International Paper Changing Labor Strategy IMAC Conference August 2009

2 Topics  IP at a Glance  Transformation  USW/ IP Relationship  Agreement

3 International Paper - At a Glance  More than 100 years in business - started in 1898  Currently focused on two global platform businesses, Uncoated Papers and Packaging, supported by our North American distribution business, xpedx  We have more than 60,000 employees worldwide

4 Our Operations  North America manufacturing locations distribution centers  Global Operations -- Europe, Asia, Russia, South America and North Africa manufacturing operations in 33 countries -- Customers in more than 100 countries

5 International Paper, Recognized Leader  Ranked 97 th in FORTUNE 100  2008 sales of $24.8 billion  #1 on FORTUNE’s list of “Most Admired Companies” in the Paper & Forest Products Industry --- six consecutive years

6 New Strategy Different Direction  USW/PACE merger  IP’s transformation – Divestitures – Selective Re-investments – Improve balance sheet – Return value to shareholders – Focus on core business

7 Status of Relationship with USW  April 2005 –USW/PACE merger  September 2005 –IP initiates communication with the USW  July 2006 –IP and USW reach agreement of understanding to begin non-binding discussions focused on the U.S. mill system  August 2006 –Non-binding discussions begin on a monthly basis through July 2007  August 24, 2007 –Agreement ratified and executed covered 14 US Mills  2008 Converting Agreement ratified and executed over 32 facilities  2008 Acquired Weyerhaeuser Packaging Business

USW Master Agreement

9 8 Initial Discussion Items  Wages  Pension  Health Care  Union/Job Security  Contracting  Profit-Sharing  Work Redesign  Joint Efforts in areas of common concern

10 Wages and Pension  Existing location wage increase and lump sums remain in effect  2%-$1,000-2%-$1,000 – Apply to renewal agreements starting on the existing expiration date  Riegelwood example: – 2% - Effective 9/9/2010 (existing expiration date) – $1, /9/2011 – 2% - 9/9/2012 – $1, /9/2013  Employees hired after the “Agreement” effective date paid in accordance with new wage grade schedule – Overall 15% reduction at full maturity  Wage grade schedule increases at each location under renewal agreement terms: – 2%-$1,000-2%-$1,000  Mill Pension improvement contingent upon ratification of the “Agreement” – Current employees: $50.00 – New employees:$45.00

11 Retiree Medical Savings Program  Eligible EEs can contribute up to $160/month  Effective 1/1/08, Company match will increase from $1 to $2 on first $80 of employee contribution

12 Retiree Medical Savings Program Age on Effective Date YR 1 – 2007YR $2,000$1, $4,000$3, $6,000$3,500

13 Active Medical ProvisionsCurrentNew Medical Plans 3 CDH Plans and PPO PPO only (BCBS & UHC Networks) Plan Changes Company has right to make up to 5% design change to each plan Company forgoes it's right to make plan changes Review Process Benefits Advisory Board meets four times per year Joint health care committee will meet at least 2x/yr Cost Sharing75% Company 25% Employee Potential to transition cost sharing to 80% Company 20% employee by the final year

14 Successorship  Includes successorship for all covered mill locations – In short, new owners assume the collective bargaining agreement – Note: This is the same successor agreement previously granted at divested facilities.  Reductions in force through voluntary severance and/or attrition – Does not apply to temporary reductions or complete/partial closures

15 Joint Efforts  Public Policy – Joint efforts governed by a joint committee  Health and Safety – 2 joint health and safety conferences  Dependant Care – Joint communication efforts

16 Miscellaneous  The “Agreement” expires in 4 years – Both parties to engage in non-binding discussions at least 60 days in advance to discuss another “Agreement”  If no new “Agreement” is reached local agreements expire at the end of their respective renewal period. “Traditional” bargaining would take place as in the past.

17 Miscellaneous  Wages, successorship, RMSP (2:1 match), Health Care, are part of the local agreement  Joint efforts (public policy, H&S conferences), employment security items, and RMSP (Lump Sums) are part of the “Agreement” and cease if a new “Agreement” is not reached  Pension council will re-open pension discussions in 4 years

18 Converting Agreement  Wages (2% - 2% - 2% - 2%)  Pension $30-$34 over term  Health Insurance – Access to former company plans  Successorship

19 Renewal Agreements  Will continue to have local bargaining and separate location agreements – Scope of local bargaining will be limited to subjects not covered by the “Agreement”  No hiatus between local expiration and contract renewal – The original provision will remain in effect if no agreement is reached on an item prior to expiration  Company agrees to no lockout; union agrees to no strike

20 What did IP get?  Constructive relationship with USW  Labor stability through transformation  No common expiration dates  2-Tier wage structure  Ability to address retiree medical  Active healthcare caps  State of Art Contingency Plan

21 What’s Next?  Integration of former Weyerhaeuser facilities  2011 Negotiations with USW on Master Agreement (Mills)  2012 Negotiations with USW on Master Agreement (Converting)

Key Component to support Transformation and Non- Traditional Bargaining

23 Contingency Planning  Had to regain our ability to have viable contingency plans – Assigned an Enterprise leader for Contingency Planning – Screened and identified a full service Contingency Partner - IMAC selected and contracted – Developed a web based application for Contingency Planning using a “virtual plant concept” with templates and piloted successfully in diverse operations – Currently require Contingency Plans at non-master agreement sites – Retain our ability to plan through leadership, contract and close partnership/relationship with IMAC