UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrantx Filed by a Party other than the Registrant¨

Check the appropriate box:

International Paper Company

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

6400 Poplar Avenue

Memphis, Tennessee 38197

JOHN V. FARACI

Chairman and Chief Executive Officer

April [    ], 20089, 2009

Dear Fellow Shareowners,

When I look back overOver the past twofew years, I am pleased by the progress we have made against our transformation objectives. At the end of 2007, we’re right where we thought we’d be back in 2005 when we announced our plan to make International Paper has reshaped itself as a global paper and packaging company, become more competitivefocused and profitable company.lower cost, and achieved better global balance.

In 2007,During 2008, we continued to strengthenmake progress despite a severe economic downturn. Due to the collective efforts of our global paper,employees worldwide, we:

These accomplishments demonstrate our commitment to becoming stronger and distribution businesses and manage our cost structure. We also returned value to shareownersmore competitive while we navigate through significant share repurchases and selectively reinvested in Brazil, China and Russia to build capabilities that will improve our global earnings and create shareowner value.challenging economic conditions.

We appreciateThroughout 2008, we appreciated the support of our Board of Directors throughout our transformation and were pleased to welcome during the past year Lynn Laverty Elsenhans, executiveStacey J. Mobley, who retired from E.I. DuPont de Nemours as senior vice president, global manufacturing, Shell Downstream Inc.,chief administrative officer and J. Steven Whisler, retired chairman and chief executive officer, Phelps Dodge Corp., to our board. Theirgeneral counsel. His accomplishments and experience will add significantbe an important benefit for International Paper.

We also would like to thank Donald F. McHenry, who retired in December, for his dedicated service and many contributions to International Paper.Paper over the past 27 years. Don’s wisdom and counsel have been very valuable to the Board, and he has played an important role in shaping the company we are today.

AsGoing forward, we go forward, we’ve got more to do to achieveare laser focused on execution and doing those things that will help us stay financially strong and flexible. In this difficult and uncertain environment, our goals of producing the No. 1 return versusobjective remains outperforming our peer companiescompetition, positioning International Paper for a stronger and generating profits that exceed our cost of capital. As we execute Year 3 of our transformation plan, we will continue to work very hard to deliver performance that generatesbetter future, and delivering long-term value for you, our shareowners.

Sincerely,

John Faraci

NOTICE OF ANNUAL MEETING OF SHAREOWNERS

To the Owners of Common Stock of International Paper Company:

By order of the Board of Directors,

MAURA A. SMITH

Senior Vice President, General Counsel, and

Corporate Secretary and Global Government Relations

April [        ], 2008

iii9, 2009

TABLE OF CONTENTS

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Shareowners of record of International Paper common stock, or their duly authorized proxies, at the close of business on Friday, March 14, 2008,16, 2009, the record date, are entitled to vote on each matter submitted to a vote at the annual meeting2009 Annual Meeting and at any adjournment or postponement of the annual meeting. There were 427,775,172431,833,280 common shares outstanding on March 14, 2008.16, 2009. Each common share is entitled to one vote on each matter to be voted on at the 2009 Annual Meeting.

A list of shareowners as of the record date will be available for inspection and review upon request of any shareowner to Ms. Smith at the address on page 5.4. We will also make the list available at the annual meeting.

Voting Procedures and Annual Meeting Attendance

How many votes must be present to hold the annual meeting?

A majority of the votes that may be cast (at least 213,887,587215,916,641 votes), present in person or represented by proxy, is needed to hold the annual meeting.2009 Annual Meeting. We urge you to vote by proxy even if you plan to attend the meeting. That will help us to know as soon as possible that we have enough votes to hold the meeting.

How do I vote my shares?

You may vote at the annual meeting by proxy or in person.

If you are a holder of record (that is, if your shares are registered in your own name with our transfer agent), you have several options. You may vote by telephone, on the Internet or by attending the meeting and voting in person. In addition, you may vote by mail using the enclosed proxy card.

If you hold your shares in street name (that is, if you hold your shares through a broker, bank or other holder of record), you will receive a voting instruction form from your broker, bank or other holder of record. This form will explain which voting options are available to you. If you want to vote in person at the annual meeting, you must obtain an additional proxy card from your broker, bank or other holder of record authorizing you to vote. You must bring this proxy card to the meeting.

How do I attend the annual meeting?

All shareowners or their proxy holders, as of the record date, Friday, March 14, 2008,16, 2009, or their proxy holders, are welcome to attend the annual meeting. If you are voting by mail, by telephone or via the Internet, but still wish to attend the meeting, follow the instructions on your proxy card or via the Internet

(www.investorconnect.comwww.proxyvote.com) to tell us that you plan to attend. When you arrive at the meeting, please look for the “Shareowners’ Welcome Desk,” where you will be asked for photo identification in order to receive your admittance card.

If you have not told us prior to the annual meeting that you will attend, but you decide to attend, please go to the “Shareowners’ Welcome Desk” and provide proof of ownership of your shares as well as your photo identification in order to obtain an admittance card.

What happens if the annual meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.

If I hold shares in an International Paper employee benefit plan, how do I vote my shares?

International Paper employees may hold shares of Company common stock in one of our employee benefit plans, including the:

If you hold shares in our Salaried Savings Plan or Hourly Savings Plan, you may instruct State Street Bank and Trust Company, the trustee for these plans, to vote your shares in the Company Stock Fund by returning the proxy/voting instruction card included with this mailing or by providing voting instructions by telephone or on the Internet as explained on the voting instruction card. If you do not provide voting instructions, or if your instructions are unclear or incomplete, the trustee will vote your shares at its discretion.

Employees who received shares of restricted stock under our LTICP may also vote their shares. The process for voting shares of restricted stock is the same as the process for voting shares of common stock, described above. However, if you do not vote your shares, they will not be counted as there is no trustee for the LTICP to vote the shares on your behalf.

Can I change or revoke my proxy?

Yes, you may change your vote or revoke your proxy at any time before the annual meeting. If you are a holder of record, prior to the annual meeting you may:

A new proxy card or written revocations of a prior vote must be sent by mail to Ms. Smith and received prior to the annual meeting. If you attend the annual meeting, your vote in person at the annual meeting will revoke any previously submitted proxy.

If you hold your shares in street name, you may change your voting instructions by contacting your broker, bank or other holder of record.

What if I do not indicate my vote for one or more of the matters on my proxy card?

If you return a proxy card without indicating your vote, your shares will be voted as follows:

What happens if I do not vote?

If you do not vote shares held in your name, your shares will not be voted.

If your shares are held through the Company’s Salaried Savings Plan or the Company’s Hourly Savings Plan, and you do not provide instructions, the trustee for the plan will vote your shares at its discretion.

If your shares are held through a broker and you do not give your broker instructions on how to vote, one of two things can happen, depending upon the type of proposal. First, for Items 1 through 3 of the election of directors and ratification of our independent registered public accounting firm,Company’s proposals, the broker may vote your shares at its discretion. For Item 4 of the CompanyCompany’s proposals and the shareowner proposals,proposal in Item 5, absent instructions from you, the broker may not vote your shares at all. When that happens, it is called a “broker non-vote.” Please refer to “Matters to be Acted Upon at the 20082009 Annual Meeting” for a discussion of the effect of a “broker non-vote” on each proposal.Items 4 and 5.

Will my vote be confidential?

Yes. Your vote is confidential and will not be disclosed to our directors or employees.

Will the Company’s independent registered public accounting firm be present at the annual meeting?

Yes, representatives of Deloitte & Touche LLP will attend the meeting. They will be available during the meeting to answer your questions and they will have the opportunity to make a statement, if they desire to do so. The Audit and Finance Committee of our Board and our entire Board havehas approved the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 20082009 fiscal year, subject to ratificationand this decision has been ratified by a majority of votes cast at the annual meeting.our entire Board.

As discussed above, a paper copy of our By-lawsBy-Laws is available at no cost by written request to Ms. Smith.

Matters to be Acted Upon at the 20082009 Annual Meeting

Item 1 — Election of Directors

Item 2 — Ratification of Deloitte & Touche LLP as ourthe Company’s Independent Registered Public Accounting Firm for 20082009

Our Board of Directors upon the recommendation of the Audit and Finance Committee, has ratified the selection of Deloitte & Touche LLP (“Deloitte & Touche”) by our Audit and Finance Committee to serve as our independent registered public accounting firm for 2008, subject2009.

We are asking shareowners to ratification by our shareowners.

ratify the selection of Deloitte & Touche. To ratify the selection of our independent registered public accounting firm, amajority of votes cast“for” the proposed amendmentitem is required.

You may vote “for” or “against” the ratification of the selection of our independent registered public accounting firm, or you may “abstain” from voting. “Abstentions” will have no effect on the vote.

Although ratification is not required by our By-lawsBy-Laws or otherwise, the Board is submitting the selection of Deloitte & Touche LLP to our shareowners for ratification because we value our shareowners’ views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. Our Audit and Finance Committee will consider the outcome of this vote in its decision to appoint an independent registered public accounting firm, but is not bound by the shareowners’ vote. Even if the selection of Deloitte & Touche is ratified, the Audit and Finance Committee may change the appointment at any time during the year if it determines that a change would be in the best interest of the Company and our shareowners.

Our Board of Directors unanimously recommends that you vote FOR the ratification of Deloitte & Touche as our independent registered public accounting firm for 2008.2009.

Item 3 — Company Proposal to Amend Our Restated CertificateArticle I and Article II of Incorporation to Approve Majority Voting for Election of Directors in Non-Contested Electionsthe Company’s By-Laws Regarding Special Shareowners Meetings

To approve this amendment to our Restated Certificatethe By-Laws of Incorporation,the Company, amajority of all outstanding sharesvotes cast must be voted “for” the proposed amendment.amendment is required.

You may vote “for” or “for”against or“against”” the Company proposal, or you may ““abstain”abstain” from voting. An““abstention”Abstentions” will have no effect on the same effect as a vote“against” the Company’s proposal to amend our Certificate of Incorporation.vote.

The Board of Directors recommends that shareowners approve an amendment to Article VII of the Company’s Restated Certificate of Incorporation to approve majority voting for the election of directors in non-contested elections.

Background

Article I of the By-Laws of International Paper Company states that a special meeting of shareowners may be called by (i) a majority of the Board of Directors, (ii) the Chairman of the Board, or (iii) the President of the Company. Presently, our By-Laws do not provide shareowners the right to call a special meeting.

Section 602 of the New York business corporation law providesBusiness Corporation Law (“NYBCL”) states that unless otherwise specified ina special meeting of shareowners may be called by the boardor by such person or persons as may be authorized by a company’s by-laws or certificate of incorporation (emphasis added). Under Section 601 of the NYBCL, a director is electedcompany’s by-laws may be amended by a pluralitymajority of the votes cast. Thecast by the shares entitled to vote at the company’s annual meeting.

We are proposing that our shareowners amend our Company’s RestatedBy-Laws to grant shareowners holding not less than 40 percent of our outstanding common stock the right to call a special meeting. This right would be subject to all other relevant provisions of our By-Laws, our Certificate of Incorporation does not specify the voting standard required in director elections, so our directors are currently elected by a plurality vote; that is, a director nominee who receives the highest number of affirmative votes cast is elected, whether or not such votes constitute a majority, including withheld votes.and applicable laws.

In 2006, the Company adopted a form of majority voting for non-contested director elections, implementing the voting standard through a By-law amendment. Under the majority voting standard, directors continue to be elected by a plurality vote, but the By-law requires that a director nominee who receives a greater number of “withheld” votes than “for” votes must immediately tender his or her resignation from the Board. The Board then would decide, through a process managed by the Governance Committee and excluding the nominee in question, whether to accept the resignation. Unless the Board determines in its judgment that it is in the best interest of the Company for the director to remain on the Board, the Board will accept the

resignation. The Board’s explanation of its decision would be promptly disclosed in a Form 8-K report filed with the Securities and Exchange Commission.

Proposal

To further strengthen this majority voting approach,Our Board, in its continuing review of best practices in corporate governance, has evaluated the right of shareowners to call special meetings. Our Board has authorized, and recommends thata proposal to amend our By-Laws to permit shareowners approve, an amendmentholding not less than 40 percent of our outstanding common stock the right to the Company’s Restated Certificate of Incorporation that would specify that director nominees incall a non-contested election would be elected by a majority vote. Under this provision, each vote is specifically counted “for” or “against” the director’s election, and will further enhance the accountability of each director to the Company’s shareowners. An affirmative majority of the total number of votes cast “for” a director nominee will be required for election. Shareowners will also be entitled to abstain with respect to the election of a director. In accordance with New York law, abstentions will have no effect in determining whether the required affirmative majority vote has been obtained. Director nominees in contested elections would continue to be elected by plurality vote. An election is considered contested if there are more nominees for election than positions on the Board to be filled.special meeting.

Next Steps

Under New York law, shareowners must approve an amendment to the Company’s Restated Certificate of Incorporation to change the voting standard in director elections. This amendment, if approved, will become effective upon the filing of an appropriate certificate of amendment with the New York Department of State.

If the proposed amendment is approved, a new paragraph will be added to Article VII of our Restated Certificate of Incorporation. The text of Article VII of our Restated Certificate of Incorporation, as marked to reflect the proposed amendment, is attached to this proxy statement asAppendix 1.

Upon approval of this proposal and the filing of the certificate of amendment, the Board will also amend the Company’s By-laws to conform its director resignation policy to the majority vote standard contained in our Restated Certificate of Incorporation, so that an incumbent director who did not receive the requisite affirmative majority of the votes cast for his or her re-election must tender his or her resignation to the Board. The Board will decide whether to accept the resignation in a process similar to the one the Board currently uses pursuant to the existing policy.

Our Board of Directors unanimously recommends that you vote FOR the proposal to approve majority voting for the election of directors in non-contested elections.

Item 4 — Company Proposal to Amend Our Restated Certificate of Incorporation to Elect Directors Annually

To approve this amendment to our Restated Certificate of Incorporation,at least 80 percent of the outstanding shares of the Company must be voted “for” the proposed amendment.

You may vote “for” or “against” the Company proposal, or you may “abstain” from voting. An “abstention” will have the same effect as a vote “against” the Company’s proposal to amend our Certificate of Incorporation.

Our Board of Directors has adopted and now recommends for your approval a proposal to amend Article VII of our Restated Certificate of Incorporation to eliminate the classification of our Board of Directors. Our Restated Certificate of Incorporation permits an amendment to, or repeal of, this provision of Article VII only upon the vote of at least 80 percent of the shares outstanding.

Background

Our Restated Certificate of Incorporation currently divides our Board into three classes, with each class of directors elected to serve staggered three-year terms. Our Board has adopted, and recommends that you approve, a proposal to amend our Restated Certificate of Incorporation to phase out the classified Board and phase in the annual election of directors.

The Company and our Board are committed to good corporate governance, which is why our Board has made developing and implementing corporate governance best practices one of its fundamental goals. Board efforts in this regard are working; we have been repeatedly recognized as a global corporate governance leader.

Over the past two years, our Board, through its Governance Committee, has reviewed the classified board structure. Our Board acknowledges the growing sentiment among shareowners in favor of annual elections. Our Board further recognizes that annual elections are in line with emerging best practices in the area of corporate governance.

Proposal

As a result of its most recent review of the classified board structure, our Board, on the recommendation of its Governance Committee, has decided to propose declassifying our Board. If approved, declassification will be phased in over a three-year period, beginning at the 2009 Annual Meeting, as follows:

This proposal will not affect the election of Class II directors at this 2008 Annual Meeting. Beginning with the 2011 Annual Meeting, if this proposal is approved, all directors will stand for election for one-year terms.

Next steps

If Item 4 is approved, we will amend the text of Article VII of our Restated Certificate of Incorporation, as shown inAppendix 2. The amendment will become effective upon the filing of an appropriate certificate of amendment with the New York Department of State.

Our Board of Directors unanimously recommends that you vote FOR the approval of an amendment to Article VII of our Restated Certificate of Incorporation to elect directors annually.

Item 5 – Company Proposal to Amend Article VII of Our Restated Certificate of Incorporation to Eliminate Supermajority Voting Provisions

To approve this amendment to our Restated Certificate of Incorporation,at least 80 percent of the outstanding shares of the Company must be voted “for” the proposed amendment.

You may vote “for” or “against” the Company proposal, or you may “abstain” from voting. An “abstention” will have the same effect as a vote “against” the Company’s proposal to amend our Restated Certificate of Incorporation.

Background

Our Board of Directors, in its continuing review of best practices in corporate governance, has evaluated the need for the supermajority voting provisions contained in Article VII of our Restated Certificate of Incorporation. Our Board has adopted and now recommends for your approval a proposal to amend Article VII of our Restated Certificate of Incorporation to eliminate supermajority voting provisions.

Proposal

One provision in Article VII of our Restated Certificate of Incorporation requires an 80 percent vote to approve the removal of a director for cause. The Company proposes to eliminate this 80 percent vote requirement and replace it with a majority vote requirement.

Another provision in Article VII of our Restated Certificate of Incorporation requires that any modification or repeal of any of the following sections be approved by an 80 percent vote:

The Company proposes to eliminate the requirement that the repeal or modification of these provisions must be approved by an 80 percent vote and replace it with a majority vote requirement.

Next steps

If this proposal is approved, we will amend the text of Article VIII and Article II of our Restated Certificatethe By-Laws of Incorporation,International Paper Company will be amended as shown inAppendix 31. The amendment will become effective upon the filing of an appropriate certificate of amendment with the New York Department of State.

Special note regarding the Company’s proposal in Item 4:

Under Item 4, above, the Company has proposed to amend Article VII of our Restated Certificate of Incorporation to phase-in the annual election of directors. The amendment proposed under Item 4 requires approval by 80 percent of our outstanding shares. If Item 4 is not approved at this 2008 Annual Meeting, but Item 5 is approved at this Annual Meeting, then any future changes to our Restated Certificate of Incorporation relating to the length of a director’s term in office will require approval by only a majority of the shares outstanding rather than the supermajority vote currently required.

Our Board of Directors unanimously recommends that you vote FOR the approval of the amendment to Article VII of our Restated Certificate of Incorporation to eliminate supermajority voting provisions.

Item 6 – Company Proposal to Amend Article VIII of Our Restated Certificate of Incorporation to Eliminate Supermajority Voting Provisions Relating to Business Combinations

To approve this amendment to our Restated Certificate of Incorporation,a majority of outstanding shares voted “for” the proposed amendment is required.

You may vote “for” or “against” the Company proposal, or you may “abstain” from voting. An “abstention” will have the same effect as a vote “against” the Company’s proposal to amend our Certificate of Incorporation.

Background

Article VIII of our Restated Certificate of Incorporation contains a provision that applies to certain business combinations. Under this provision, any merger or business combination with an“Interested Stockholder” (defined as the beneficial owner of 10 percent or more of the Company’s outstanding voting stock or an affiliate or associate of the Company who was a 10 percent beneficial owner within the two years preceding the transaction) requireseither:(i) affirmative approval by 80 percent of the outstanding shares entitled to vote;or (ii) approval by a majority of votes entitled to be cast by disinterested shareownersand either (x) approval by our Board at a time when the majority of the directors are disinterested directors, or (y) the consideration received meets an articulated “fair price” test.

An amendment of Article VIII must be approved by 80 percent of the outstanding shares entitled to vote,unless the change has been recommended by our Board of Directors and, at the time of the change, disinterested directors constitute a majority of the entire Board, in which case this amendment of Article VIII requires the affirmative vote of a majority of outstanding shares.

Proposal

Our Board, in its continuing review of best practices in corporate governance, has evaluated the need for these 80 percent vote requirements relating to business combinations. Our Board, which is comprised of a majority of disinterested directors, has determined that these provisions should be eliminated, and is recommending a proposal to amend Article VIII of our Restated Certificate of Incorporation to eliminate the 80 percent vote requirement and replace it with a majority vote requirement.

Next steps

If this proposal is approved, we will amend the text of Article VIII of our Restated Certificate of Incorporation, as shown inAppendix 4. The amendment will become effective upon the filing of an appropriate certificate of amendment with the New York Department of State.

Our Board of Directors unanimously recommends that you vote FOR the approval of the amendmentamendments to Article VIIII and Article II of our Restated Certificatethe By-Laws of IncorporationInternational Paper Company to eliminate supermajority voting provisions relatinggrant shareowners holding not less than 40 percent of the Company’s common stock the right to business combinations.call a special shareowners meeting.

Item 74 — ShareownerCompany Proposal Concerning Majority Votingto Approve the 2009 Incentive Compensation Plan

We expectThe Company currently maintains the followingInternational Paper Company Long-Term Incentive Compensation Plan (the “LTICP”). Shareowners first approved the LTICP in 1989, and later approved amendments to the LTICP in 1994, 1999, 2000, 2003 and 2004. On February 9, 2009, the Board of Directors approved the 2009 Incentive Compensation Plan (the “Incentive Compensation Plan” or “ICP”), subject to shareowner proposal toapproval. If shareowners approve the ICP, no further grants will be presented atmade under the annual meeting.LTICP.

The shareowner proposal is considered passed ifTo approve the 2009 Incentive Compensation Plan, amajority of the votes cast are “for” the proposal. this proposal is required.

You may vote “for” or “against” the shareowner proposal,approval of the ICP, or you may “abstain” from voting. “Abstentions” will have no effect on the vote forvote. For this Item 4, a broker non-vote will have no effect on the shareowner proposal.vote.

We describe below the terms of the ICP. This summary is qualified in its entirety by the full text of the ICP, which is attached to this proxy statement asAppendix 2.

Summary of the Proposed Incentive Compensation Plan

“RESOLVED,Purpose. Shareowners urge our companyThe purpose of the ICP is to take all steps necessary, in compliance with applicable law,provide incentive for directors and designated employees of the Company to fully adopt simple majority vote requirements in our Charterimprove the performance of the Company on a long-term basis, and By-laws. This includes any special solicitations needed for adoption.to attract and retain the services of directors and employees.

Simple majority voteAdministration. The ICP will facilitatebe administered by the adoptionManagement Development and Compensation Committee (the “Committee”) of annual electionthe Board of Directors. The Committee will have the authority to designate participants; determine the type or types of awards to be granted to each director. Annual electionparticipant and the number, terms and conditions of each director wonthe awards; establish, adopt or revise any rules and regulations as it may deem advisable to administer the ICP; and make all other decisions and determinations that may be required under the ICP. The Board may from time to time delegate to the senior vice president, human resources and communications, the authority to grant awards under the ICP, other than the grant of awards to senior vice presidents or above. In addition, the full Board of Directors may at any time assume the administration of the ICP, in which case it will have all the powers of the Committee under the ICP. Further, grants to our overwhelming 79 percent-support at our 2006 annual meeting. The Council of Institutional Investorswww.cii.org recommends adoption of shareholder proposals upon receiving their first majority vote.

These directors received large withhold votes in part because the annual election of each director proposal was not adopted after our 79 percent-supporting vote:

Simple majority vote won a remarkable 72 percent yes-vote average at 24 major companies in 2007. Currently a 1 percent-minority can frustrate the willchief executive officer or to members of our 79 percent-shareholder majorityBoard must be approved by the independent members of the Board pursuant to ourCorporate Governance Principles.

Shares Available for Awards. The proposed ICP provides that the maximum number of shares of common stock that may be available for awards is 15,400,000 shares, plus shares that are subject to awards under the LTICP as of the date of the 2009 Annual Meeting that thereafter terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason. It is important to understand how we have arrived at this requested amount.

As of December 31, 2008, the total number of shares available under the LTICP was 28,091,772 shares. Of these shares, 7,048,502 shares remain available for stock-based awards, such as performance-based restricted stock awards under our multiple supermajority provisionsPerformance Share Program (“PSP”). The balance – 21,043,270 – is available only for grants of 80 percent. Alsostock options or stock appreciation rights. Because we changed our supermajority vote requirements canequity awards to focus on performance-based stock awards, the remaining number of shares available for performance-based stock awards compared to the number available for stock options is no longer sufficient.

In order to align our share authorization with the equity vehicles that comprise our compensation program, we are seeking to convert the 28,091,772 shares into 15,400,000 shares that may be almost impossibleused for any type of awards. This both reduces the total number of shares available for grant, and provides us greater flexibility to obtain when one considers abstentionsaward the types of equity vehicles that we believe better serve our incentive compensation objectives.

Eligibility. The ICP permits the grant of incentive awards to non-employee directors and broker non-votes.designated employees as selected by the Committee. As of April 9, 2009, the number of eligible participants was approximately 1,100. The number of eligible participants may increase over time based upon future growth of the Company.

For example, Goodyear (GT) proposal for annual electionPermissible Awards. The ICP authorizes the granting of each director failed to pass even though 90 percentawards in any of votes cast were yes-votes. While companies often state that the purpose of supermajority requirements is to protect minority shareholders, supermajority requirements are arguably most often used to block initiatives opposed by management but supported by most shareowners. The Goodyear vote is a perfect illustration.

William Steiner, Piermont, NY, said the merits of adopting this proposal should also be considered in the context of our company’s overall corporate governance structure and individual director performance. For instance, in 2007 the following structure and performance issues were identified (and certain concerns are noted):forms:

1) Cumulative voting.

2) Act by written consent.

3) Call a special meeting.

Additionally:

Ms. Brooks

Mr. McHenry

Mr. Walter

Mr. Faraci

Mr. Gibara

Mr. Turner

The above concerns show there is room for improvement and reinforces the reason to take one step forward to encourage our board to respond positively to this proposal:

Adopt Simple Majority Vote –

Yes on [7]

The above shareholder proposal text is subject to a more independent vetting process for accuracy and truthfulness than the management comments that follow.”

[End of Shareowner Proposal]

The Company agrees with the concept of majority voting, as evidenced by the Company’s proposals in this proxy statement and recent governance changes. However, the Company believes the proponent’s non-binding proposal is vague and confusing, and does not offer specific, constructive suggestions. The Company has decided to take a proactive approach, as reflected by the Company’s proposals in Items 3, 5 and 6 that, if approved by shareowners, will adopt majority voting in our Restated Certificate of Incorporation.

Much of the supporting statement in the proponent’s non-binding shareowner proposal attempts to criticize the Company’s overall corporate governance practices. The Board believes this criticism is unfounded based on the following corporate governance steps the Company has taken:

Board Actions Taken Prior to this Annual Meeting

Limitations on Individual Awards. The maximum number of shares of common stock that may be granted under the ICP in the form of restricted stock or restricted stock units to any one person during any 12-month period is 660,000. The maximum number of shares of common stock that may be covered by options granted under the ICP to any one person during any 12-month period is 1,200,000. The maximum number of shares that may be covered by stock appreciation rights granted under the ICP to any one person during any 12-month period is 1,200,000. The maximum number of shares that may be granted under the ICP in the form of other stock-based awards to any one person during any 12-month period is 660,000. The aggregate dollar value of any cash-based award that may be paid to any one participant during any one fiscal year under the ICP is $10,000,000.

Performance Goals. All options and stock appreciation rights granted under the ICP will be exempt from the $1,000,000 deduction limit imposed by Code Section 162(m). The Committee may designate any other award granted under the ICP as a qualified performance-based award in order to make the award fully deductible without regard to the $1,000,000 deduction limit imposed by Code Section 162(m). If an award is so designated, the Committee must establish one or more objectively determinable performance goals for the award based on one or more of the following Qualified Business Criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance of an affiliate or a division, region, department or function within the Company or an affiliate:

As explained above

performance achievement and such shares will be prorated based on the number of months completed in that period prior to the change in control. The remaining portion of the award will be cancelled.

In addition, the Committee may, in Items 3, 5its discretion, accelerate the vesting and/or payment of awards at any time. The Committee may differentiate among participants or among awards in exercising such discretion. The Committee may not accelerate payment of any award if such acceleration would violate Section 409A of the Code.

Adjustments. In the event of a transaction between the Company and 6,its shareowners that causes the per-share value of our common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the share authorization limits under the ICP will be adjusted proportionately, and the Committee will make such adjustments to the ICP and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend, or a combination or consolidation of the outstanding common stock into a lesser number of shares, the authorization limits under the ICP will automatically be adjusted proportionately, and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price. The ICP permits discretionary adjustments for mergers, business combinations and the like (which are not equity restructurings), and permits discretionary adjustments in the context of equity restructurings where the adjustment is for a purpose other than equalizing the award’s value immediately before and after the equity restructuring.

Termination and Amendment. The Board of Directors or the Committee may, at any time and from time to time, terminate or amend the ICP; however, if an amendment would constitute a material amendment requiring shareowner approval under applicable listing requirements, laws, policies or regulations, then such amendment will be subject to shareowner approval. In addition, the Board of Directors or the Committee may condition any amendment on the approval of shareowners for any other reason. No termination or amendment of the ICP may, without the written consent of the participant, reduce or diminish the value of an award determined as if the award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination.

The Committee may amend or terminate outstanding awards to one or more participants. However, such amendments may require the consent of the affected participants and, unless approved by shareowners, the exercise price of an outstanding option or base price of a stock appreciation right may not be reduced, directly or indirectly, and the original term of an option may not be extended.

Prohibition on Repricing. As indicated above under “Termination and Amendment,” outstanding stock options and stock appreciation rights cannot be repriced, directly or indirectly, without the prior consent of International Paper’s shareowners. The exchange of an “underwater” option (i.e., an option having an exercise price in excess of the current market value of the underlying stock) for another award would be considered an indirect repricing and would, therefore, require the prior consent of International Paper’s shareowners.

Expenses.All expenses of the ICP are paid for by the Company.

Certain U.S. Federal Income Tax Effects

The U.S. federal income tax discussion set forth below is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the ICP. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. State, local and U.S. income tax consequences that may have applied in prior years are not discussed, and may vary from locality to locality.

Restricted Stock.Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the stock as of that date (less any amount he or she paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the participant files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.

Restricted or Deferred Stock Units. A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a stock unit award is granted. Upon receipt of shares of stock (or the equivalent value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the stock or other property as of that date (less any amount he or she paid for the stock or property), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

Performance Awards.A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a performance award is granted (for example, when the performance goals are established). Upon receipt of cash, stock or other property in settlement of a performance award, the participant will recognize ordinary income equal to the cash, stock or other property received, and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

Non-qualified Stock Options. There will be no federal income tax consequences to the optionee or to the Company upon the grant of a non-qualified stock option under the ICP. When the optionee exercises a non-qualified option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the stock received upon exercise of the option at the time of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.

Incentive Stock Options. There will be no federal income tax consequences to the optionee or to the Company upon the grant of an incentive stock option. If the optionee holds the option shares for the required holding period of at least two years after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss, and the Company will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price, and the Company will be allowed a federal income tax deduction equal to such amount. While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.

Stock Appreciation Rights. A participant receiving a stock appreciation right under the ICP will not recognize income, and the Company will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of stock received will be ordinary income to the participant and the Company will be allowed a corresponding federal income tax deduction at that time.

Code Section 409A. The ICP permits the grant of various types of incentive awards, which may or may not be exempt from Code Section 409A. If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Restricted stock awards, stock options and stock appreciation rights that comply with the terms of the ICP, are designed to be exempt from the application of Code Section 409A. Restricted stock units and deferred stock units granted under the ICP would be subject to Section 409A unless they are designed to satisfy the short-term deferral exemption under the regulations. If not exempt, such awards must be designed to meet the requirements of Section 409A in order to avoid early taxation and penalties.

Tax Withholding. The Company has adoptedthe right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and now recommendslocal taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the ICP. Certain participants, including the Company’s senior vice presidents and above, are permitted to elect additional withholding for yourpayment of income taxes.

Benefits to Named Executive Officers and Others

As of the date of the 2009 Annual Meeting, no awards had been granted under the ICP. Subject to shareowners’ approval three binding proposalsof the ICP, all awards under the ICP will be made at the discretion of the Committee or under delegated authority. Therefore, it is not presently possible to implement a majority vote standard.determine the benefits or amounts that will be received by any individual or groups pursuant to the ICP in the future, or the benefits or amounts that would have been received by any individuals or groups for the last completed fiscal year if the ICP had been in effect.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, 2008, regarding compensation plans under which our equity securities are authorized for issuance.

(1) Amount does not include 18,914 shares to be issued under the plan of an acquired company. No additional shares may be granted under this plan.

Our Board of Directors unanimously recommends that you vote AGAINST this proposal.FOR the approval of the 2009 Incentive Compensation Plan.

Item 85 — Shareowner Proposal Concerning Sustainable Forestry

We expect the following shareowner proposal to be presented at the annual meeting. Upon request, we will promptly provide any shareowner with the name, address and phone number of shares held by the shareowner making this proposal.

The shareowner proposal is considered passed if amajority of the votes cast are “for” the proposal. You may vote “for” or “against” the shareowner proposal, or you may “abstain” from voting. “Abstentions” will have no effect on the vote for this shareowner proposal. For this Item 5, a broker non-vote will have no effect on the vote.

“Whereas:

As a global forest products, paper and packaging company, forests provide significant raw materials for International Paper’s (IP) products. Forests are rapidly declining at a rate of 3355 soccer fields per minute according to the United Nations and only about 20 percent20% of the world’s original forests remain undisturbed.

Forests store extensive amounts of carbon, critical to mitigating the effects of climate change. Forests store the equivalent of 175 years of global fossil fuel emissions and forest loss is responsible for 20-25 percent20-25% of total CO2annual carbon dioxide emissions globally.

The Intergovernmental Panel on Climate Change, (IPCC), the leading international network of climate scientists, has concluded that global warming is “unequivocal.” The Stern Review on the Economics of Climate Change states greenhouse gas emissions from deforestation are greater than emissions from the global transportation sector. “Action to preserve the remaining areas of natural forest is needed urgently,” is one of the report’s conclusions. A 2006 study inEcological Economics found that natural forests in the Southern US – IP’s primary wood sourcing region – store and sequester more carbon than fast-growing tree plantations and continued loss of natural forests to tree plantations could contribute to future carbon emissions.

Climate change impacts from deforestation and poor forest management can be reduced by increasing the use of recycled fiber and purchasingsourcing virgin fiber that it isfrom well-managed forests harvested according to independent and internationally recognized sustainable forestry standards.

Credibility is the most important criterion for the selection of any certification scheme. Our company relies upon the Sustainable Forestry Initiative (SFI) and CERFLOR certification schemes. Both were developed by the forestry

industry. The Forest Stewardship Council (FSC) is the only independent certification system in the world accepted by the conservation, aboriginal and business communities. FSC is the world’s largest and fastest growing certification system, by hectares.

Our company can ensure it is purchasing sustainably harvested fiber by purchasing FSC certified fiber. IP customer companies such as Staples, Office Depot, Corporate Express and FedEx/Kinko’s,FedEx Office, already have FSC-certified paper procurement preferences. Large IP paper packaging customers are adopting environmental paper procurement policies. Though IP has recently initiated steps to provide FSC products, we believe that continued reliance on non-FSC certification systems may threaten IP’s future positioning in the marketplace relative to competitors that are embracing FSC on a large scale.

RESOLVED: Shareholders request the Board to prepare a report, at reasonable cost and omitting proprietary information, by November 30, 2008,2009, assessing the feasibility of phasing out our company’s use of non-FSC certified fiber and increasing the use of increasing our company’s use of FSC certified fiber and increasing the use of postconsumer recycled fiber as a means to reduce our company’s impact on greenhouse gas emissions.

Supporting Statement:

The study should discuss the Company’s goals and timeframes with respect to:

[End of Shareowner Proposal]

International Paper has been and will continue to be a leader in promoting sustainable forestry practices and certification requirements globally. The Company is also committed to using fiber from sustainable sources to make its paper and packaging products. Our Board of Directors recognizes that forests and sustainable forestry practices provide environmental, social and economic benefits to the Earth and to the communities in which we live and operate our facilities. Our Board is particularly concerned about the adverse consequences of illegal logging, deforestation and the accompanying loss of biodiversity in some regions of the world. In fact, International Paper has been and will continue to be a leader in promoting sustainable forestry practices and certification requirements globally. The Company is also committed to using fiber from sustainable sources to make its paper and packaging products.

As a global organization, International Paper relies on third-party certification, chain of custody and internationally recognized forest certification standards for fiber procurement. Our use ofdecision to rely on a particular certification standard, dual-certification,dual certification, or multi-certification, will depend upon the region of the world in which we are procuring fiber, and the availabilitywhat type of certified fiber.fiber is available in that region.

The proponent’s request is impractical and unnecessary for the following reasons:

The proponent’s request is impractical and unnecessary for the following reasons:

Since only 10 percent of the world’s industrial forestlands are certified to any sustainability standard, there is still important advocacy work to do. While the proponent disputes the value of SFI certification, SFI is recognized by PEFC, and other PEFC-endorsed forest certification programs around the world. More than 480471 million acres of forestland have been certified under SFI—PEFC—more than any other certification program, and only 229253 million acres in 7881 countries are certified according to FSC requirements. International Paper is committed to procuring fiber from certified sources.

Our Company is committed to increased use of recycled fiber in our products where practical and economical. How much recycled fiber can and should be used to make our products depends on many factors, including the availability of recycled fiber, and the costs and environmental impact of transporting and collecting it. To better understand the impacts of our products, we have employed Life Cycle Assessment (LCA) as a tool to provide a detailed environmental analysis of our products and to help us improve our products. This tool will also help us take into account the benefits of using recycled fiber as well as the potential inefficiencies and negative environmental impacts that may be associated with the collection, transportation and processing of recycled fiber. International Paper optimizes its reliance on this renewable resource for the benefit of the Company, our customers, our shareowners and society.

For all of these reasons, the reports requested in the shareowner proposal are duplicative, unnecessary, and a waste of shareowner assets.

Our Board of Directors unanimously recommends that you vote AGAINST this proposal.

Our Board of Directors

Class I Directors – Term Expiring in 2010

Class II Directors – Term Expiring in 2011

The following three directors are nominated for election at the 2008 Annual Meeting. Each of these directors is standing for election to serve a term that will expire in 2011.

Class III and New Directors Standing for Election – Term Expiring in 2010

The following four directors are nominated for election at the 2009 Annual Meeting. Each of these directors is standing for election to serve a term that will expire in 2010.

Director Compensation

Compensation Philosophy

Our compensation program for non-employee directors is guided by the following principles. We believe our compensation program should:

In May 2007, we transitioned the oversight of our director compensation program from the Management Development and Compensation Committee to the Governance Committee. Each element of director compensation discussed below is recommended by the Governance Committee and approved by our Board.

Stock Ownership Requirements

Our directors are required to own a significant equity stake in the Company of at least 10,000 shares of common stock or deferredrestricted stock units. Directors have until March 2011, or, in the case of newly elected directors, five years from the date of their election, to meet the ownership requirement. We believe this helps align the interests of our directors with the interests of our shareowners. As of December 31, 2008, all directors required to meet the ownership levels held the requisite number of shares.

Elements of Our Director Compensation Program

For 2007,2008, compensation for our non-employee directors consists of:

We evaluate the reasonableness and appropriateness of the total compensation paid to our directors in comparison to peer companies who comprise our Compensation Comparator Group, or CCG, listed on page 46 of this proxy statement.CCG. Our practice is to target our director compensation at the median of our CCG so that we can effectively compete for top director talent.

Our pay study for director compensation conductedWe did not increase the fees paid to our directors in 2007 showed that our total board fees were 18 percent below the CCG median, causing the Company to rank 15^th out of the 21 companies in our CCG for director pay. Accordingly, the Board approved an increase in annual retainer fees and committee chair fees, and the payment of an additional fee to members of the

Audit and Finance Committee.2008. The 2007-20082008-2009 director fees are shown in the table below.

Annual Compensation

AnnualThe annual retainer fees for both the 2006 and 2007May 2008 – April 2009 performance years (May to April)year are shown below. The actual amountsA director’s annual compensation is $200,000, 40 percent of which is paid as a cash retainer fee and 60 percent of which is paid as an equity retainer fee.

Non-employee directors may elect to convert all or one-half of their $80,000 cash retainer fee into shares of restricted stock. In order to encourage director stock ownership, a director who makes this election receives a 20 percent premium in additional shares of restricted stock. For 2008, seven of our directors elected to receive stock in lieu of all or one-half of their cash retainer fee and received the applicable premium.

Non-employee directors may elect to defer receipt of restricted stock until January of the calendar year following retirement. Directors who make this election receive restricted stock units (“RSUs”) in lieu of restricted stock. For 2008, seven of our directors elected to defer payment of all or a portion of their equity compensation until retirement.

Elections with regard to form of payment and deferrals are made in December of each year for the upcoming May – April performance year.

We use the closing market price of the Company’s common stock on the day preceding our Annual Meeting in May to award the equivalent number of shares for the $120,000 equity retainer and restricted stock elected by our directors in lieu of their cash retainer fee. RSUs are valued as of December 31 of the year of the director’s retirement.

In addition, each committee chair receives a fee for the 2007 calendar year are shown in the Director Compensation Table.his or her service as a chairperson. For 2008, Mr. McHenry, Mr. Townsend, Mr. Turner and Mr. Walter each received a committee chair fee. Members of our Audit and Finance Committee also receive an additional fee for their services on this committee. For 2008, Ms. Elsenhans, Mr. Gibara, Mr. Walter and Mr. Weisser received an Audit and Finance Committee member fee.

Board & Committee Fees

Annual Matching Gift Program

OurIn 2008, the Company offered our directors are eligible to participate in oura matching gift program which isfor donations to educational institutions. This program was also available to all our employees. Under this program, we matchmatched our employees’ and directors’ charitable gifts to eligible educational institutions up to $5,000 per year per person. This program has been discontinued effective January 1, 2009.

Legacy DirectorDirectors’ Charitable Award Program

Directors who joined our Board on or before July 1, 2007, are eligible to participate in our legacy charitable award program. Under this program, the Company will make a charitable donation in the aggregate amount of $1 million in the director’s name in 10 equal annual installments following the director’s death to the eligible collegecolleges or universityuniversities selected by the director. This program was closed to new participants effective July 1, 2007.

Insurance and Indemnification Contracts

We provide life insurance in the amount of $10,500 to each toof our non-employee directors, and travel accident insurance in the amount of $500,000 that covers a director if he or she dies or suffers certain injuries while traveling on business for us.

We provide liability insurance for our directors, officers and certain other employees at an annual cost of approximately $5.8$4.9 million. The principalprimary underwriters of coverage, which was renewed in 20072008 and extends to June 15, 2008,2009, are FederalXL Specialty Insurance Company and XL SpecialtyFederal Insurance Company.

Our By-lawsBy-Laws provide for standard indemnification of our directors and officers in accordance with New York law. We also have contractual

arrangements with our directors that indemnify them in certain circumstances for costs and liabilities incurred in actions brought against them while acting as our directors.

Our Analysis

We believe that our director compensation program effectively rewards our directors for their time and commitment to the Company and is consistent with our compensation philosophy as shown below.

Non-Employee Director Compensation Table

The following table provides information on 20072008 compensation for non-employee directors. This table shows fiscal year 20072008 compensation based on the Securities and Exchange Commission’s compensation disclosure requirements. Since we pay our directors on a May-to-AprilMay – April performance year, the amounts in the table below show differences among directors because (i) each director makes individual elections to receive his or her fees in the form of cash and/or equity; (ii) each director makes individual elections to defer compensation; (iii) certain directors receive committee chair fees and/or member fees; and (iv) directors may join our Board on different dates, so their compensation is prorated for the year.

The value of equity awards in the “Stock Awards” column is based on Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment (“SFAS No. 123(R)”), as required by the Securities and Exchange Commission. As a result, this value may include amounts from awards granted in and prior to 2007,2008 and not the amount actually paid toreceived by the director in 2007.2008.

20072008 Non-Employee Director Compensation

(1) Directors may elect to convert their $80,000 cash retainer fee into shares of Company stock. In order to encourage director stock ownership, a director who makes this election receives a 20 percent premium in additional shares of stock, thereby receiving the equivalent of $96,000 in Company stock, based on the closing stock price of the Company’s common stock on the day preceding our annual shareowners meeting in May. This election must be made prior to the end of each calendar year for the upcoming performance year. BecauseAs described above, certain directors who have elected to receive shares of restricted stock in lieu of cash certain directors shown above receivedshow no cash compensation during 2007.2008.

(2) The value of stock awards shown in the “Stock Awards” column is based on SFAS No. 123(R) as required by the Securities and Exchange Commission.

Directors who elect to defer their restricted stock until death, disability or retirement receive restricted stock units, or RSU’s, rather than restricted stock. RSU’sRSUs. RSUs are accounted for as liability awards rather than equity awards. For 2007,2008, the grant date fair value of the equity awards shown in the “Stock Awards” column is based on the closing price of the Company’s common stock on May 4, 2007,9, 2008, which is the day prior to the effective date of the grant, and were as follows: $230,086$120,011 for Mr. Bronczek, and $134,074 for Mr. Townsend and Mr. Turner, and $216,010 for Mr. Weisser, each of whom received shares of restricted stock rather than RSU’s.RSUs. The grant date fair value of restricted stock received by Mr. Weisser on June 1, 2008, for his service on our Audit and Finance Committee was $9,990. Mr. Mobley’s grant was made upon his appointment to the Board in July 2008, with a grant date fair value of $139,990. All other directors selected RSU’s,RSUs, which are valued at the closing price of the Company’s stock on December 31, 2007.2008.

Restrictions on shares awarded to our directors under our current compensation plan lapse one year from issuance, and then are freely transferable, subject to our director stock ownership requirement and securities regulations. TwoAs of our directors holdJanuary 1, 2009, only Mr. Gibara holds shares of Company stock that were awarded under our previous compensation plan andplan. Mr. Gibara may not sell those shares awarded under that plan until their retirement, disability or death. RSU’sRSUs are not transferable until a director’s retirement from the Board, death or disability. The cash value of his or her RSU’s areRSUs is paid in cash in January following retirement, death or disability.

The following table shows the aggregate number of unvested shares of restricted stock and RSUs outstanding as of December 31, 20072008, for each non-employee director.

Aggregate Number of Unvested Shares or Units Outstanding as of December 31, 20072008

(3) A breakdown of the amounts shown in the “All Other Compensation” column for 20072008 for each non-employee director is set forth in the following table:

20072008 All Other Compensation

(a) Under the Company’s matching gifts program, contributions in 20072008 by Ms. Brooks, Ms. Elsenhans, Mr. Gibara Mr. McHenry and Mr. Townsend were matched by the Company up to a maximum amount of $5,000. The Company matched one-half of Mr. Gibara’s 2007McHenry’s 2008 gift in 2008.2009. This program was discontinued for new gifts effective January 1, 2009.

(b) With regard to the annual expense of our legacy charitable award program, we determine the total annual expense to the Company by using assumptions related to each current and retired director who participates in the program. We take into account each director’s age, years of service on our Board, and mandatory retirement age. We make a standard mortality assumption for all directors and use a discount rate of 6six percent. For directors who served in 2007,2008, the Company incurred a non-cash expense of $285,488$149,993 that was allocated ratably to those directors eligible to participate in the program based on the number of months each served. Non-employee directors vest in the program upon the earliest of (i) serving on our Board for at least 10 years, (ii) retiring from our Board at the mandatory retirement age, or (iii) in the event of

disability or death. Directors derive no

financial benefit from our charitable award program. We finance the program in part through life insurance policies, of which we are the beneficiary. We expect to receive an income tax deduction when we make the designated charitable awards.

(c) Directors earn dividends on their shares of restricted stock and RSU’s,RSUs, which they may elect to receive either as cash or in the form of additional shares of restricted stock or RSU’s.RSUs. Dividends are paid to the director at the time the underlying award is paid. The amount shown represents the value of dividends earned, whether in cash or in stock. Directors who have accumulated a greater number of shares or RSU’sRSUs will earn a greater number of dividends.

(d) The total column represents the sum of columns (a) through (c), and is shown in column (3) of the 20072008 Director Compensation Table, above. The amount shown does not include thede minimis cost for each director of a $10,500 life insurance policy and a $500,000 business travel accident policy.

Information About Our Corporate Governance

Our Commitment to Sound Corporate Governance Principles

We believe that good corporate governance is critical to achieving business success. Our Board has adoptedCorporate Governance Principles that reflect its commitment to sound governance practices. In addition, each of our Board committees has its own charter to assure that our Board fully discharges its responsibilities to our shareowners. Our Board regularly reviews itsCorporate Governance Principles and committee charters and makes changes from time to time to reflect developments in the law and the corporate governance area.

OurCorporate Governance Principles and our Board committee charters are published on our Web site, atwww.internationalpaper.com, under the “Our Company” tab at the top of the page and then under the “Governance” link in the menu on the right. This section of our Web site contains all of our corporate governance materials. A paper copy of these materials is available at no cost upon written request to Ms. Maura A. Smith, Corporate Secretary, International Paper, 6400 Poplar Avenue, Memphis, TN 38197.

In each of the areas discussed below, we have embraced sound principles, policies and procedures to ensure that our Board and our management goals are aligned with our shareowners’ interests.

Our Code of Business Ethics

Our Board has adopted aCode of Business Ethics that applies to our directors, officers and all employees to ensure that we conduct business in a legal and ethical manner. Our revisedCode of Business Ethics (Third Edition), which became effective on January 31, 2008, can be found on our Web site, atwww.internationalpaper.com, by clicking onunder the “Our Company” tab at the top of the page and then on the “Ethics and Business Practice” link. This updatedCode of Business Ethics reflects the increasingly global nature of our business and addresses many global compliance issues. A paper copy is available at no cost upon written request to Ms. Maura A. Smith, Corporate Secretary, International Paper, 6400 Poplar Avenue, Memphis, TN 38197.