ITEM 1A. RISK FACTORS
Sylvamo faces risks in the normal course of business and through global, regional and local events. In addition to the risks and uncertainties discussed elsewhere in this Annual Report on Form 10-K, including in Item 1. Business , Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations , and Item 1C. Cybersecurity , the following are some important risk factors that we face. The occurrence of any of the following risk factors, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause a material adverse effect on our business, financial condition, results of operations and cash flows. In any such case, the trading price of our common stock could decline. In addition, many of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them could in turn cause the emergence or exacerbate the effects of others.
This Annual Report on Form 10-K also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the factors described below. See Item 1. Business - Forward-Looking Statements .
RISKS RELATING TO OUR BUSINESS
Economic, Trade, Political, Civil and Environmental Risks
Our business can be adversely affected by global or regional economic, civil, political or trade developments.
We operate in three primary regions: Europe, Latin America and North America. Five of our seven mills are located outside the United States, including three in Brazil, one in France and one in Sweden. Adverse economic, civil or political developments, whether globally or in any of these regions, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Elevated, persistent global inflation has, and could continue to, increase our operating and input costs. Our ability to increase prices to offset those costs without reducing demand is constrained. Thus, inflation has and could further negatively impact our profitability. If an economic recession were to occur, it could reduce demand for our products, lower our capacity utilization and compress margins. Furthermore, significant inflation or a recession could negatively affect industrial non-durable goods production, consumer spending, commercial printing and advertising activity, white collar employment levels, and overall consumer confidence, which also could reduce demand for our products.
Civil or political unrest, including military conflict, has the ability to disrupt the availability of, and increase the cost of, raw materials, energy, transportation and other inputs critical to our operations. Examples of conflicts and unrest that have in the past caused, and still have the potential to cause, these impacts are the war in Ukraine and armed conflicts (and related security concerns) in and near the Middle East. With respect to these specific examples, in 2025 they did not have a material adverse impact on us, but they could if they were to worsen and spread. We believe that, generally, our operations in Europe are at more risk than our operations elsewhere from the potential expansion of these conflicts, because geographic proximity to such conflicts elevates the risk of transportation network, energy and supply chain and related price increases.
Other unfavorable economic, political or civil conditions in the regions where we operate, such as strikes, lack of availability and high cost of credit, and fluctuations in the value of local currency versus the U.S. dollar, could adversely affect our costs and ability to manufacture and deliver our products to customers, obtain credit on favorable terms and maintain profit margins. Fluctuations in local currencies versus the U.S. dollar impact the translation of our results in Latin America and Europe into U.S. dollars, and, for example, in 2025 had a negative impact on our operating results.
We are exposed to risks from the imposition, expansion or removal of trade protection measures, including tariffs, anti-dumping or countervailing duties, governmental subsidies and tax incentives.
Trade policies that favor locally produced competing products, without providing comparable protection to our products, could place us at a competitive disadvantage, as could the elimination or reduction of trade protection measures that currently benefit our products. For example, our mills in Brazil have historically benefited from Brazil’s policies that favor Brazilian domestic producers. We cannot predict whether such policies will remain in effect,
whether they will be modified or repealed, or whether future trade or industrial policies may adversely affect us. Any material change in these policies could reduce the competitive position or profitability of our operations in that region.
Increased trade friction between countries or disruptions to existing trade agreements have resulted, and may further result, in the imposition of protective trade measures such as tariffs. Tariffs also could disrupt the cross border flow and availability of raw materials, energy or finished goods, negatively affecting our supply chain and distribution capabilities. As of December 31, 2025, the United States has imposed tariffs on imported goods from various countries. Resulting changes in trade flows have introduced additional competing products into some countries where we sell, putting downward pressure on the pricing of our products. Also, the tariffs have increased, directly or indirectly, the costs of certain equipment and other goods that we purchase for our operations, constrained our ability to import and sell in the United States various products that we produce outside the United States, and caused, and could cause future, volatility in ocean shipping prices as demand for ocean transport increases or decreases in response to the tariffs’ impact on the volume of goods to be transported to and from affected areas. We cannot predict how long these impacts will continue or if new tariffs or other protective trade measures will be introduced in the future. Any new or increased tariffs or other protective trade measures could add to these impacts.
To offset increased costs resulting from tariffs or other protective trade measures, we may implement price increases, cost reductions and operational efficiencies, but we are limited in our ability to mitigate higher costs through price increases without decreasing demand for our products. The ultimate impact of continuing or new tariffs or other protective trade measures on our business is uncertain and depends on a number of factors, including which jurisdictions are affected by the tariffs or other measures, the scope and duration of the measures, the volume and nature of the goods affected, the extent to which we can pass any increased costs on to customers, changes in competitive dynamics resulting from the measures, and whether we obtain any competitive advantage from the measures and such advantage is sufficient to offset any higher costs we incur as a result of the measures.
We are exposed to risks associated with adverse climate and weather conditions and evolving climate-related regulations, obligations and stakeholder expectations.
Climate related physical conditions, including those typically associated with climate change, could disrupt our operations and supply chain and result in financial losses. If average temperatures increase, it may contribute to changes in weather patterns, including precipitation variability and more frequent or severe extreme weather events and natural disasters. Events such as hurricanes, tornadoes, hailstorms, wildfires, floods, droughts, heatwaves, snow, ice storms and lightening strikes could damage or destroy our facilities and other assets, interrupt operations, increase operating and repair costs and adversely affect demand for our products. If any such event were to damage infrastructure at our mills or disrupt water and energy availability, it could cause us reduced throughput, temporary shutdowns or costly repairs. For example, periodic conditions in Mogi Guaçu, Brazil have at times in the past reduced water flow needed for our mill operations there. In addition, our mills located near rivers are to the risk of flooding that could significantly facilities. If enough, any of these types of events could result in a of operations at a mill for an extended period or mill .
Our business relies on a steady and reliable supply of timber and other forest-based inputs. Reduced timber availability and quality and poor timber harvesting conditions can be caused by climate-related problems, such as the spread of pests or disease, increased drought, wildfires, altered growing seasons, flooding and other extreme weather. Any reduction in the availability, density or quality of virgin timber fiber could increase manufacturing costs or disrupt operations. For example, i n Brazil, our owned and managed forestlands have been producing sub-optimal yields, partly due to weather events, of mature virgin fiber for our operations, and if there were additional adverse weather-related events affecting virgin timber availability in Brazil, it could further increase the costs we have been incurring to replenish trees on such forestlands (and, in the meantime, our costs to source virgin fiber from third parties). Drought conditions in Brazil in 2024 caused weather- and fire- related decreases in the supply of virgin fiber and thus inflated its cost, which inflation continued into 2025. While these events did not have a material impact in 2025, if we become unable to procure wood supplies in Brazil, or third party wood costs significantly elevate, or increase in frequency or , then our wood fiber costs in Brazil would further increase. If adequate fiber supply could not be obtained, production at our Brazil mills could be reduced or .
Energy and fuel are critical to our manufacturing processes, our suppliers’ transportation of materials to us and our transportation of finished products to customers. Climate related disruptions of or constraints on energy and fuel sources could increase their costs, cause shortages or cause delivery disruptions. Such events could increase our manufacturing and logistics costs or require us to curtail or suspend operations.
Severe or unpredictable weather may disrupt our suppliers’ and customers’ operations, impair logistics networks, or reduce end market demand, which could increase our input costs, delay production or reduce sales volumes.
While we maintain disaster preparedness, response and business continuity plans, these measures may not fully mitigate the adverse effects of all climate-related events. Also, we may not be able to offset increased costs resulting from climate-related events through pricing or other measures. Attempts to pass such costs on to customers could reduce demand for our products and adversely affect our competitive position.
We are exposed to risks associated with climate-related regulatory developments. The introduction of carbon taxes or new or more stringent environmental regulations, such as those addressing GHG emissions, energy use or permitting requirements, could increase our compliance, monitoring, reporting or capital expenditure costs (references to “regulations” in these Risk Factors include all governmental and quasi-governmental requirements, including, without limitation, laws, rules, regulations, ordinances, governmental agency requirements and court orders). The scope, timing, and impact of future regulatory developments is uncertain and may vary by jurisdiction. See Item 1. Business – Environmental and Other Regulations for additional information. Compliance with evolving regulations could increase our administrative and compliance costs.
A public health crisis could adversely affect our operations and results.
If a public health crisis were to curtail business activities or result in the imposition of governmental restrictions on the general public or on business activities, or were to cause widespread illness among our or our customers’ or suppliers’ employees, it could, in turn, have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, a public health crisis could: reduce demand for our paper as a result of school and business closures and increased remote work among the general public; disrupt operations at our mills due to employee attrition, illness, quarantines, government actions or other restrictions; and cause labor shortages, supply chain disruptions and inflation that constrain our operations and increase our costs to operate.
Industry, Competition and Customer Risks
Paper and pulp supply and demand are cyclical and fluctuate, which can result in declines in our products’ prices.
The paper and pulp industry, including the demand for products like ours, is cyclical. Historically , economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for our products. The length and magnitude of industry cycles have varied over time and by product, but generally reflect changes in macroeconomic conditions and levels of industry capacity. Also, the supply of paper and pulp products fluctuates, as changing industry conditions have and will continue to influence producers to idle or permanently close individual machines or entire mills or convert them to different products to offset a decline in demand. Any such closure by us would result in significant cash and non-cash charges. Some producers, to avoid substantial cash costs in connection with idling or closing a mill, may choose to continue operating at a loss, which could prolong weak pricing environments due to oversupply.
As a result of this cyclicality and fluctuation, prices for our products are driven by many factors outside of our control, and we have little influence over the timing and extent of price changes, which are often volatile. Our profitability with respect to our products depends significantly on managing our cost structure to the extent that we can, particularly wood fiber, chemicals, transportation and energy costs, which represent some of the largest components of our operating costs and which also can fluctuate based upon factors beyond our control. If the prices or demand for our paper or pulp products decline, or if wood fiber, chemicals, transportation or energy costs increase, or both, our business, financial condition, results of operations and cash flows could be materially adversely affected.
Demand for the types of products that we sell is in a secular decline.
We rely heavily on the sale of paper products, an industry expected to continue experiencing a secular decline in demand. This may put pressure on our future revenue, profit margin and growth opportunities. The global demand for uncoated freesheet (“UFS”) decreased at 2.1% CAGR from 2019 to 2025 (which includes the COVID-19 pandemic’s atypical impact in 2020 of a 10.2% decline year-over-y ear) and 1.1% CAGR from 2021 (the year we became a public company) to 2025, based on third party RISI industry data reporting as of December 2025. This secular decline in
demand is due in large part to competing technologies and materials, including the increased use of e-mail, messaging and other electronic forms of communication, increased and permanent product substitution, including less print advertising, more electronic billing, more e-commerce, fewer catalogs and a reduced volume of mail. This decline can have a material adverse effect on our business, financial condition, results of operations and cash flows as the use of non-paper alternatives continues to grow. Demand for paper products is likely to decline further.
Our products face strong competition as commodities and from industry consolidation.
We operate in a competitive environment in Europe, Latin America and North America. Most of our products are commodities that are available from other producers. We believe our brand recognition and service levels impact the demand for our products, but because commodity products have few other distinguishing qualities from producer to producer, competition for these products is significantly based on price, which is determined by supply relative to demand. The overall levels of demand for the products that we manufacture, and consequently our sales and profitability, reflect fluctuations in levels of end-user demand, which depend in part on general macroeconomic conditions and competition, including from electronic substitution. Additionally, p roduct innovations, manufacturing and operating efficiencies, and marketing, distribution and pricing strategies pursued or achieved by our competitors could reduce demand for our products and place downward pressure on our pricing.
There has been a trend toward consolidation in the paper industry. Consolidation could result in the emergence of competitors with greater resources and scale than ours, which could adversely impact our competitive position. Further, actual or speculated consolidation among competitors, or the acquisition by, or of, our third party service providers and business partners by competitors could increase the competitive pressures faced by us as customers could delay spending decisions or not purchase our products at all.
We rely significantly on a few customers and are exposed to risks associated with their financial viability and consolidations.
We rely on a small number of significant customers. If we were to lose one or more of such customers, it could have a material adverse effect on our sales and profitability. Our top ten customers represent approximately 41% of our net sales, including one customer that represents approximately 15% of our net sales; see Note 1 5 Financial Information by Business Segment and Geographic Area to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
Generally, our customers are not contractually required to purchase any product minimums from us. We are exposed to the risk that our customers might purchase our products in significantly lower quantities than they have in the past. We are also exposed to risks associated with the ability of our customers to meet their financial obligations to us. The financial viability of our customers is key to maintaining our sales to those customers and their ability to pay for those sales. Any threat to the financial viability of our customers could result in the reduction, delay or cancellation of customer orders and their ability to pay their outstanding receivables with us.
In addition, consolidation among our customers could result in changes to their purchasing habits and volumes and could affect our relationship with them. If one of our competitors’ customers acquires any of our customers, we could lose that business, which could have a material adverse impact on our business and financial results if the acquired customer were one of our primary customers. Additionally, as our customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including us. As a result, we could be forced to reduce the prices of our products.
Operational and Supply Chain Risks
Increased costs or decreased availability of raw materials and energy could adversely affect our business.
We rely heavily on the use of certain raw materials (principally virgin wood fiber, caustic soda, starch and water) and energy sources (principally biomass , natural gas, electricity and fuel oil) to manufacture our products. Our profitability has been, and will continue to be, affected by changes in the cost and availability of the raw materials and energy sources we use, including inflation that we experienced in 2025. Future inflation in the costs of and decreases in the availability of raw materials and energy is not within our control and could increase our costs of production and slow or stop our production.
We rely on a steady supply of quality virgin wood fiber for our products. The market price of virgin wood fiber varies based upon demand, availability, source, and the costs of labor and the fuels used in harvesting and transporting the fiber. The cost and availability of wood fiber can also be affected by weather, climate variations, natural disasters, general logging conditions, geography, human activity and regulatory activity. An example of regulatory activity that has the potential to decrease the supply of wood fiber available to us are carbon sequestration regulations. Such regulations limit the availability of forestlands for harvest and could increase our cost of wood fiber and potentially create shortages having an impact on our operations. In particular, the EUDR in the European Union, which will become effective on December 30, 2026, prevents companies trading in certain goods and products derived from such goods, such as paper, from selling those products in Europe unless they conduct extensive diligence on the value chain to ensu re that the products do not result from recent deforestation, forest degradation or breaches of local regulations. The EUDR could decrease the volume of wood supplied in the European Union and increase prices there for wood generally.
Also in Europe, there is a heightened level of sensitivity in the pricing and availability of raw materials and energy from the geopolitical confli cts in Europe and in and near the Middle East. We cannot predict whether these geopolitical conflicts will cau se future increases in the costs of raw materials and energy for our mills, particularly our mills in Sweden and France.
If we were to experience increases in our operating costs for any of the reasons described above, we might be unable to pass on the increases to customers. The commodity nature of our products means that supply and demand primarily determine our ability to increase our prices. Any sustained increase in the prices of raw materials and energy required for our manufacturing operations without any corresponding increase in our product pricing would reduce our operating margins and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Disruptions at our facilities or in transportation and logistics could increase our costs and impair our ability to operate and serve customers.
Our business depends on the continuous and efficient operation of our manufacturing facilities, the reliable performance of the equipment within those facilities, and the ability to process and fill customer orders. A material disruption at our corporate headquarters or at any of our mills -- whether affecting an entire facility, operations at multiple facilities, or one or more key machines -- could interrupt production, delay product deliveries, limit our ability to meet customer demand, and reduce sales.
Our facilities or equipment could experience unexpected downtime or cease operations as a result of a variety of events. Examples are natural disasters or severe weather; disruptions to water, energy or other utility supplies; shortages of raw materials, such as wood fiber, and other critical inputs; interruptions in transportation infrastructure (including roads, bridges, railways or ports); unscheduled maintenance outages; equipment failures or damage to paper‑making or other important equipment; prolonged power outages; or information technology or operational technology system failures, including those resulting from cybersecurity affecting us or third parties with whom we do business. In addition, spills or releases of chemicals or other substances, explosions or involving boilers or other equipment, or caused by third parties operating on or near our facilities could result in , repairs or corrective or regulator actions.
Disruptions may also result from other third-party events that impact us, such as failures or delays by our third‑party service providers or a business partner’s labor disputes or workforce availability issues, or regulations or governmental action applicable to our or our business partners’ businesses. The frequency, severity or duration of any such disruptions could affect our production volumes, increase operating or repair costs, cause missed deliveries or require capital expenditures to restore operations. While we maintain maintenance programs, contingency plans and insurance coverage for certain risks, these measures may not prevent all disruptions or fully offset their financial impact.
We rely on third parties for transport, including by rail, truck and ship, of materials that we purchase for our operations and products that we deliver to customers. If a transporter does not deliver materials to us in a timely manner, we could experience delays in our ability to manufacture products and be unable to meet customer demand. If a transporter does not deliver our products to customers in a timely manner, it could result in additional costs to us to remedy the untimely deliveries and a potential loss of business with affected customers. If any of our transportation providers were to cease operations or cease doing business with us, we could be unable to replace them at a reasonable cost. If the availability of transportation by rail, truck or ship were to become constrained, it could cause inflationary pressure on
the prices charged by our transportation providers, increasing our costs to produce and deliver our product to customers. In 2025, transportation markets remained relatively stable and we did not experience any material increased transportation costs or disruptions, but we cannot predict whether this stability will continue. Any of the circumstances described in this paragraph could cause us increased supply chain costs, increased costs to supply customers and loss of customers.
Failures or security breaches of our information technology systems could disrupt our operations, harm our business and result in regulatory non-compliance.
Our business operations rely upon secure information technology systems for data capture, processing, storage and
reporting. Despite careful security and controls design, implementation, updating and independent third-party verification, our information technology systems could become subject to employee error or malfeasance, cyber-attacks, geopolitical events, natural disasters, failures or impairments of telecommunications networks or other catastrophic events.
Also, third parties with which we do business are potential sources of cybersecurity risks. For example, we outsource certain information technology functions that allow access to our information technology systems, which could lead to a compromise of our systems or the introduction of vulnerable or malicious code, resulting in security breaches adversely affecting us or our customers. We have in place third-party cyber risk management to reduce this risk, and many of our agreements with third parties include relevant indemnification provisions. However, we cannot guarantee that our efforts to minimize third-party cyber risk will prevent a third-party cyber incident from occurring that has a material adverse impact on us. Additionally, if we were to experience loss as a result of a third-party cyber incident, we cannot guarantee that we would be able to recover any or all of such loss under any relevant contractual indemnity.
Although in 2025 we did not experience any significant breaches of our information technology systems from cybersecurity attacks, we cannot be certain that the security measures we maintain to protect our information technology systems are able to prevent, contain or detect cyber-attacks, cyber terrorism or security breaches from known or future cyber-attacks. We expect cyber-attacks to continue to increase in sophistication and frequency for a number of reasons, including increases in technology-based products and services used by us and our customers, the growing use of mobile, cloud, and other emerging technologies such as artificial intelligence, and the increasing sophistication and activities of organized crime, hackers, terrorists, nation-states, activists and other external parties. If a cyber-attack against us successfully resulted in network, system, application or data breaches, it could cause us harm, including, but not limited to, interruption of our systems’ availability, cyber criminals’ of our applications, our to access applications required for our operations (such that we may be or to source materials, manufacture and ship finished goods and account for orders and deliveries), theft of our intellectual property and trade secrets, disclosure of confidential company, employee, customer and vendor information, including disclosures in of laws, including privacy laws, and our contractual obligations. The to us could be significant, including financial resulting from remediating to our systems, from our to operate or in our operations, sales, publicity, and government . As a result, such could have a material effect on our business, financial condition, results of operations and cash flows.
We have processes and controls in place to prevent, detect, respond to and mitigate potential cybersecurity breaches. Nonetheless, we could experience significant cybersecurity breaches.
For additional pertinent information, see Item 1C. Cybersecurity .
Artificial Intelligence (“AI”) is increasingly being integrated into applications and systems used by us and third parties with which we do business. The development, adoption and use of AI is in its early stages. We use only limited AI-enhanced tools at the Company, which are approved after review by our information security team. Yet, our employees could use unauthorized AI tools on our systems, notwithstanding that we require only approved software be used, and our vendors and third-party partners could incorporate AI tools into their software or systems with or without disclosing it to us. AI tools not vetted by us may not meet existing or rapidly evolving regulatory or industry standards concerning privacy and data protection, and may result in a loss of intellectual property or confidential information, resulting in fines, litigation, harm to our reputation, and diminished public perception of the effectiveness of our security measures. Additionally, unapproved AI tools that are faulty or for the use to which they are put could our Company systems or data. We also could incur substantial costs to address and mitigate privacy and data protection , to correct and data or , and to other resulting issues for affected
third parties (for example, customers or other business partners who rely on our systems). Additionally, cyber criminals are increasingly using AI to enhance the sophistication and effectiveness of their cyber attacks, which increases our risk of cybersecurity incidents and our cost to protect ourselves against cybersecurity incidents.
Labor disputes could disrupt our operations and increase our labor and operating costs.
A portion of our workforce is represented by unions and operate under various collective bargaining agreements, including some of our employees that are represented by six unions in Brazil, three unions in France, four unions in Sweden, and a union with two branches representing the hourly employees at our mill in Ticonderoga, New York. We must negotiate to renew or extend any union contracts near or upon their expiration. We may not be able to successfully negotiate new agreements without work stoppages or labor difficulties in the future or renegotiate them on favorable terms. If we are unable to successfully or favorably renegotiate the terms of any of these agreements, or if we experience any extended interruption of operations at any of our facilities as a result of strikes or other work stoppages, this could have a material and effect on our business, financial condition, results of operations and cash flows.
Our business depends on our ability to attract, retain and develop skilled employees and management.
We are led by a strong senior management team that has extensive experience in the paper industry, and we rely upon an extensive and skilled workforce . Our ability to successfully operate our business and our future growth depends, to a significant degree, on the ability to continue to attract and retain senior management with strong leadership experience and relevant knowledge and skills. There is no guarantee that we will be able to continue to attract and retain strong senior management.
Many employees at our mills are near retirement. When they retire, we will lose operators and other members of our skilled workforce with 30+ years’ experience, and many of the employees replacing them will have much less tenure. This is due to a large extent on workforce preferences; that is, employee interest in manufacturing jobs with shifts covering 24 hours, seven days per week, has declined, and employees also are more open to voluntarily leaving their positions and having multiple employers over their career than was historically the case in our industry. We provide our employees with training programs that target the skills needed for their positions, but it is difficult to replace the years of experience our retiring operators and skilled workforce possessed. Although the labor market generally is not as tight as it was a few years ago, it does remain tight for labor with the specialized technical and trade skills and experience needed for manufacturing operations at our mill locations. The se factors drive up our cost of labor and, further, there is no guarantee that we will be able to attract and retain t he skilled employees needed to successfully operate our business in the future.
Loss of the services of any members of our senior management team or other key or skilled employees without a suitable transition, or significant attrition in our workforce and retirements as our workforce ages combined with failure to attract and retain qualified persons to serve in those positions, could have a material adverse effect on our business and business prospects.
Legal Risks
Environmental regulations could result in significant compliance costs, operational constraints and liabilities for non-compliance.
We are subject to extensive environmental regulation (including laws, rules, regulations and other governmental requirements) in the jurisdictions in which we operate -- Europe, Latin America and North America. Such regulations govern, among other things, air emissions, water discharges, waste management, land use and remediation obligations. Environmental regulations continue to evolve, and regulatory authorities may adopt or more actively enforce environmental regulations, including those affecting air quality, water use and quality, emissions, permitting, reporting or facility operations. Compliance with existing environmental requirements, or with new or more stringent standards that may be adopted, could increase our operating and capital costs or restrict certain aspects of our manufacturing operations.
We have incurred, and expect that we will continue to incur, significant costs complying with applicable environmental regulations, including expenditures related to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater.
We anticipate continued or increased activity by local, state, federal and international regulators regarding environmental matters and policies affecting our operations. Changes in regulatory frameworks or enforcement practices could require us to modify or install additional controls, make capital investments, change operating practices, obtain permits or take other required actions. In certain circumstances, compliance obligations could result in production constraints, temporary shutdowns or the curtailment of operations at facilities.
We are required to comply with multiple environmental permits in the jurisdictions where we manufacture paper, including permits imposing performance-based requirements for effluent and air emissions. For example, in the United States, federal, state and local regulations require us to routinely obtain authorizations from and comply with evolving permit terms over which governmental authorities have considerable discretion. If we cannot maintain or renew existing permits, it could materially adversely affect our business.
As the owner and operator of real property, we may be liable for investigation, cleanup, closure and other costs and damages resulting from hazardous substances on, or released from, our properties or operations, including properties that we no longer own or operate. For example, at our Mogi Guaçu mill in Brazil, we are working with environmental regulators to establish the work necessary to address historic contamination on areas owned near the mill. See Note 1 1 Commitments and Contingent Liabilities t o the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
We are subject to sustainability regulations, such as the EUDR in the European Union, which will become effective on December 30, 2026, and EPR regulations in various European countries, Canadian provinces and states in the United States that increase our costs of operating and, if we fail to be fully compliant, could result in fines, penalties and reputational harm.
We may be subject to liabilities, fines, penalties or other enforcement actions, as well as third-party litigation, arising from alleged violations of current or future environmental regulations, permits or other regulatory requirements, including obligations relating to cleanup , remediation or other corrective actions at our facilities or sites for which we may be responsible. The cost of compliance, remediation or other corrective action, litigation or penalties associated with environmental matters could be material. The amount and timing of environmental expenditures is difficult to predict. In some cases, liability may be imposed without regard to contribution or whether we knew of or caused the environmental issue. Liability could exceed forecasted amounts or the value of the property itself. There can be no assurance that our existing reserves for specific matters will be adequate to cover our future costs.
For more information about risks related to environmental regulations and governmental requirements, see I t em 1. Business – Environmental and Other Regulations .
Compliance with a broad range of complex and changing regulations could increase our costs or limit our operations, and failure to comply could result in liabilities and harm our business.
In addition to environmental regulations, our operations are subject to a wide range of other regulations and governmental requirements in the jurisdictions in which we operate, including Europe, Latin America and North America. These requirements relate to, among other areas, health and safety, labor and employment, data privacy and cybersecurity, taxation, antitrust and competition, trade and customs and other regulatory matters. Changes in these regulations, or in their interpretation or enforcement, could require us to modify certain operations and incur additional costs to maintain compliance, including costs to modify policies, processes, systems and controls, and to enhance monitoring and reporting capabilities. Regulatory authorities may also interpret applicable regulations in ways that differ from our interpretations or expectations. If our efforts to comply with existing or future regulations are deemed inadequate, we could be subject to investigations, enforcement actions, remediation obligations, fines or penalties, criminal prosecution, private litigation and restrictions on our operations.
Compliance obligations in certain regulatory areas are complex and actively evolving. For example, we are subject to data‑protection and privacy regulations in multiple jurisdictions, including the European Union’s General Data Protection Regulation (“GDPR”), Brazil’s Lei Geral de Proteção de Dados Pessoais (“LGPD”), and state‑level privacy regulations in the United States, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CCPA/CPRA”). These regulations impose requirements related to the collection, use, processing, storage, security and transfer of personal data, and provide regulators with enforcement authority that includes the ability to impose significant fines and other remedies for noncompliance. There is no assurance that our security controls over
personal data, our training of employees and vendors on data privacy and data security and our policies, procedures and practices will prevent the improper disclosure of personal data in violation of current or future data protection and privacy regulations.
We are subject to income, payroll, indirect and other taxes in the jurisdictions in which we operate. These regulations are complex and subject to interpretation and change, and administrative guidance may be incomplete or applied inconsistently by taxing authorities. As a result, the application of certain tax regulations to our business is uncertain, and tax authorities may challenge our interpretations, positions or methodologies.
We are regularly subject to audits, examinations, and inquiries by tax authorities in multiple jurisdictions, particularly Brazil. Although we believe our tax positions are appropriate and are reported in accordance with applicable regulations, tax authorities could reach different conclusions. Adverse outcomes from tax audits, litigation or changes in regulation or interpretation could result in additional tax liabilities, higher effective tax rates, interest, penalties or other charges, some of which could be material. We are currently involved in ongoing tax controversy matters, including a dispute in Brazil relating to the deductibility of goodwill amortization arising from a 2007 acquisition by our Brazilian subsidiary, Sylvamo do Brasil Ltda. Assessments for the tax years 2007 through 2015 total approximately $106 million in tax and $289 million in interest, penalties and fees, which increased in 2025 due to currency fluctuations. We would share liability in this matter with our former parent, International Paper, pursuant to a tax matters agreement entered into in connection with our spin-off from International Paper in 2021 (the “Tax Matters Agreement”). Although Sylvamo do Brasil Ltda. prevailed in October 2024 in Brazilian federal court proceedings covering approximately two‑thirds of the amounts, the Brazilian tax authorities have appealed the ruling. The remaining one-third of the assessments is also under active . A ruling at the Brazilian administrative court level in November 2025 upheld this one-third of the assessments, and Sylvamo do Brasil Ltda. filed a defense the upheld assessments in the Brazilian federal court system in January 2026 . A description of this matter is set forth in Note 10 Income Taxes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10‑K. The outcome and timing of the Brazil Tax and other tax matters are uncertain and could extend for many years.
We maintain defined benefit pension plans for some current and former employees in the United States and United Kingdom, along with immaterial plans in certain other jurisdictions. These plans are subject to extensive and evolving regulations and regulatory interpretations. Changes in applicable pension requirements, or in how existing requirements are interpreted or enforced, could increase our compliance obligations, funding requirements or administrative costs. Developments in the United Kingdom have introduced uncertainty regarding our historical pension plan amendments. A 2024 U.K. court decision (Virgin Media Ltd v. NTL Pension Trustees II) held that certain pension plan amendments dating back to the late 1990s were invalid because statutory notification and actuarial confirmation requirements were not properly followed. As a result of this decision, U.K. pension plans generally, including our U.K. pension plan, may face the risk that historical amendments could be deemed void if required statutory processes were not properly completed or adequately documented. If one or more amendments were determined to be invalid, we could be required to reassess past benefit calculations and make backdated benefit payments to plan members. Any such outcome could result in a material increase in our U.K. pension plan liabilities and require increased contributions or additional funding. The timing, scope and financial impact on us of any required remedial actions or increased funding obligations are uncertain.
We are subject to anti‑corruption and anti‑bribery regulations in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act, France’s Sapin II Act, and similar regulations in other countries. These regulations generally prohibit us and our directors, officers, employees, agents and business partners acting on our behalf from offering, promising, authorizing or providing improper payments or things of value to government officials or others for the purpose of influencing official actions, obtaining or retaining business or securing other improper advantages. We are also subject to regimes for economic and trade sanctions, export controls and other restrictions administered or enforced by governmental authorities, including the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations and other applicable authorities. These regimes restrict or prohibit transactions with certain persons, countries or regions and impose complex compliance obligations that may change over time.
Because we operate internationally and work with third‑party agents, distributors, suppliers and other business partners, we are exposed to the risk that our employees or third parties may violate, or be alleged to have violated, applicable anti‑corruption or sanctions regulations, even if such conduct was not authorized by us. We have implemented policies, procedures, training and internal controls designed to promote compliance with applicable
anti‑corruption and sanctions regulations. However, these measures may not prevent all violations, and we may not be able to detect improper conduct or third‑party non‑compliance in a timely manner. Violations or alleged violations could result in expensive and disruptive investigations or enforcement actions by authorities in the U.S. or other jurisdictions, require significant management time and resources, and lead to criminal or civil fines or penalties, disgorgement, sanctions, injunctions, exclusions from government contracts or other remedial measures.
Failure to protect our intellectual property or defend against infringement claims could harm our business.
We rely on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret regulations to establish and protect our intellectual property. Although we endeavor to protect our rights, third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect our copyrights, trademarks, patents, trade secrets and know-how or to determine their scope, validity or enforceability. This would require a diversion of resources that may be significant, and our efforts may not prove successful. The inability to secure or protect our intellectual property assets could harm our reputation and have a material adverse effect on our business and our ability to compete with other companies in our industry. In addition, we have a license from HP Inc. for the right to produce and sell HP branded copy paper in almost all geographies globally. If we were to lose such license, our production volumes could decline and our business could be materially affected.
Furthermore, third parties could claim that we (i) infringed their patent, trademark or copyright, (ii) breached patent, trademark or copyright license usage rights or (iii) misappropriated trade secrets. Any such claims or resulting litigation could result in significant expense and liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain patents, copyrights, trademarks, trade secrets or licenses. Alternatively, we could be required to enter into costly licensing arrangements with third parties or implement a costly alternative. Any of these scenarios could harm our reputation and have a material effect on our business.
Strategic and Transaction Risks
We may not achieve expected benefits from strategic capital investments or transactions.
Our business strategy includes investing capital in our company’s assets expected to produce the highest returns on investment. Additionally, in the future, we could determine to pursue strategic acquisitions, joint ventures, divestitures or other transactions. The benefits of strategic investments and transactions potentially include cost savings, business growth, synergies and access to new markets (or a combination thereof), and in the case of divestitures, the realization of proceeds from the sale of assets to purchasers who place high strategic value on such assets. We may not achieve the expected benefits associated with an investment or transaction. In addition, if we were to pursue a corporate transaction, we would face a number of other special risks, such as diversion of management’s attention to the transaction, failure to integrate an acquired business into our operations, significant demands on our financial, operational and information technology systems resulting from an acquired business, and the possibility that we may become responsible for substantial contingent or unanticipated legal liabilities as the result of acquisitions or other corporate transactions. Realization of any of these risks could have an financial impact on us, including the to the expected benefits of a transaction could require us to record an charge for goodwill or fixed assets.
Transactions involving our Brazil eucalyptus forest plantations are subject to the terms of an agreement between us and International Paper. Except for certain exceptions for immaterial transfers, if any portion of the Brazil eucalyptus forest plantations owned by Sylvamo as of October 1, 2021 are directly or indirectly transferred, the Company will be required to make a payment to International Paper. The payment amount starts at a maximum of $100 million, reduced in increments over time starting September 1, 2026, as set forth in the First Amendment to the Brazil Payment Agreement, which was entered into between affiliates of the Company and International Paper in October 2025. For these purposes, a transfer will include any sale, pledge or transfer of any legal or beneficial interest in the Brazil lands, including any grant of an option or other right or interest or entry into any contract that would result in a reduction or diminution of Sylvamo’s economic ownership in the Brazil lands. A change of control of Sylvamo would also result in the payment becoming due and payable. As a result, we would not realize the full value of any transfer of the Brazil eucalyptus forest plantations, which may make any such transaction less attractive to us, and the provision requiring payment upon a change in control of Sylvamo would be a pricing consideration in any potential strategic transaction.
If the transaction separating us from International Paper in 2021 fails to qualify for non-recognition treatment for U.S. tax purposes, it could result in significant tax liabilities.
Our separation spin-off from International Paper (the “Separation Transaction”) was generally deemed tax-free. However, until the fifth anniversary of the Separation Transaction on October 1, 2026, or later until any audit of International Paper’s 2021 tax year is closed, the U.S. Internal Revenue Service (the “IRS”) with court confirmation could determine that the Separation Transaction did not qualify for such treatment. If the IRS ultimately determines, and a court confirms, that any aspect of the Separation Transaction is taxable, then (i) International Paper could incur significant U.S. federal income tax liabilities and/or (ii) International Paper shareholders that received Sylvamo stock in the distribution could be required to include taxable income or gain with respect to their receipt of Sylvamo stock. Sylvamo may be required to indemnify International Paper for such tax liability in certain circumstances, pursuant to the Tax Matters Agreement with International Paper.
We have ongoing potential liabilities in connection with our 2021 separation from International Paper.
Pursuant to various agreements entered into by us and International Paper in connection with the Separation Transaction, we and International Paper have indemnity obligations to each other with respect to certain liabilities. Payments that we may be required to make under our indemnity of International Paper are not subject to any cap, may be significant and could negatively impact our business, particularly with respect to indemnities provided in the Tax Matters Agreement. Also, we may incur significant costs related to environmental liabilities that may arise at our mills, or other sites that were not owned by International Paper at the time of separation but were primarily operated or used by International Paper’s former printing papers business. Furthermore, third parties could seek to hold us responsible for any of the liabilities that International Paper agreed to retain. Indemnities from International Paper may not be sufficient to protect us against the full amount of such liabilities if, for example, International Paper is not able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from International Paper amounts for which we are indemnified by it, we may be temporarily required to bear these losses ourselves, requiring us to cash that would otherwise have been used in furtherance of our operating business.
Financial Risks
Our operations require substantial capital, and significant capital investments could negatively affect our cash flows.
Our operations require substantial capital. We make capital investments, sometimes substantial, primarily to expand and replace existing facilities and equipment , improve our operations, and comply with changes in environmental regulations. Key pieces of equipment in our various manufacturing facilities may, perhaps unexpectedly, need to be repaired or replaced. Increased fixed costs from capital investments or large one-time capital investments could negatively affect our cash flows. In 2026, we will make significant capital investments to enhance and upgrade our manufacturing operations, including a large capital project at our Eastover, South Carolina, mill. We expect our capital spend in 2026 for all of our mills to be between approximately $230 and $250 million. We expect our capital investments to result in favorable returns, but there is no guarantee that they will have the levels of return that we expect.
We may be required to recognize impairments of goodwill or other intangible assets.
We review our goodwill balance for impairment at least once a year using the qualitative assessment and, when necessary, the quantitative goodwill impairment test allowed in accordance with current accounting standards. Future changes in the cost of capital, expected cash flows, or other factors could cause our goodwill and other intangible assets to be impaired, resulting in a non-cash charge against results of operations to write down these assets for the amount of the impairment. As of December 31, 2025, we recorded a goodwill impairment charge of $11 million for our France reporting unit , as described in Note 9 Goodwill to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10‑K. In addition, changes in our business strategy or external conditions adversely affecting our operations could require an impairment charge for goodwill or intangibles. An impairment charge leads to decreased assets and reduced net operating results and, potentially, a material adverse effect on our results of operations.
Pension plan investment performance and actuarial changes could adversely affect our financial results and cash flows.
We sponsor various defined benefit pension plans in the U.S. and U.K. The assets of the pension plans are diversified in an attempt to mitigate the risk of a large loss. Required funding for our U.S. defined benefit pension plan is determined in accordance with guidelines set forth in the federal Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the U.K. pension plan is funded in accordance with local statutes or practice. Additional contributions to enhance the funded status of the pension p lans can be made at our discretion.
As of December 31, 2025, the Sylvamo U.S. and U.K. pension plans were fully funded with respect to statutory requirements. However, if underfunding were to exist in the future, we may be required to make contributions to reduce the underfunding. Th ere can be no assurance that the value of the pension plan assets, or the investment returns on those plan assets, will be sufficient to retain the current percentage funding levels and meet the future benefit obligations of such plans. Particularly during periods of adverse market conditions and declining interest rates, we may be required to make additional cash contributions to the pension plans that could reduce our financial flexibility. Changes in plan demographics, including an increase in the number of retirements or increases in life expectancy assumptions, may also increase the costs and funding requirements of the plans. Additionally, interpretations of or changes in regulations applicable to our U.S. or U.K. pension plan could cause us to have to increase funding of the plan; for example, see the disclosure concerning our U.K. pension plan under the Risk Factors heading “Compliance with a broad range of complex and changing regulations could increase our costs or limit our operations, and failure to comply could result in liabilities and harm our business.”
Our indebtedness could constrain our business and use of cash, and a default under our debt agreements could adversely impact our business.
We have outstanding indebtedness that includes the following amounts as of December 31, 2025: a revolving credit facility with $67 million outstanding; a Term Loan A maturing in 2029 with $208 million outstanding; a Term Loan F maturing in 2027 with $257 million outstanding; a Term Loan F‑2 maturing in 2031 with $220 million outstanding; and an accounts receivable finance facility maturing in 2027 with $90 million outstanding.
Although we have significantly reduced our indebtedness over the past few years, our indebtedness nonetheless could adversely affect us, such as by necessitating cash to be used for debt service instead of for other business objectives. To the extent our borrowings are subject to variable interest rates, increases in interest rates would further increase our interest expense. Our ability to make scheduled payments on or refinance our debt obligations will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond our control. There is no assurance that we will maintain a level of cash flows sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
Additionally, the agreements governing our indebtedness contain restrictive covenants that limit our ability to conduct our business, including certain limitations on our ability to dispose of assets and the use of the proceeds from those dispositions, certain requirements that we use the proceeds from future incurrences of debt or issuances of equity to repay existing indebtedness, and limit our ability to incur additional indebtedness. We may not be able to consummate dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
A failure to make scheduled payments on our debt, or a breach of any of the covenants under the agreements governing our indebtedness, if not waived by the lenders, or, to the extent applicable, not cured within specified periods, would result in an event of default under those agreements. Lenders under the agreements governing our indebtedness could declare all outstanding principal and interest to be due and payable, and lenders could further terminate their commitments to loan money under our existing revolving credit facility or foreclose against the assets securing their borrowings, which could force us to file for bankruptcy protection and either restructure or liquidate. Any of these events could result in our shareholders losing some or all of the value of their investments. Further, an event of default may result in the acceleration of any other debt to which a cross-acceleration or cross- provision applies. In the event the lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
Equity and Capital Market Risks
Dividends and share repurchases are subject to board discretion and may be reduced or discontinued.
Since 2022, we have paid quarterly dividends and have been opportunistically repurchasing shares of our common stock. Our continued declaration and payment of quarterly dividends, continued repurchases of shares, and institution of any other return of cash to our shareholders, including payment of any special dividends, will nonetheless be at the discretion of our board of directors and will depend on many factors, including our earnings, financial condition and results of operations, capital requirements, level of indebtedness, covenants contained within our debt agreements, contractual restrictions with respect to payment of dividends and the repurchase of shares, ability to obtain cash or other assets from our subsidiaries, restrictions imposed by applicable law, g eneral business conditions and other factors that our board of directors may deem relevant. As of December 31, 2025 , we have repurch ased $300 million of the total $450 million currently authorized by our board of directors for repurchases of our common stock. Any repurchases in excess of the remaining amount authorized for repurchases would require further authorization by our board of directors.
Among the covenants in our debt agreements, prior to the Brazil Tax Dispute (as defined in this Form 10-K) being resolved, if we do not maintain the minimum level of liquidity specified in such agreements, or, if there are adverse rulings in the Brazil Tax Dispute and we do not maintain the specified minimum level of liquidity and deposit $60 million into escrow, then we would be limited in the amount of “restricted payments,” including dividends and share repurchases, that we may make while our indebtedness remains outstanding.
There can be no assurance that we will continue to pay dividends or repurchase shares of our common stock in the future. Therefore, the success of an investment in shares of our common stock may in the future depend only upon any future appreciation in their value. Shares of our common stock lost value in 2025, and could further lose value.
Future issuances of securities could rank senior to our common stock, dilute shareholders or adversely affect our common stock’s value.
In the future, we may decide to issue senior or subordinated debt securities or preferred stock or other equity securities that rank senior to our common stock, including, without limitation, to finance ongoing operations or as consideration for future strategic investments or transactions. Also, we grant stock-based equity awards to our directors and certain officers and other employees as partial compensation for their services for us. Such potential future issuances may, and our ongoing awards of stock-based compensation will, dilute our other shareholders’ equity ownership of us.
The instruments governing securities that we issue in the future may include covenants restricting our operating flexibility and ability to pay dividends and make other distributions to our shareholders. Additionally, any convertible or exchangeable securities issued in the future could have rights, preferences and privileges more favorable than those of our common stock and could result in dilution to owners of our common stock. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. Thus, holders of our common stock will bear the risk of our future issuances reducing the market price of our common stock and diluting the value of their common stock holdings in us.
Sale of a substantial number of shares of our common stock could cause its market price to decline.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales (or the possibility that these sales may occur), or speculation that a holder of a large number of shares of our common stock intends to sell its shares, could reduce the market price of our common stock. Our two largest shareholders have reported, on Schedule 13Ds filed with the SEC, ownership of approximately 16% and 15%, respectively, of our outstanding common stock.
Actions of activist shareholders could increase our costs, divert management attention and resources, adversely affect our business and cause volatility in our stock price.
We may be the subject of activity by activist shareholders. Responding to shareholder activism can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees from executing our
business plans. We may not be able or willing to respond to the activist shareholder’s requests, which could result in a proxy contest or other actions by the shareholder and disrupt our operations. Activist campaigns could create perceived uncertainties as to the future direction of the Company, its leadership and strategic plans and result in lost potential business opportunities, harm our ability to attract qualified personnel and business partners and cause us to incur associated legal, financial advisory and other costs. Any activist shareholder activity, the expectation of such activity or the mere presence of an activist shareholder among our investor base could cause periods of significant volatility in the market price for our common stock.
Governance Risks
Anti-takeover provisions in our governing documents and a shareholder rights plan adopted in 2025 may discourage, delay or prevent a change of control of our company.
Our certificate of incorporation and bylaws contain certain provisions that may discourage, delay or prevent a change in our management or change of control, including that they, collectively: authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; prohibit shareholder action by written consent, thereby requiring all actions to be taken at a meeting of the shareholders; and establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our shareholders.
Additionally, in November 2025, we adopted a shareholder rights plan, pursuant to which we issued a dividend of one preferred share purchase right (a “Right”) for each share of our common stock then outstanding. In the event of certain takeover events not authorized by our board of directors, the holders of Rights may purchase additional shares of preferred stock at a discount, diluting the ownership stake of any potential acquirer and making a takeover more expensive and difficult.
These provisions in our certificate of incorporation and bylaws and the Rights could prevent our shareholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Their impact that delays, deters, renders more difficult or prevents a change in our control in a takeover attempt may not be in the best interests of our shareholders. Even in the absence of a takeover attempt, the existence of these provisions and the Rights could adversely affect the prevailing market price of our common stock if their impact is perceived by investors as detrimental. Also, they could make it more difficult for shareholders to replace or remove our management and thus facilitate management entrenchment.
An exclusive forum provision in our Certificate of Incorporation may limit shareholders’ ability to bring claims in some forums.
Our certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for derivative actions, claims for breach of fiduciary duty, claims arising under the Delaware General Corporation Law (“DGCL”), our certificate of incorporation or bylaws, or other claims governed by the internal affairs doctrine. In addition, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for claims arising under the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations thereunder. These forum selection provisions may limit a stockholder’s ability to bring certain claims against the Company, or against current or former directors, officers or other shareholders, in a judicial forum that the shareholder perceives to be favorable and may with respect to such . If a court were to find any portion of these provisions inapplicable or unenforceable, we could incur additional costs associated with resolving such matters in other jurisdictions.
Our certificate of incorporation limits the liability of our directors and officers.
Our certificate of incorporation contains provisions permitted under the DGCL relating to the liability of directors and officers. These provisions eliminate a director’s or officer’s personal liability to the fullest extent permitted by the DGCL for monetary damages resulting from a breach of fiduciary duty, except in circumstances involving:
• any breach of the director’s or officer’s duty of loyalty;
• acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law;
• any transaction from which the director or officer derives an improper personal benefit;
• with respect to directors only, Section 174 of the DGCL (unlawful dividends); or
• with respect to officers only, any action by or in the right of the Company.
The principal effect of the limitation on liability provision is that a shareholder cannot prosecute an action for monetary damages against a director or officer unless the shareholder is able to demonstrate a basis for liability for which indemnification is not available under the DGCL. These provisions, however, should not limit or eliminate our rights or any shareholder’s rights to seek non-monetary relief, such as an injunction or rescission. These provisions do not alter a director’s or officer’s liability under federal securities laws. This limitation on liability could discourage or deter shareholders or management from bringing a lawsuit against directors or officers for a breach of their fiduciary duties, even though such an action, if successful, might otherwise have benefited us and our shareholders.
