UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Transcription

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x IN RE INTERPUBLIC SECURITIES 02 Civ (DLC) LITIGATION CLASS ACTION x HENRY KARPUS, Derivatively on behalf of Nominal Defendant, The Interpublic Group of Companies, Inc. 03 Civ (DLC) Plaintiff, DERIVATIVE ACTION v. Bell, et al. Defendants. x JOINT NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION AND DERIVATIVE ACTION, AND OF MOTION FOR ATTORNEYS FEES AND EXPENSES This Notice provides you with important information in connection with the settlement of two lawsuits concerning The Interpublic Group of Companies ( IPG ). Your rights may be affected by this Notice. If you wish to recover money you must act by November 22, You should read this Notice carefully. If you 1) purchased or acquired IPG common stock between October 28, 1997 and October 16, 2002 (the Class Period ) (inclusive) (the Purchaser Class ), or 2) acquired shares of IPG common stock in exchange for shares of True North Communications common stock pursuant to IPG s Form S-4 registration statement filed on April 19, 2001 and amended on May 9, 2001 (the True North Class ), you may be entitled to receive a payment from the settlement of the securities class action (the Securities Class Action ) (the Purchaser Class and the True North Class are referred to as the Class ); If you are a current shareholder of IPG common stock, this Notice describes the changes in IPG s corporate governance which are the basis for the settlement of a lawsuit brought by a shareholder on behalf of IPG (the Derivative Action ). A federal court authorized this Notice. This is not a solicitation from a lawyer. The Settlement (as defined in the Stipulation and Agreement of Settlement for the Securities Class Action and the Derivative Action, respectively) resolves two lawsuits. The Securities Class Action Claims that IPG overstated its earnings and understated its expenses due to its failure to reconcile properly expenses that were incurred for work done by more than one IPG office on the same account or on the same project for the years These failures are alleged to have occurred principally at IPG s subsidiary McCann-Erickson World Group. The discovery of these failures led to IPG s announcement of a restatement of its financial statements. The Securities Class Action Claims that IPG made materially false and misleading statements on August 5 and August 13, 2002 regarding the size of the restatement. The Securities Class Action also Claims that the Individual Defendants, each of whom was an officer or director of IPG (Phillip H. Geier, Jr., John J. Dooner, Jr., Eugene P. Beard, Sean F. Orr, Joseph M. Studley, Frederick Molz, David I.C. Weatherseed and Richard P. Sneeder) (collectively with IPG, the Securities Class Action Defendants ), controlled and/or possessed the authority to control the contents of IPG s reports, press releases and presentations to securities analysts, and were under a duty to disclose material facts, but instead misrepresented or concealed them during the Class Period, knowingly or recklessly disregarding the fact that these material misrepresentations and/or omissions would cause the value of the common stock to be inflated. What began as an announced restatement of $68.5 million on August 13, 2002, was increased in an announcement on October 16, 2002, the last day of the Class Period, to $120 million. After the close of the Class Period, on November 13, 2002, the restatement was revised upwards to $181.3 million. The Securities Class Action alleges that the misrepresentations caused the stock price of IPG to be artificially inflated throughout the Class Period. The other lawsuit, the Derivative Action, is an action filed by a shareholder on behalf of IPG. Plaintiff Claims that IPG was harmed by the acts of the Director Defendants (David A. Bell, Frank J. Borelli, Reginald K. Brack, Jill M. Considine, John J. Dooner, Jr., Richard A. Goldstein, H. John Greeniaus, Sean F. Orr, Michael A. Roth, and J. Phillip Samper) when they

2 breached their fiduciary duties in failing to set up adequate accounting controls and by disseminating materially false information concerning IPG s accounting controls. The Derivative Action also asserts Claims on behalf of IPG against PricewaterhouseCoopers, LLP ( PwC ) for breach of contract and negligence (PwC is referred to collectively with the Director Defendants as the Derivative Action Defendants ). PwC was the auditor for IPG during the audit years at issue in the Securities Class Action and the Derivative Action, The Derivative Action Defendants and the Securities Class Action Defendants (referred to collectively as Defendants ) deny the allegations of both lawsuits, and the parties disagree with respect to issues of liability and damages. The Securities Class Action Settlement is being funded with a combination of cash ($20,000,000) and IPG common stock (6,551,725 shares) ( Gross Settlement Fund ). As described below, the Settlement will have a guaranteed minimum value of seventy-seven million dollars ($77,000,000) as of the date of the Final Settlement Hearing. The Settlement may provide a recovery to IPG shareholders who had purchased common stock during the Class Period and still retained some of those shares as of 8/3/02, among others as described below. In addition, because one of the components of consideration is stock, the value of the Settlement has a potential to provide a recovery greater than $77,000,000. The Securities Class Action recovery is explained in greater detail below. The Derivative Settlement will provide corporate governance benefits to IPG, which are explained below. As noted above, the Derivative Action is brought derivatively on behalf of IPG, and not on behalf of the individual shareholders of IPG. Plaintiffs Lead Counsel in the Securities Class Action, which has not yet received any compensation in connection with the case, will apply to the Court for an award of attorneys fees from the Gross Settlement Fund not to exceed twenty percent (20%) of that fund, and reimbursement of expenses of no greater than $375,000, or an average of $.057 per share. Plaintiffs Lead Counsel have litigated the Securities Class Action on a contingent fee basis, and have advanced the expenses of litigation with the expectation that if they were successful in recovering money for the Class, they would receive fees and be reimbursed for their expenses from the Gross Settlement Fund, as is customary in this type of litigation. Plaintiffs Lead Counsel will request fees divided between cash and stock in the same proportion of cash and stock that is to be distributed to the Class. As a result, counsel will bear the same risk of the fluctuating stock price as the Class. Plaintiff's Counsel in the Derivative Action, who has litigated the Derivative Action on a contingent fee basis, has not yet received any compensation in connection with the case, and will apply for an award of attorneys' fees of $295,000 and reimbursement of expenses of up to $20,000 to be paid from the Gross Settlement Fund in the Securities Class Action. Your legal rights may be affected whether you act, or don t act, so please read this Notice carefully. You may do the following YOUR LEGAL RIGHTS AND OPTIONS IN THE SECURITIES CLASS ACTION SETTLEMENT SUBMIT A CLAIM FORM EXCLUDE YOURSELF OBJECT GO TO A HEARING DO NOTHING This is the only way to qualify to receive any portion of the Net Settlement Fund. This is the only option that allows you to ever file or be part of any other lawsuit against IPG or the Individual Defendants asserting the Claims that are being released in this Settlement. You will not receive any portion of the Settlement Fund if you select this option. Write to the Court about why you don t like the Securities Class Action Settlement. Ask to speak in Court about the fairness of the Securities Class Action Settlement. Receive no payment. Give up your right to file your own lawsuit or participate in any other lawsuit against IPG concerning the legal Claims in the case. These rights and options and deadlines to exercise them are explained below. The Court in charge of this case still has to decide whether to approve the Settlements. Payments to the Class will be made only if the Court approves the Settlements, the Settlements become final after the resolution of all appeals, and after the Claims processing procedure is complete. Approval of the Securities Class Action Settlement by the Court is a condition of approval of the Derivative Settlement. Approval of the Derivative Settlement by the Court is not a condition of the Securities Class Action Settlement. 2

3 Statement of Plaintiffs Recovery (1) The Securities Class Action The Settlement consists of 1) Twenty Million Dollars ($20,000,000) in cash and 2) 6,551,725 shares of freely tradable IPG common stock (the Settlement Shares ), the value of which depends on the price of IPG s stock (collectively the Gross Settlement Fund ). The Gross Settlement Fund will be used for the settlement of this litigation, the payment of taxes, administrative costs (including the costs of notice in both the Securities Class Action and the Derivative Action) and for attorneys fees and expenses in both lawsuits. The cash and Settlement Shares remaining after the expenditures for administrative costs, taxes, and attorneys fees and expenses will be the Net Settlement Fund. The Securities Class Action Defendants have agreed that the Gross Settlement Fund will have a guaranteed minimum value of $77,000,000 as of October 22, 2004, the date of the Final Settlement Hearing. The value of the shares in the Gross Settlement Fund will be calculated using the average price of the stock over the ten (10) trading days preceding the Final Settlement Hearing. If the value of the Gross Settlement Fund at that time is below $77,000,000 (i.e., market value of IPG s stock is below $8.70 per share), then IPG, at its sole election, shall either issue additional shares of IPG common stock or pay additional cash at that time so that the Gross Settlement Fund shall have a total combined market value of $77,000,000 on the Final Settlement Hearing date. The Gross Settlement Fund can also have a much greater value if the stock trades above $8.70 per share. The average closing price of IPG common stock over the last year is $ If the value of the shares in the Gross Settlement Fund in the 10 trading days preceding the Final Settlement Hearing is calculated using $14.94, the Gross Settlement Fund would have a total value of $117,882,772. The Class will enjoy the full benefit of any increase in the stock s value above $8.70, as there is no ceiling on the size of the benefit that the Class can receive. Lead Plaintiffs believe that the accounting issues raised in the case do not undermine the financial stability of IPG, that the stock component of the Settlement is valuable consideration for the Class, and that the stock component of the Settlement is likely to result in a Gross Settlement Fund with a value in excess of the $77,000,000 guarantee. Lead Plaintiffs estimate that approximately 389,613,447 shares of IPG common stock were purchased and/or acquired during the period of October 28, 1997 through October 16, 2002, inclusive, and damaged as a result of the purported acts or omissions alleged in the Securities Class Action. Lead Plaintiffs estimate that the average recovery per damaged share of IPG common stock under the Settlement will be $.20 per damaged share before the deduction of attorneys fees, costs and expenses, as approved by the Court, if the value of the Settlement is $77,000,000. At the stock s value on July 20, 2004 of $12.87, the average recovery per damaged share of IPG common stock under the Settlement will be $.27 before the deduction of attorneys fees, costs and expenses, as approved by the Court. In addition to the fluctuating price of the stock, the following factors will also affect the actual recovery per damaged share (1) the number of Claims filed; (2) when Class Members purchased or acquired their shares during the Class Period; (3) whether Class Members either sold their shares during the Class Period, or held their shares past the end of the Class Period; (4) administrative costs, including the costs of notice, for both lawsuits; and (5) the amount awarded by the Court for attorneys fees, costs and expenses. Distributions to Class Members will be made based on the Plan of Allocation described below. (2) The Derivative Action The Derivative Action is brought on behalf of IPG, not individual shareholders of IPG. The settlement of the Derivative Action will provide benefits to IPG in the form of the corporate governance measures adopted by IPG, as described below. The Status of the Lawsuits Both of these actions have been filed in the United States District Court for the Southern District of New York. They are assigned to the Honorable Denise Cote (the Court ). As stated above, the Securities Class Action alleges, among other things, that IPG and the Individual Defendants issued false and misleading press releases and other statements during the Class Period regarding IPG s financial condition during the Class Period in order to inflate artificially the price of IPG s common stock, and that IPG shareholders who purchased or otherwise acquired the stock at inflated prices were damaged as a result. Plaintiffs in the Securities Class Action filed the First Amended Consolidated Complaint (the Complaint ) on January 10, On February 7, IPG and the Individual Defendants moved to dismiss the Complaint. On May 29, the Court granted one part of the motion. The Court dismissed Claims against the Individual Defendants for securities fraud in violation of Section 10(b) of the Securities Exchange Act, but denied the remainder of the motions to dismiss. On July 11, Lead Plaintiffs moved to certify the Purchaser Class and the True North Class. The Securities Class Action Defendants opposed the motion solely on the ground that the Class Period should end on August 12, 2002 rather than October 16, 2002 because IPG released information disclosing the accounting irregularities on August 13, On November 6, 2003, the Court certified the Class as requested by Plaintiffs - - with the Class Period ending on October 16, At the same time that Lead Plaintiffs were pursuing class certification, they were also pursuing discovery and obtained approximately 800,000 pages of documents from IPG, the Individual Defendants, and a third party. As to the Derivative Action, on February 24, 2003, the plaintiff commenced this shareholder derivative action on behalf of IPG. The plaintiff filed an amended derivative complaint on May 1, and a second amended complaint ( Derivative Complaint ) on July 11, The Derivative Complaint asserts five Claims. In Count 1, plaintiff alleges a Claim for forfeiture in favor of IPG against defendants Dooner (the former Chairman and Chief Executive Officer of IPG) and Orr (the former Chief Financial Officer of IPG). This forfeiture Claim seeks forfeiture in favor of IPG of any bonus or other equity based compensation, and any profits from the sale of IPG securities, which these defendants received as a result of their alleged misconduct in connection with IPG s restatement. In Counts 2 and 3, plaintiff alleges that the members of the IPG Board breached their fiduciary duties by failing to cause the company to maintain adequate financial controls, and by disseminating misleading and inaccurate information to the public, all of which is alleged to have harmed IPG. 3

4 In Counts 4 and 5, plaintiff alleges that PwC was negligent and breached its contract with IPG by failing to audit properly IPG's financial statements. The Derivative Complaint seeks monetary damages against the defendants in favor of IPG. On August 12, 2003, the Derivative Action Defendants filed motions to dismiss the Derivative Complaint. The motions to dismiss were fully briefed and awaiting the Court s decision when settlement discussions commenced. The parties requested that the Court not decide those motions unless the settlement discussions failed. The Reasons for the Settlement Discovery in the Securities Class Action began in June The Court referred the parties to Magistrate Judge Gabriel Gorenstein for settlement discussions at that time. Over the course of the next six months, the parties mediated with Magistrate Judge Gorenstein on two separate occasions, and negotiated the settlement through numerous telephonic meetings. Those settlement discussions ultimately resulted in the settlement of both the Securities Class Action and the Derivative Action. The basic outline of the Securities Class Action Settlement is memorialized in a letter dated December 2, In the succeeding months, the parties negotiated the details of the Settlement, while Plaintiffs completed their review of the 800,000 pages of documents produced in discovery. Plaintiffs also deposed three IPG employees in April and early May of this year. The parties disagree as to the probable outcome if the two actions are not settled. Plaintiffs Counsel in the Securities Class Action recognize that a trial is a risky proposition and that plaintiffs may not have prevailed on all or any of their Claims. The evidence indicated that the failure of the McCann Erickson offices to record accurately inter and intra-company expenses was primarily limited to local offices in Europe, and that the failure to reconcile these accounts was not systemic and did not appear to result from a company-wide effort to mislead investors. In addition, the fact that certain Individual Defendants increased their holdings of IPG common stock before the announcement of the restatement, meaning that these individuals apparently did not seek to take advantage of the inflated price of IPG stock, made proving any willful misconduct by IPG more difficult. Discovery revealed that while IPG failed to reconcile properly inter and intra-company accounts for many years, that failure did not result in a significant understatement of expenses for IPG until just prior to the announcement of the restated numbers in August Moreover, the price of IPG stock increased when the Company announced on August 13, 2002 that it would be restating its earnings, a fact that a jury may view as inconsistent with plaintiffs argument that the Class was injured by the release of information on that date. The parties also disagree as to the probable outcome of the Securities Class Action with respect to damages. Lead Plaintiffs and their economic consultants believe that the damages arising from the alleged accounting malfeasance in the Securities Class Action, depending on the methodology used, can range anywhere between $465,400,659 and $909,230,910. The high side of the range results from the use of a damages model which presumes that the majority of the drop in the stock price over the Class Period can be attributed to fraud, and not to other factors that may have had an impact on the stock price during the Class Period. This figure also assumes that the Court and a jury would make every factual finding in plaintiffs favor. The $465,400,659 damage figure is based on the rise of the stock price which resulted from defendants second disclosure, on August 13, 2002, which the plaintiffs assert was misleading and understated the amount of the required restatement, as explained more fully below in the description of the Plan of Allocation. Adjusted for overall market activity, Lead Plaintiffs consultant has calculated that the partial disclosure of August 13, 2002 affected the stock price by $1.37 per share, and that this figure reflects the value of the misleading earnings restatement information in the market, as well as the damage per share through price inflation during the Class Period. Contrary to Lead Plaintiff s position, IPG and the Individual Defendants have argued that much of the decline in the price of IPG stock was not attributable to the release of information regarding the restatement, but rather, was the result of other factors, including the Company s release of information regarding revised earnings estimates for the year for reasons unrelated to the reconciliation of inter-company accounts. In addition, defendants argue that plaintiffs allegations arise from accounting procedures that did not impact the fundamental businesses of IPG, such as advertising. As a result, defendants argue that any damage calculation should be based on a figure of $101 million, the portion of the restatement announced on November 13, 2002 that was attributable to the alleged fraud. Plaintiffs do not agree that tying the damages suffered by shareholders to the amount of the restatement can ever be proper. IPG and the Individual Defendants have also argued that the decline in the stock market generally, and for advertising stocks in particular at the end of the Class Period, influenced the trading price of IPG common stock, and at least in part, was responsible for the decline in the value of the IPG stock. This dispute regarding damages in the Securities Class Action would be subject to expert testimony and, therefore, it is impossible to predict with certainty which side s arguments would prevail. With respect to the Derivative Action, Derivative Counsel concluded that (1) a significant risk existed that the Derivative Action would be dismissed for failure of the plaintiff to make a pre-suit demand on IPG that it bring this action in its own name; (2) defendants will assert strong defenses to the Claims, including the defenses that their actions were protected by the business judgment rule, and provisions in the Delaware Corporation Law and IPG's Charter; (3) the Claim for forfeiture of bonuses was novel; and (4) PwC possessed support for its defenses to the breach of contract and negligence Claims. Derivative Counsel concluded that if the Complaint survived the motions to dismiss, the risks of continued litigation were outweighed by the benefits of settlement, and it was agreed to settle the Derivative Action based on the benefits set forth in the Notice. Given the relative weakness of the Claims against PwC and the benefit to IPG of ending the Derivative Action (PwC might assert Claims against IPG if it remained a defendant), Derivative Counsel agreed that the Claims against PwC would be dismissed as part of an overall resolution of the Derivative Action without recovery from PwC. Plaintiffs Counsel in both the Securities Class Action and the Derivative Action have recommended the Settlements because they believe that these Settlements provide a substantial recovery to the Class, and beneficial corporate governance changes for IPG, and believe that they may not have obtained a greater recovery or better remedies if they had gone to trial. 4

5 WHAT THIS NOTICE CONTAINS BASIC INFORMATION...PAGE 5 A. Why did I receive this notice package? B. Why is the Securities Class Action a class action? C. Why is the Derivative Action a derivative action? D. Why is there a settlement? E. How do I know if I am part of the Securities Class Action Settlement? F. Are there exceptions to being included in the Class? G. I m still not sure I am included? H. Who is affected by the Derivative Settlement? I. What do the Settlements provide? J. How much will my payment be in the Securities Class Action Settlement? K. How can I receive a payment in the Securities Class Action Settlement? L. When will I receive my payment in the Securities Class Action Settlement? M. What am I giving up to receive a payment in the Securities Class Action Settlement? N. What is the Corporation giving up to receive the benefits of the Derivative Settlement? O. How do I exclude myself from the Securities Class Action Settlement? P. If I don t exclude myself, can I sue IPG or the Individual Defendants later for the Claims that I am releasing in this Settlement? Q. If I exclude myself can I obtain a payment from this Settlement? R. Can I exclude myself from the Derivative Settlement? S. Do I have a lawyer in these cases? T. How will the lawyers be paid? U. How do I notify the Court that I don t like either or both of the Settlements? V. What is the difference between objecting and requesting exclusion from the Securities Class Action Settlement? W. When and where will the Court decide whether to approve the Settlement? X. Do I have to answer questions at the hearing? Y. May I speak at the Fairness Hearing? Z. What will happen if I do nothing at all? SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES. PAGE 11 GETTING MORE INFORMATION.. PAGE 11 BASIC INFORMATION A. Why did I receive this Notice package? The Court authorized this Notice to be sent to you because you or someone in your family 1) may have purchased or acquired shares of IPG common stock between October 28, 1997 and October 16, 2002, inclusive; 2) acquired shares of IPG common stock in exchange for shares of True North Communications common stock in 2001; or 3) is a current shareholder of IPG common stock. If one of the descriptions above applies to you or someone in your family, you have a right to know about the proposed settlements of the Securities Class Action and the Derivative Action, and about all of your options. B. Why is the Securities Class Action a class action? In a class action, one or more people and/or entities called Class Representatives (in this case, Private Asset Management and Doyle McClain), sued on behalf of people and/or entities who have similar Claims. All these people and/or entities are referred to as a Class or individually as Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. C. Why is the Derivative Action a derivative action? In a derivative action, one or more people and/or entities who are shareholders of a corporation (in this case, Henry Karpus), sued on behalf of the corporation, alleging that the corporation was injured, and seek recovery on behalf of the corporation. In a derivative action, the corporation and not the individual shareholders of the corporation receives the benefits of the Settlement (except to the extent that the value of the corporation s shares increases as a result of the benefits the corporation receives in the settlement of the litigation). 5

6 D. Why is there a settlement? The Court did not decide in favor of plaintiffs or defendants in either lawsuit. Instead, both sides in each lawsuit agreed to a settlement. As explained above, the Class Representatives in the Securities Class Action lawsuit, the Plaintiff in the Derivative Action, and their attorneys think the Settlement is best for all Class Members and all current shareholders. E. How do I know if I am part of the Securities Class Action settlement? The Class includes All people or entities who 1) purchased or otherwise acquired shares of IPG common stock between October 28, 1997 and October 16, 2002, inclusive; and 2) acquired shares of IPG common stock in exchange for shares of True North Communications common stock pursuant to IPG s Form S-4 registration statement filed on April 19, 2001, and amended on May 9, F. Are there exceptions to being included in the Class? You are not a Class Member if you are one of the defendants, a member of the immediate family of one of the defendants, a person, firm, trust, corporation, officer, director or other individual or entity in which any defendant has a controlling interest, or the legal representative, agent, affiliate, heir, successor-in-interest or assign of any excluded party. If you own a mutual fund that owns shares of IPG stock, that alone does not make you a Class Member. You are a Class Member only if you purchased or otherwise acquired shares of IPG stock individually, during the time period between October 28, 1997 and October 16, 2002, inclusive. Contact your broker to see if you bought shares of IPG common stock during this time period. G. I m still not sure I am included. If you are still not sure whether you are included, you can ask for free help. You can call or visit for more information. Or you can fill out and return the Claim form described below to see if you qualify. H. Who is affected by the Derivative Settlement? A derivative action is brought on behalf of the corporation. The corporation, and not the individual shareholders (except insofar as the value of their shares increase) receives the benefits of the Settlement. I. What do the settlements provide? The Securities Class Action Settlement The Settlement consists of 1) Twenty Million Dollars ($20,000,000) in cash; and 2) 6,551,725 shares of freely tradable IPG common stock (the Settlement Shares ), the value of which depends on the price of IPG s stock (collectively the Gross Settlement Fund ). The Gross Settlement Fund will be available for the settlement of this litigation, the payment of taxes, administrative costs, including the costs of notice in both the Securities Class Action and the Derivative Action, and for attorneys fees and expenses in both lawsuits. The Securities Class Action Defendants have agreed that the Gross Settlement Fund will have a guaranteed minimum value of $77,000,000. The value of the Settlement Shares will be calculated using the volume weighted average price of the stock over the ten (10) trading days preceding the Final Settlement Hearing. If the value of the Gross Settlement Fund at that time is below $77,000,000 (i.e. market value of IPG s stock is below $8.70 per share), then IPG, at its sole election, shall either issue additional shares of IPG common stock or pay additional cash at that time so that the Gross Settlement Fund will have a total combined market value of $77,000,000 on the Final Settlement Hearing date. The Gross Settlement Fund can also have a greater value if the stock trades above $8.70 per share. The 52-week average closing price of IPG stock is $ If the value of the Settlement Shares over the ten days preceding the Final Settlement Hearing is $14.94, the Gross Settlement Fund would have a total value of $117,882,772. The Class will enjoy the full benefit of any increase in the stock s value over $8.70, as there is no ceiling on the size of the benefit that the Class can receive. The Derivative Settlement The following corporate governance procedures will be instituted in settlement of the Derivative Action a. for a period of five (5) years, IPG will retain an ombudsman, currently Pinkerton Compliance Services, which can receive information from employees regarding any alleged financial irregularities, or ethical concerns. Each IPG employee has been provided with Pinkerton s toll-free 800 number, and may call that number day or night. The employee may call anonymously, no trace is made of 6

7 the call and the calls are not recorded. Pinkerton staffs the hot-line with its employees, who are not employed by IPG. Pinkerton is charged with opening an investigation file for each such call. Depending on the nature of the call, the matter is subsequently referred to the IPG internal audit group or the IPG legal department for action and further investigation. Pinkerton, at its discretion, may bring such information directly to the Audit Committee of IPG s Board of Directors, which consists solely of outside, non-management, non-employee directors, without the prior permission of IPG s senior management. Further, no employee who reports any such information to the ombudsman shall be subject to retaliation. Federal law requires companies like IPG to institute a complaint procedure, and IPG intended even apart from this lawsuit to employ a third-party ombudsman to comply with the law. This Settlement ensures, however, that the complaint procedure described here will be in place for five (5) years. b. any remaining out of the money options held by two Individual Defendants will not be repriced lower until IPG s stock price closes at $30 or higher for a period of no less than ninety (90) trading days. The two Individual Defendants and the stock options they now hold are 1. John J. Dooner, the former IPG Chairman and Chief Executive Officer holds 100,000 share options granted at the exercise price of $60.00 which expire 12/16/2010; 248,000 share options granted at the exercise price of $ which expire 3/24/2010; 220,000 share options granted at the exercise price of $ which expire 12/15/2010; 100,000 share options granted at the exercise price of $ which expire 1/2/2011; 120,000 share options granted at the exercise price of $ which expire 12/17/2008; 350,000 share options granted at the exercise price of $ which expire 1/2/2012; 25,000 share options granted at the exercise price of $27.41 which expire 2/28/2012; 150,000 share options granted at the exercise price of $ which expire 5/19/2007; and 180,000 share options granted at the exercise price of $ which expire 5/20/2006; 2. David A. Bell, IPG's current Chairman and Chief Executive Officer holds 131,100 share options granted at the exercise price of $33.60 which expire 2/28/2011; 79,800 share options granted at the exercise price of $32.46 which expire 3/1/2010; 30,000 share options granted at the exercise price of $ which expire 1/2/2012; 125,000 share options granted at the exercise price of $ which expire 8/23/2011; 114,000 share options granted at the exercise price of $23.74 which expire 3/3/2008; and 45,828 share options granted at the exercise price of $21.05 which expire 3/2/2009. Repricing of options occurs when the exercise price of the option is reset lower, and may occur after the company s stock has declined. This benefits the holder of the option by allowing the holder to exercise his or her options more cheaply than would otherwise be permitted. IPG has never repriced options and can only do so with shareholder approval. Under the settlement, the Company would relinquish the option to seek shareholder approval. J. How much will my payment be in the Securities Class Action Settlement? If you are entitled to a payment, your share of the Net Settlement Fund will depend on the number of valid Claim forms that Class Members submit, how many shares of IPG stock you purchased or acquired, or how many shares of IPG common stock you acquired in exchange for shares of True North Communications common stock, and when you bought and sold your shares. By following the Plan of Allocation described here you can calculate your Recognized Claim. The Claims Administrator will distribute the Net Settlement Fund, that is, the Gross Settlement Fund, less taxes owed, all administrative costs, and attorneys fees, including the costs of notice in both lawsuits, and expenses, as awarded by the Court, according to the Plan of Allocation after the deadline for submission of Proof of Claim and Release forms has passed. No shareholder is entitled to a payment in the Derivative Settlement. In essence, Lead Counsel has used the stock price movement following an IPG announcement on August 13, 2002 to compute damages for the Class. Lead Counsel believes that the stock price movement at that time best reflects the extent to which the price of IPG common stock was inflated during the Class Period by IPG and the Individual Defendants alleged misrepresentations. The following events help to explain why the price movement on August 13, 2002 was chosen as the basis for the Plan of Allocation. On August 5, 2002, IPG announced a delay in the release of its financial results for the second quarter of 2002, causing IPG s common stock price to drop 24% that day, from $19.68 to $14.99 per share, and an additional 11% the next day. Soon after, on August 7, J.P. Morgan issued a report which articulated confidence in IPG, and the Company s stock rebounded 21% from the previous day s close, to $ IPG then announced second quarter results on August 13. As part of that announcement, IPG disclosed a restatement of prior earnings in the amount of $68.5 million. Analysts interpreted the restatement as much less negative than expected. The price of IPG s common stock rose 8% on August 14, and 9% on August 15, IPG then announced on October 16, that the restatement amount was not expected to exceed $120 million (pre-tax). IPG also announced that it lowered its forecast for 2002 earnings and that it expected to report lower third quarter earnings than the consensus estimate among Wall Street analysts. The stock dropped 30% from its October 16 closing price of $16.30 to close at $11.44 on October 17. Ultimately, on November 13, 2002, IPG announced that the restatement would be $181.3 million, rather than the previously announced figures. In response to this announcement, the stock price initially declined by $.40, but then rose over the course of the succeeding weeks. Lead Counsel alleges that the second disclosure, on August 13, was misleading and understated the amount of the required restatement, which was ultimately restated as over $181 million in November Lead Counsel s economic consultant has determined that the most accurate damages assessment for the Securities Class Action is based on the August 13,

8 announcement, even though IPG s stock price rose following the August 13 disclosure. Adjusted for changes in the industry stock prices, the consultant has calculated that the partial disclosure of August 13 affected IPG s stock price by $1.37, and that this figure reflects the value of the misleading earnings restatement information in the market, as well as the damages per share during the Class Period. Lead Counsel believes that the October 16 fall in price does not provide as accurate a basis on which to calculate damages because that stock price drop also reflects the effect of two other unrelated and significant pieces of financial information about IPG. Some of those investors who purchased or acquired shares of IPG common stock during the Class Period, including those who acquired shares of IPG common stock in exchange for shares of True North Communications common stock, will not be entitled to any recovery. For instance, those who sold their shares of IPG common stock on or before August 2, 2002 will not recover any damages because the value of IPG common stock was inflated during that entire period of time -- the first drop in IPG common stock s value which is attributable to the alleged misrepresentations did not occur until after August 2, In addition, those who purchased or acquired IPG common stock on or after August 5, 2002, and sold their shares of IPG common stock on or before October 16, 2002, also will not recover any damages because, although the price of IPG common stock fell on August 3, 2002, the price remained inflated until October 16, 2002, and the price fluctuated during that time due to reasons unrelated to the events at issue in the Securities Class Action. As a result, Lead Counsel has determined that those who purchased or acquired and sold during those two time periods have not lost any money because of the issues litigated in this lawsuit and will not be entitled to recover under the Plan of Allocation. If you have submitted a timely and valid Claim and release form, your recovery will be calculated as follows under the Plan of Allocation 1. For shares of common stock purchased or acquired between October 28, 1997 and August 2, 2002, inclusive A. If such shares were sold between October 28, 1997 and August 2, 2002, inclusive, there is no Recognized Loss. B. If such shares were sold between August 5, 2002 and October 16, 2002, the Recognized Loss shall be the lesser of (1) 75% of $1.37, or $1.03 per share; or (2) the difference between the purchase price per share and the sales price per share, if such difference is a positive number. C. If such shares were retained at the end of trading on October 16, 2002, the Recognized Loss shall be the lesser of (1) $1.37 per share; or (2) the difference between the purchase price per share and the sales price per share for each share sold between October 17, 2002 and January 14, 2003, if such difference is a positive number; or (3) the difference between the purchase price per share and $13.77 for each share still held at the close of trading on January 14, 2003, if such difference is a positive number For shares of common stock purchased and acquired between August 5, 2002 and October 16, 2002, inclusive A. If such shares were sold between August 5, 2002 and October 16, 2002, inclusive, there shall be no Recognized Loss. B. If such shares were retained at the end of trading on October 16, 2002, the Recognized Loss shall be the lesser of (1) 25% of $1.37, or $0.34 per share; or (2) the difference between the purchase price per share and the sales price per share for each share sold between October 17, 2002 and January 14, 2003, if such difference is a positive number; or (3) the difference between the purchase price per share and $13.77 for each share still held at the close of trading on January 14, 2003, if such difference is positive. Each Authorized Claimant shall be paid the percentage that each Authorized Claimant's Claim bears to the total of the Claims of all Authorized Claimants. The Court has reserved jurisdiction to allow, disallow or adjust the Claim of any Class Member on equitable grounds. Each Claimant is deemed to have submitted to the jurisdiction of the Court with respect to the Claimant's Claim, and the Claim will be subject to investigation and discovery under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall be limited to that Claimant's status as a Class Member and the validity and amount of that Claimant's Claim. No discovery shall be allowed on the merits of the Action, or of the settlements of the Securities Class Action or the Derivative Action. The date of purchase, acquisition or sale is the contract or trade date and not the settlement date. All profits will be subtracted from all losses to determine the net recognized loss of each Class Member. Therefore, you need to list all purchases, acquisitions, and sales of IPG common stock during the relevant time period. Brokerage commissions and transfer taxes paid by you in connection with your purchase and sale of IPG common stock should be included in the total purchase price and net of the total proceeds. In processing Claims, sales will be matched in chronological order, by trade date, first against the common stock held as of the close of trading on October 27, 1997 (the last day before the Class Period begins) and then against the purchases during the Class Period. 1 $ was the mean closing price of IPG common stock during the 90-day period beginning on October 17, 2002 and ending on January 14,

9 No distribution will be made on a Claim where the potential distribution amount is $10.00 or less in cash, or less than 1 share. Payment pursuant to the Plan of Allocation is conclusive against all Authorized Claimants. Payments will be final and conclusive against all Class Members. All Class Members whose Claims are not approved by the Court will be barred from participating in distributions from the Net Settlement Fund, but otherwise shall be bound by all of the terms of the Settlement, including the terms of the Judgment to be entered in the Securities Class Action and will be barred from bringing any Released Claim against any Released Persons (as those terms are defined in the Stipulation of Settlement, which is available on the Internet at or through the mail upon request). K. How can I receive a payment in the Securities Class Action Settlement? To qualify for payment you must send in a Claim form. A Claim form is attached to this Notice. You may also obtain a Claim form on the Internet at Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and mail it postmarked no later than November 22, L. When will I receive my payment in the Securities Class Action Settlement? The Court will hold a hearing on October 22, 2004, to decide whether to approve the Settlement. Even if the Court approves the Settlement, it could take more than a year before the Settlement Fund is distributed to the Class Members. One reason that it may take more than a year for the Settlement Fund to be distributed is that delays could be caused by the filing of appeals. The other reason that it may take more than a year for the Settlement Fund to be distributed is that once the Settlement has been approved, and any appeals are resolved, the Claims Administrator must process all of the Proof of Claim and Release forms. The processing is a complicated process and will take many months. Everyone who sends in a Claim form may remain informed of the progress of the Settlement through information posted on the website. M. What am I giving up to receive a payment in the Securities Class Action Settlement? If you are a Class Member in the Securities Class Action, and you do not exclude yourself, you are remaining in the Class, and that means that if the Settlement is approved, you, on behalf of yourself, your heirs, executors, administrators, successors and assigns and any persons you represent, will release all Settled Claims, including all Unknown Claims, against all Released Parties, as defined in the Stipulation of Settlement, which is available on the web at or through the mail upon request. N. What is the Corporation giving up to receive the benefits of the Derivative Settlement? If the Derivative Settlement is approved, IPG, on behalf of itself or anyone acting or claiming to act on behalf of IPG, will release all Settled Claims, against all Released Parties, as defined in the Stipulation of Settlement, which is available on the web at or through the mail upon request. O. How do I exclude myself from the Securities Class Action Settlement? You can exclude yourself from the Securities Class Action Settlement. If you don t want a payment from the Securities Class Action Settlement, but you want to keep the right to sue or continue to sue IPG or the Individual Defendants about the Claims you would be releasing in this Settlement, then you must take steps to exclude yourself from the Settlement. This is sometimes referred to as opting out of the settlement class. To exclude yourself from the Securities Class Action Settlement, you must send a letter by mail saying that you want to be excluded from In re The Interpublic Group of Companies Securities Litigation. Be sure to include your name, address, telephone number, information concerning your purchase(s) and sale(s), including the number of shares and the dates of purchase and sale, and your signature. You can t exclude yourself on the telephone or by . You must mail your exclusion request postmarked no later than September 27, 2004 to In re Interpublic Securities Litigation c/o The Garden City Group, Inc. Claims Administrator P.O. Box 9000 #6218 Merrick, NY If you ask to be excluded, you will not receive any settlement payment and you cannot object to the Settlement. You will not be legally bound by anything that happens in this lawsuit. You may be able to sue (or continue to sue) IPG in the future. 9

10 P. If I don t exclude myself, can I sue IPG or the Individual Defendants later for the Claims that I am releasing in this Settlement? No. Unless you exclude yourself, you give up any right to sue IPG or the Individual Defendants for the Claims that this Settlement releases. You must exclude yourself from the Class to bring or to continue your own lawsuit. Remember, the exclusion deadline is September 27, Q. If I exclude myself can I obtain a payment from this Settlement? No. If you exclude yourself, do not send in a Claim form to ask for any payment. R. Can I exclude myself from the Derivative Action? No. Because the Derivative Action is on behalf of IPG, you cannot exclude yourself from the Derivative Settlement. S. Do I have a lawyer in these cases? The law firm of Schiffrin & Barroway, LLP of Bala Cynwyd, Pennsylvania, represents the Lead Plaintiff and Class Members in the Securities Class Action. Laurence D. Paskowitz, Paskowitz & Associates, New York, New York is the attorney representing the Plaintiff in the Derivative Action. You will not be charged for the work done by these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. T. How will the lawyers be paid? Lead Counsel for the plaintiffs in the Securities Class Action has yet to be paid. Plaintiffs Lead Counsel has litigated this Securities Class Action on a contingent fee basis, and has advanced the expenses of litigation with the expectation that if it was successful in recovering money for the Class, it would receive fees and be reimbursed for their expenses from the Settlement Fund, as is customary in this type of litigation. Plaintiffs Lead Counsel will apply to the Court for an award of attorneys fees from the Gross Settlement Fund not to exceed twenty percent (20%), and reimbursement of expenses of no greater than $375,000, or an average of $.057 per share. Plaintiffs Lead Counsel will request fees equally out of the cash and stock components of the Gross Settlement Fund, so that it will bear the risk of the fluctuating stock price along with the Class. Plaintiff's Counsel in the Derivative Action has not yet been paid either. It will apply to the Court for an award of attorneys' fees of $295,000 and reimbursement of expenses of up to $20,000 to be paid out of the Securities Class Action Settlement. U. How do I notify the Court that I don t like either or both of the Settlements? If you are a Class Member you can object to the settlement of the Securities Class Action if you don t like any part of it. If you are a current shareholder, you can also object to the Derivative Action if you don t like any part of it. To object, you must send a letter saying that you are a Class Member and/or a current shareholder and that you object to the Securities Class Action Settlement and/or the Derivative Settlement, and stating the reasons why you object. You should also state whether you are objecting to the settlement in In re The Interpublic Group of Companies, 02 Civ (the Securities Class Action), or Karpus, Derivatively on behalf of nominal Defendant, The Interpublic Group of Companies, 03 Civ (the Derivative Action). In your objection, you must include your name, address, telephone number, and your signature. If you are objecting to the settlement of the Securities Class Action you must also include information concerning your purchase(s) and sale(s), including the number of shares and the dates of purchase and sale. If you are objecting to the settlement of the Derivative Action you must include the number of shares of IPG that you currently own. Mail the objection postmarked no later than September 27, 2004, to both Clerk of Court United States District Court for the Southern District of New York The Daniel Patrick Moynihan Courthouse 500 Pearl Street New York, NY Richard S. Schiffrin Schiffrin & Barroway, LLP Three Bala Plaza East Suite 400 Bala Cynwyd, PA