Salesforce.com 2005 Annual Report Download - page 82

Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
that was abandoned in December 2001 in exchange for an agreement to lease additional space elsewhere in the building at fair value. Accordingly, the
Company recorded a $285,000 credit to reflect the reversal of a portion of the accrual that was directly related with this previously abandoned space.
The following table sets forth the lease abandonment activity:
Liability balance at January 31, 2003 $ 6,335,000
Additions 897,000
Charges utilized, net of subtenant income of $219,000 (919,000)
Reversals (4,342,000)
Liability balance at January 31, 2004 $ 1,971,000
Charges utilized, net of subtenant income of $124,000 (440,000)
Liability balance at January 31, 2005 $ 1,531,000
Charges utilized, net of subtenant income of $96,000 (298,000)
Reversals (285,000)
Liability balance at January 31, 2006 $ 948,000
Legal Proceedings
On July 26, 2004, a purported class action complaint was filed in the United States District Court for the Northern District of California, entitled
Morrison v. salesforce.com, inc. et al., against the Company, its Chief Executive Officer and its Chief Financial Officer. The complaint alleged violations of
Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), purportedly on behalf of all persons who purchased
salesforce.com common stock between June 21, 2004 and July 21, 2004, inclusive. The claims were based upon allegations that defendants failed to disclose
an allegedly declining trend in its revenues and earnings. Subsequently, four other substantially similar class action complaints were filed in the same district
based upon the same facts and allegations, asserting claims under Section 10(b) and Section 20(a) of the 1934 Act and Section 11 and Section 15 of the
Securities Act of 1933, as amended. The actions were consolidated under the caption In re salesforce.com, inc. Securities Litigation, Case No. C-04-3009
JSW (N.D. Cal.). On December 22, 2004, the Court appointed Chuo Zhu as lead plaintiff. On February 22, 2005, lead plaintiff filed a Consolidated and
Amended Class Action Complaint (the "CAC"). The CAC alleged violations of Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all
persons who purchased salesforce.com common stock between June 23, 2004 and July 21, 2004, inclusive. As in the original complaints, the claims in the
CAC were based upon allegations that defendants failed to disclose an allegedly declining trend in its revenues and earnings. On April 14, 2005, defendants
filed a motion to dismiss the CAC. On April 15, 2005, the Court granted lead plaintiff leave to file an amended/superseding complaint. On April 22, 2005,
lead plaintiff filed a Corrected and Superceding [sic] First Amended Class Action Complaint ("FAC"). As in the CAC, the FAC alleged violations of
Section 10(b) and Section 20(a) of the 1934 Act, purportedly on behalf of all persons who purchased salesforce.com common stock between June 23, 2004
and July 21, 2004, inclusive. The claims in the FAC were based upon allegations that defendants failed to disclose an internal forecast that earnings for fiscal
year 2005 would decline from the prior fiscal year. On April 29, 2005, defendants filed a motion to dismiss the FAC. On December 22, 2005, the court
entered an order granting defendants' motion to dismiss, with prejudice, and directing the clerk to close the file. On January 23, 2006, lead plaintiff filed a
motion for leave to file a motion for reconsideration, as well as a notice of appeal to the United States Court of Appeals for the Ninth Circuit. On January 27,
2006, defendants filed a motion to strike as untimely lead plaintiff's motion for leave to file a motion for reconsideration. On January 26, 2006, the Ninth
Circuit entered a time schedule order for the appeal, requiring, inter alia, lead plaintiff to file his opening brief on May 11, 2006, and defendants to file their
responsive brief on June 12, 2006. On or about February 2, 2006, lead plaintiff filed a motion with the Ninth
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