MEMORANDUM

TO: All Hands
FROM: Stephen C. Neal
DATE: November 14, 2002
RE: A Firm Perspective

On behalf of the Management Committee, I would like to take this opportunity to update all of you on the firm and our perspective for 2003. As all of you are no doubt aware, the economy has yet to see the recovery that the country has been anticipating, and while Cooley has performed admirably in this challenging business environment, the firm is not immune to its effects. Some practice groups have continued to grow and thrive, while others have experienced a decline in demand for their services. Throughout it all, we have done some of our most notable work ever on behalf of our clients and we remain both confident and enthusiastic about Cooley's future.

While the firm has reasonably weathered the downturn, it is the ongoing responsibility of the Management Committee to ensure that Cooley is well positioned for the future. Given that the economic recovery widely anticipated for 2002 did not occur and that robust recovery in 2003 is difficult to predict, Cooley is today implementing further personnel reductions. These reductions are occurring in all offices except Reston and Sand Hill Road. Twenty-seven Business Department associates and nineteen paralegals, secretaries and other firm personnel will be affected. Individuals affected by the reductions are being notified today and will receive appropriate severance and transition packages.

In light of the market conditions in the Pacific Northwest, as well as the ongoing consolidation in the legal market in that area, the Management Committee and the partners in our Kirkland office have agreed to pursue strategic alternatives for that office.

We deeply regret having to carry out these personnel reductions and losing highly qualified individuals who have served Cooley well. However, with no sure way of predicting when the economy will rebound, we are compelled to undertake these efforts to continue to shape and balance the firm so that our capacity meets the demand we can reasonably foresee. Decisions like this are never easy to make and the Management Committee took this action only after thorough consideration of how best to ensure the long-term health of Cooley. On behalf of the entire Management Committee, I extend my deepest thanks and best wishes for future success to those who will be leaving us.

While today we are having to take these difficult steps, it is important to remember and emphasize that we have had a remarkably strong 2002 despite very trying circumstances and are very well positioned for 2003 and beyond. By all important financial indicators, including profitability, capitalization and debt levels, Cooley continues to be strong and competitive. We have excellent attorneys, paralegals and staff, and a deep and diverse client base. While the level of activity for certain practice groups has decreased considerably over the last few years, the Litigation Department has been consistently busy and our Business Department has done a good job of securing a substantial portion of the deals that have been done.

The firm's Litigation Department has had a very active year. Earlier in the year, we achieved an important win for eBay, when the California Court of Appeals upheld a demurrer granted in eBay's favor by the trial court in a class action seeking to hold eBay liable for counterfeit sports memorabilia sold on its site. On the intellectual property front, we had a number of patent litigation victories including a jury verdict in favor of Gen-Probe in its case against Vysis in San Diego, a summary judgment ruling for Flaswat in the patent infringement case brought against it by Sentius in federal court and a summary judgment in favor of our client Excel Pharmaceuticals which was sued for patent infringement by GlaxoSmithKline in the Eastern District Court of Virginia. In addition, the Ninth Circuit upheld a rare summary judgment decision in a trademark infringement case obtained on behalf of our client PETsSMART. Cooley's securities litigation practice has also been robust. Recently, Cooley successfully represented Blue Martini Software in the Northern District of California when the Court dismissed with prejudice the derivative action that was brought against the company's directors. Cooley has a seat on the seven member Steering Committee overseeing the IPO Allocation Litigation which is the largest coordinated securities litigation in U.S. history with over 300 cases coordinated in a single proceeding. In addition to this sample of accomplishments during 2002, we also have a challenging line-up of cases scheduled for trial around the country next year and beyond.

Over the past year, the Business Department has worked on a number of significant transactions. Our M&A work included representing Walter Hewlett in his proxy contest against the HP-Compaq merger, and transactions for major companies such as Borland and Adobe. We have also advised on public and Rule 144A securities offerings by a number of companies including Amylin Pharmaceuticals, Pacificare, URS, Telik, Healthetech, Kyphon, Photon Dynamics, InVision, Peet's Coffee & Tea, PETsSMART and LeapFrog Enterprises.

The firm's Technology Transactions practice group represented Yahoo! in its Internet access agreement with SBC Communications and eBay with its patent license and equipment and software procurement agreement with NCR. We advised PalmSource and Mobile Digital Media on their spinout agreements. We also advised on a number of outsourcing transactions including a transaction for Pacificare.

Our Life Sciences practice group has attracted some of the most important partnering transactions in the industry, including Amylin/Lilly on a diabetes drug, Stressgen/Roche for an antiviral compound and Kosan/Roche for an anti-cancer compound, and the recent landmark transaction between Exelixis and GlaxoSmithKline.

We expect that our Venture Capital practice group will close more than 20 venture funds in 2002 including funds for MPM BioVentures and Alloy Ventures. Our Real Estate practice group represented the tenant in the largest Northern California campus transaction this year and is representing Hospital Corporation of America in its complex Broadlands Regional Medical campus project.

We are also very proud of our substantial, ongoing pro-bono work. An example is Cooley's successful representation of Soko Bukai, a group of San Francisco-based, Japanese American churches, in their case against the YWCA. The case, which Cooley took on in January 2000, was a modern-day Alien Land Law dispute arising out of the discriminatory laws of the early 20th century, which prohibited Japanese immigrants from owning most kinds of real property in California.

I would like to welcome our new class of 44 first-year associates who joined us last week. In the next few weeks, we will proudly be announcing our new partnership class.

Because of your talent, hard work and dedication, Cooley remains deeply and extensively involved in a wide variety of complex and high profile legal work and continues to provide the high level of excellence that our clients have come to expect. We have proven our ability to manage successfully through a severe business downturn and are poised to meet the challenges of 2003 and beyond. On behalf of the firm and the entire Management Committee, I offer my sincere thanks to all of you for your efforts on behalf of Cooley.