Salesforce.com 2005 Annual Report Download - page 79

Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
and 2004, respectively. The Company amortized $2,758,000, $3,275,000 and $3,491,000 of the deferred stock-based compensation during fiscal 2006, 2005
and 2004, respectively. The compensation expense is being recognized on a straight-line basis over the option-vesting period of four years.
During fiscal 2004, the Company accelerated the vesting of certain stock options relating to terminated employees. As a result, the Company recorded
compensation expense totaling $146,000. The Company did not accelerate the vesting of any stock options during fiscal 2006 and 2005.
The following table summarizes information about stock options outstanding as of January 31, 2006:
Options Outstanding Options Vested
Range of
Exercise Prices
Number
Outstanding
Weighted-
Average
Remaining
Contractual
Life (Years)
Weighted-
Average
Exercise
Price
Number of
Shares
Weighted-
Average
Exercise
Price
$0.03 to $2.00 2,339,570 6.17 $ 1.03 1,710,328 $ 1.00
$2.50 2,915,905 7.39 2.50 1,460,445 2.50
$4.00 to $8.00 2,997,281 8.03 7.11 1,126,741 6.99
$12.77 to $14.39 2,594,540 8.92 13.85 529,815 13.68
$15.00 to $22.64 2,735,926 9.20 19.25 156,869 17.21
$23.05 to $32.60 1,725,250 9.79 28.11 — —
$39.97 697,435 9.98 39.97 — —
16,005,907 $ 12.24 4,984,198 $ 4.67
Stock Awards to Non-Employees
During fiscal 2004, the Company granted stock awards of 100,000 shares to non-employees with 4 year vesting terms. Compensation expense is re-
measured as the shares vest and is recorded over the vesting periods. Together with past stock awards to non-employees, such expenses amounted to
$279,000, $167,000 and $162,000 for fiscal 2006, 2005 and 2004, respectively. Such expense was estimated using the Black-Scholes pricing model with the
following weighted-average assumptions:
Risk-free interest rate 6.00%
Contractual lives 18 - 48 months
Expected dividend yield 0%
Expected volatility 50 - 100%
Warrants for Common Stock
In August 2002, the Board of Directors authorized the issuance of four warrants, each to purchase 125,000 shares of common stock at $1.10 per share to
the salesforce.com/foundation (the "Foundation"), which is a nonprofit related party. The Company's chairman is the chairman of the Foundation. He, one of
the Company's executive officers and one of the Company's board members hold three of the Foundation's nine board seats. The warrants are exercisable for
one-year terms beginning on the earlier of the initial public offering of the Company or August 1, 2003, August 1, 2004, August 1, 2005, and August 1, 2006,
respectively. The warrants were issued as a charitable contribution to the Foundation. The warrants were fully vested on the date of grant without any
performance obligations by the Foundation. Through January 31, 2006, the Foundation exercised 250,000 warrants and as of January 31, 2006, the warrants to
purchase an aggregate of 250,000 shares of common stock remain outstanding.
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