principal, premium, if any, and interest on bearer securities denominated and payable in U.S. dollars must be made at the office of our paying agent in the Borough of Manhattan, The City of New York, but only if full payment in U.S. dollars is illegal or effectively precluded by exchange controls or similar restrictions at all offices or agencies located outside the United States. (Section 10.2)

 

Unless otherwise indicated in an applicable prospectus supplement:

 

 

An applicable prospectus supplement will specify the name of any other paying agent located within the United States and any paying agent located outside the United States and initially designated by us for the debt securities. We may at any time designate additional paying agents, rescind the designation of any paying agent, or approve a change in the office through which any paying agent acts.

 

If a series of debt securities are issuable solely as registered securities, we will maintain a paying agent in each place of payment for such series.

 

If a series of debt securities are issuable as bearer securities we will maintain:

 

 

However, if the debt securities of such series are listed on The Stock Exchange of the United Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any other stock exchange located outside the United States, and that stock exchange requires, we will maintain a paying agent in London, Luxembourg, or any other required city located outside the United States, as the case may be, for the debt securities of such series. (Section 10.2)

 

Payment of any principal, premium, if any, and interest on book-entry securities registered in the name of any depositary or its nominee will be made to the depositary or nominee as the registered owner of the global security representing the book-entry securities. We expect the depositary, upon receipt of any payment of principal, premium, or interest, to immediately credit the participants’ accounts in an amount proportionate to their respective beneficial interests as shown on the records of the depositary or its nominee.

 

Neither we, the trustee, the securities registrar nor any paying agent for the debt securities will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the book-entry securities, nor will we or they have any responsibility or liability for maintaining, supervising or reviewing any records relating to beneficial ownership interests.

 

All moneys paid by us to a paying agent in respect of any principal, premium, if any, or interest on any debt security and which is unclaimed for two years after the amount becomes due and payable will be repaid to us. After that time the holder of the debt security or coupon can look only to us for payment. (Section 10.3)

 

Global and Book-Entry Debt Securities

 

If so specified in an applicable prospectus supplement, the portion of a series of debt securities which are issuable as bearer securities will initially be represented by one or more temporary or permanent global debt securities, without interest coupons, to be deposited with a common depositary in London for the Euroclear System and Clearstream Banking, S.A. for credit to the designated accounts. Unless otherwise indicated in an applicable prospectus supplement, each temporary global debt security, on or after 40 days following its issuance, may be exchanged for definitive bearer securities, definitive registered securities, all or a portion of a permanent global debt security, or any combination thereof, as specified in an applicable prospectus supplement and upon written certification in the form and to the effect described under “— Form, Exchange, Registration and Transfer.” No bearer security, including a debt security in permanent global form, that is delivered in exchange for a portion of a temporary or permanent global debt security will be mailed or otherwise delivered in connection with the exchange to any location in the United States. (Sections 3.4 and 3.5)

 

If debt securities to be sold in the United States are designated by us in an applicable prospectus supplement as book-entry securities, a global security representing the book-entry securities will be deposited in the name of Cede & Co. as nominee for DTC representing the debt securities to be sold in the United States. Upon deposit of the book-entry securities, DTC will credit an account maintained or designated by an institution to be named by us or any purchaser of the debt securities represented by the book-entry securities

with an aggregate amount of debt securities equal to the total number of debt securities that have been so purchased. An applicable prospectus supplement will describe the specific terms of any depositary arrangement regarding any portion of a series of debt securities to be represented by one or more global securities. Beneficial interests in the debt securities will only be evidenced by, and transfers of the debt securities will only be effected through, records maintained by DTC and the institutions that are its participants.

 

Certain Covenants

 

We have covenanted in the senior indenture that with regard to the senior debt securities, we will not, nor will we permit any subsidiary (as defined below) to, issue, assume or guarantee any debt for money borrowed that is secured by a mortgage, pledge, security interest or lien (a “mortgage” or “mortgages”) upon any forest lands or principal manufacturing facility (each as defined below) which we or it now owns or hereafter acquires, unless we or it provides that the senior debt securities are secured equally and ratably with, or with preference to, that debt. The foregoing restrictions will not apply if an applicable prospectus supplement provides otherwise, and will not apply to the following:

 

 

The following types of transactions, among others, will not be deemed to create debt secured by a mortgage:

 

 

However, we and any subsidiary may, without securing the senior debt securities, issue, assume or guarantee secured debt which would otherwise be subject to the foregoing restrictions; provided that the aggregate amount of secured debt that we may issue, assume or guarantee will not exceed 10% of the net tangible assets of us and our consolidated subsidiaries as of the latest fiscal year-end, when considered together with all other such debt and attributable debt (as defined below) then existing in respect of sale and lease-back transactions (as defined below) of us and our subsidiaries, other than sale or lease-back transactions whose proceeds were applied to the retirement of funded debt (as defined below). (Section 10.7 of senior indenture)

 

The term “net tangible assets” means the aggregate assets, net of applicable reserves and other properly deductible items, less current liabilities and goodwill, trade names, trademarks, patents, unamortized debt discount and expense (to the extent included in the aggregate assets), and other similar intangibles. Such amounts will be as described in our most recent consolidated balance sheet, and computed in accordance with generally accepted accounting principles.

We will not, nor will we permit any subsidiary to, lease from any person for greater than a three year term any forestlands or principal manufacturing facility which was owned (and in the case of any such principal manufacturing facility, placed in commercial operation by us or a subsidiary for more than 180 days) and then sold or transferred to that person by us or a subsidiary (a “sale and lease-back transaction”), unless either:

 

 

The term “forestlands” means property in the United States which contains standing timber which is, or is expected upon completion of a growth cycle then in process to become, of a commercial quantity and merchantable quality. However, this does not include any land which at the time is held by, or has been, or after the date of this prospectus is, transferred to a subsidiary primarily for development and/or sale rather than for the production of lumber or other timber products. (Section 1.1 of senior indenture)

 

The term “principal manufacturing facility” means any paperboard, paper or pulp mill, or paper converting plant of ours or any subsidiary which is located within the United States, other than any mill or plant or portion thereof which:

 

 

The term “subsidiary” means any corporation of which at least a majority of the outstanding stock having by its terms the ordinary voting power to elect a majority of its board of directors is at the time directly or indirectly owned or controlled by us, by any one or more subsidiaries, or by us and one or more subsidiaries, irrespective of whether any other class or classes of the corporation’s stock has or might have voting power by reason of the happening of any contingency. (Section 1.1 of senior indenture)

 

The term “attributable debt” means the present value at the time of determination of the lessee’s net rental payment obligation over the term, including any extensions, of any lease entered into in connection with a sale and leaseback transaction. The present value will be determined by using a discount rate equal to the weighted average yield to maturity of the senior debt securities then outstanding, compounded semiannually. The average will be weighted by the principal amount of the senior debt securities of each series or, in the case of original issue discount securities, the amount to be determined as provided in the definition of “outstanding” in the applicable senior indenture. (Section 1.1 of senior indenture)

 

The term “funded debt” means 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 the debt is created. (Section 1.1 of senior indenture)

 

Subordination of Subordinated Debt Securities

 

Unless otherwise indicated in an applicable prospectus supplement, the following provisions will apply to the subordinated debt securities.

 

The subordinated debt securities will, to the extent described in the subordinated indenture, be subordinate in right of payment to the prior payment in full of all senior indebtedness (as defined below).

Upon any payment or distribution of assets to creditors pursuant to any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of ours, the holders of senior indebtedness will be entitled to payment in full of any principal, premium, if any, and interest on such senior indebtedness, before the holders of the subordinated debt securities will be entitled to any payment in respect of any principal, premium, if any, or interest on the subordinated debt securities. (Section 16.2 of subordinated indenture) Because of the subordination, our creditors may ratably recover less than the holders of senior indebtedness, and more than the holders of the subordinated debt securities, upon liquidation or insolvency.

 

If the maturity of any subordinated debt securities is accelerated, the holders at that time of all senior indebtedness then outstanding will first be entitled to receive payment in full of all amounts due thereon, before the holders of the subordinated debt securities will be entitled to receive any payment of any principal, premium, if any, and interest on the subordinated debt securities. (Section 16.3 of subordinated indenture)

 

No principal, premium, or interest payments may be made in respect of the subordinated debt securities if:

 

 

For purposes of the subordination provisions of the subordinated indenture, the payment, issuance and delivery of cash, property or securities, other than stock and our specified subordinated securities, upon conversion of a subordinated debt security, is a principal payment in respect of the subordinated debt security.

 

The subordinated indenture does not limit or prohibit the incurrence of additional senior indebtedness, including indebtedness that is senior to the subordinated debt securities, but subordinate to our other obligations. The senior debt securities constitute senior indebtedness under the subordinated indenture.

 

The term “senior indebtedness” includes all amounts due on and obligations incurred in connection with any of the following, whether outstanding at the date the subordinated indenture is executed or incurred or created after the subordinated indenture is executed, unless the instrument creating or evidencing the obligation provides that it is not senior in right of payment to the subordinated debt securities, or is equally senior with or junior to the subordinated debt securities (Section 1.1 of subordinated indenture):

 

 

 

The applicable prospectus supplement may further describe the provisions, if any, applicable to the subordination of the subordinated debt securities of a particular series.

 

Conversion Rights

 

If applicable, the terms pursuant to which debt securities of any series are convertible into or exchangeable for our common stock or our other securities will be described in an applicable prospectus supplement. These terms will describe whether conversion or exchange is mandatory, at the option of the holder, or at our option. These terms may include provisions pursuant to which the number of shares of our common stock or our other securities to be received by the holders of debt securities would be subject to adjustment.

 

Events of Default

 

Each of the follow events is an event of default under the applicable indenture, regarding debt securities of any series, unless otherwise indicated in an applicable prospectus supplement:

 

 

If an event of default regarding the outstanding debt securities of any series occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of such series may declare, by notice as provided in the applicable indenture, the principal amount of the debt securities of such series to be due and immediately payable.

 

For any debt security that is an original issue discount security or whose principal amount is not then determinable, the amount due and immediately payable is that portion of the principal amount of the debt security (or other amount in lieu of the principal amount) as is specified in the terms of the debt security. At any time after a declaration of acceleration regarding debt securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the trustee, the holders of a majority in aggregate principal amount of the outstanding debt securities of such series may, under specific circumstances, rescind and annul such acceleration. (Section 5.2)

 

The indentures provide that, subject to the trustee’s duty to act with the required standard of care during default, the trustee has no obligation to exercise any of its rights or powers under the applicable indenture at the request or direction of any of the holders, unless the holders have offered reasonable indemnity to the trustee. (Section 6.1) Subject to the trustee indemnification provisions, the holders of a majority in aggregate principal amount of the outstanding debt securities of any series may direct the time, method and place of

conducting any proceeding for any remedy available to the trustee, or of exercising any trust or power conferred upon the trustee, regarding the debt securities of such series. (Section 5.12)

 

We will annually furnish to the applicable trustee a statement as to the performance of specific obligations under the applicable indenture and as to any default in performance. (Section 10.7)

 

Defeasance

 

We may, if so specified regarding any particular series of debt securities, discharge our indebtedness and certain of our obligations under the applicable indenture, by depositing with the applicable trustee funds or obligations issued or guaranteed by the United States, unless an applicable prospectus supplement indicates otherwise.

 

Defeasance and Discharge.  The indentures provide that, if so specified regarding the debt securities of any series, we will be discharged from all obligations in respect of the debt securities of such series upon deposit in trust of cash and/or U.S. government obligations with the applicable trustee, the payment of interest and principal upon which will provide sufficient cash to pay any principal, premium, each installment of interest, and any sinking fund payments on the debt securities of such series at the stated maturity of such payments and in accordance with the terms of the applicable indenture and debt securities of such series. This will include, in the case of subordinated debt securities, the subordination provisions described under “— Subordination of Subordinated Debt Securities.”

 

The term “U.S. government obligations” means direct obligations of the United States or of an agency or instrumentality of the United States that is, or is unconditionally guaranteed as, a full faith and credit obligation of the United States and that is not callable or redeemable at the option of the issuer thereof. The term also includes certain depository receipts with respect to such obligations.

 

Such a deposit in trust may be made only if, among other things, the following conditions are met: