[ -

UNITED STATES DISTRICT COURT'EASTERN DISTRICT OF VIRGINIA

ALEXANDRIA DIVISION -

DOmINIC CASTALDO, on behalf of )himself and all others )similarly situated,)

)Plaintiff, )

)v. ) Civil Action No. 00--

))MICROSTRATEGY INCORPORATED, )00 MICHAEL J. SAYLOR, MARK S. )LYNCH and SANJU K. BANSAL, )

)0 Defendants.-

•)))

4

2 CLASS ACTION COMPLAINT.a

c.)ccm 5 Plaintiff, by his attorneys, as and for his Class Action40

Complaint, alleges the following upon personal knowledge as toOZ

W‹

0. himself and his acts and as to all other matters upon information.

0 and belief based upon, inter alia, the investigation made by andzLU

(/)0 through his attorneys, including a review of the public filings ofu.

0 MicroStrategy, Inc. ("MicroStrategy" or the "Company") with the>

United States Securities and Exchange Commission ("SEC"), as well00

0 as published reports and news articles.

JURISDICTION AND VENUE

1. This Court has jurisdiction over the subject matter of

this action pursuant to Section 27 of the Securities Exchange Act'

of 1934 (the "Exchange Act"), 15 U.S.C. §78aa, and 28 U.S.C. §1331.

The claims asserted herein arise under Sections 10(b) and 20(a) of

the Exchange Act, 15 U.S.C. §78j (b) and §78t(a), and Rule 10b-5, 17.

C.F.R. §240.10b-5, promulgated thereunder by the SEC.

2. Venue is proper in this Judicial District pursuant

to Section 27 of the Exchange Act and 28 U.S.C. §1391(b). Many Of

the acts and transactions giving rise to the violations of law

complained of herein, including the preparation and dissemination 1

to the investing public of false and misleading information,

occurred in this judicial District. In addition, MicroStrategy

maintains its principal executive offices within this Judicial

District.

3. In connection with the acts, conduct and other

1wrongs alleged in this Complaint, the defendants, directly and

indirectly, used the means and instrumentalities of interstatecs,

o2 commerce, including the mails, telephone communications and the0:5tj40 facilities of national securities exchanges.ZuDzOnetiec NATURE OF THE ACTION

ES 4. This is a securities class action brought by

w10D plaintiff on behalf of himself and all persons as described below 1Xu)8

(the "Class"), other than the defendants and related parties, who0

>purchased or acquired shares of MicroStrategy common stock between

0June 11, 1998 (the date of the Company's initial public offering or

0

"IPO") and March 20, 2000 (the date the Company announced that its

previously-reported financial results improperly overstated

revenues and operating results), inclusive (the "Class Period").

5. Defendants' public misrepresentations and omissions

of material adverse information regarding, inter alia, the

Company's financial condition were known to them, or were

recklessly disregarded by them and caused the market price of

2

MicroStrategy securities to be artificially inflated during the

Class Period.

6. Each of the defendants either knew or recklessly

disregarded the facts that the statements and omissions described

below were false and misleading; that such statements would

adversely affect the integrity of the market for MicroStrategy

securities; and that such statements would deceive investors into

0purchasing MicroStrategy securities at artificially inflated

prices.0• THE PARTIES

7. During the Class Period, plaintiff and each member

.aof the Class purchased shares of MicroStrategy common stock through

40 the IPO or in the open market without knowledge of the false andZo0Z07,misleading statements and omissions of the defendants and without00Z •

E 8 knowledge that the price of MicroStrategy common stock was0°D,wium artificially inflated during the Class Period, and have suffered0Q.

damages as a result. During the Class Period, plaintiff and each

>member of the Class directly or indirectly relied upon the00defendants' public reports, press releases, filings with the SEC00and other public statements, as more fully described below, and the00

fact that MicroStrategy common stock was fairly priced and/or upon

the integrity of the market for MicroStrategy securities. As a

result, plaintiff and each member Of the Class have been damaged by

the defendants wrongful conduct.

8. Plaintiff Dominic Castaldo purchased shares of

MicroStrategy common stock during the Class Period as set forth in

3

his accompanying certification and was damaged thereby as set forth

herein.

9. Defendant MicroStrategy is a corporation duly

organized and existing under the laws of the state of Delaware with

its principal executive offices located at 8000 Towers Crescent

Drive, Vienna, Virginia 22182. The Company provides intelligent e-

business software and related services, including products that

enable proactive and interactive delivery of information for large-

scale databases. As of March 17, 2000 there were over 78.2 million0

shares outstanding, and traded on the NASDAQ National Market under

the symbol "MSTR.".

.a 10. Defendant Michael J. Saylor ("Saylor") was, at all

0 relevant times, the Company's President, Chief Executive Officerzu0zCa'fi

caCC("CEO"), and Chairman of its Board of Directors. Saylor signed the

y24Y- Registration Statement and Proxy/Prospectus filed with the SEC inec°,w connection with the Company's IPO (the "Prospectus"), as well asmen0

0. the Company's 1998 Quarterly Reports on Form 10-Q for the second0

quarter ended June, 30, 1998 ("Second Quarter 1998 10-Q"), for the

0

c° third quarter ended September 30, 1998 ("Third Quarter 1998 10-Q"),0

the Company's Annual Report on Form 10-K for the year ended00

December 31, 1998 ("1998 10-K"), and the Company's 1999 Quarterly

Reports on Form 10-Q for the first quarter ended March 31, 1999

("First Quarter 1999 10-Q"), for the second quarter ended June 30,

1999 ("Second Quarter 1999 10-Q") and for the third quarter ended

September 30, 1999 ("Third Quarter 1999 10-Q"). During the Class

Period, while in possession of material adverse non-public

4

information, Saylor sold approximately 500,000 shares of

Microstrategy common stock at artificially inflated prices,

generating over $42.5 million in illegal insider proceeds.

11. Defendant Mark S. Lynch ("Lynch") was, at all

relevant times, the Company's Chief Financial Officer ("CFO") and

Vice President, Finance. As the Company's principal financial and

accounting officer, Lynch was responsible for MicroStrategra

0 financial, treasury and accounting functions. Lynch signed the

0 Prospectus, the Second Quarter 1998 10-Q, the Third Quarter 19980

10-Q, the 1998 10-K, the First Quarter 1999 10-Q, the Second

Quarter 1999 10-Q . and the Third Quarter 1999 10-Q. During the<

.o Class Period, while in possession of material adverse non-publicUcco:5

40 information, Lynch sold approximately 61,000 shares ofIf-toDz

MicroStrategy common stock at artificially inflated prices,

generating over $4_67 million in illegal insider proceeds.

0112. Defendant Sanju K. Bansal ("Barisal") was, at all

w2v)Q. relevant times, the Company's Chief Operating Officer ("COO"),

Executive Vice President, and Director. Bansal signed the=

Prospectus and the 1998. 10-K. During the Class Period, while in00

possession of material adverse non-public information, Bansal sold00

approximately 352000 shares of MicroStrategy common stock at

artificially inflated prices, generating over $30.17 million in

illegal insider proceeds.

13. Defendants Saylor, Lynch and Bansal are collectively

' referred to herein as the "Individual Defendants."

5

14. As officers, directors and/or controlling persons of

a publicly-held company whose common stock is registered with the

SEC, the Individual Defendants had a duty to promptly disseminate

accurate and truthful information with respect to the Company's

operations, finances, financial condition, products', inventories

and present and future business prospects, to correct any

previously issued statements from any source that had become0

untrue, and to disclose any trends that would materially affect

earnings and the present and future financial operating results of0

MicroStrategy, so that the market price of the Company's publicly

traded securities would be based upon truthful and accurate

.0 information.ai52

o 15. During the Class Period, each of the Individualmz0Defendants were senior executives and/or directors of MicroStrategy

(2.E8 and were privy to confidential and proprietary information

oconcerning MicroStrategy, its operations, finances, financial

Lun

0. condition, products, inventories and present and future business0

prospects. Because of their possession of such information, each

0of these defendants knew or recklessly disregarded the fact that

00the adverse facts specified herein had not been disclosed to and

00were being concealed from the public. Because of their Board

memberships and/or executive and managerial positions with

MicroStrategy, each of the Individual Defendants had access to

adverse non-public information about MicroStrategy's operations,

finances and financial condition via access to internal corporate

documents, conversations and connections with other corporate

6

officers and emplOyees, attendance at management and Board of

Directors meetings and committees thereof, and via reports and

other information provided to them in connection therewith.

Because of their possession of such information, each of these

defendants knew or recklessly disregarded the fact that the adverse

facts specified herein had not been disclosed to and were being

concealed from the public.

16. The Individual Defendants, because of theircs,

positions of control and authority as officers and/or directors of

• the Company, were able to and did control the contents of the

various quarterly . reports, SEC filings, press releases and

.0 presentations to securities analysts pertaining to the Company.W>

< 0 Each of the Individual Defendants was provided with copies ofSF-DZOra

OCCMicroStrategy's management reports, press releases and SEC filings

00.

alleged herein to be misleading prior to, or shortly after theirc°

issuance and had the ability and opportunity to prevent their1UI Li')0

0. issuance or cause them to be corrected. As a result, each of the0< Individual Defendants is responsible for the accuracy of the public

0reports and releases detailed herein as "group published"

0information, and is therefore responsible and liable for the

0representations contained therein.

17. Each of the defendants is liable as a direct

participant in, and a co-conspirator with respect to the wrongs

complained of herein. In addition, the Individual Defendants, by

reason of their stock ownership and their status as officers and/Or

directors of MicroStrategy, were "controlling persons" within the

7

meaning of Section 20 of the Exchange Act and had the power and

influence to cause .MicroStrategy to engage in the unlawful conduct

complained of herein. Because of their positions of control, these

defendants were able to and did, directly or indirectly, control

the conduct of MicroStrategy's business, the information contained

in its filings with the SEC, and public statements about its

business.

00

cs, 18. During the Class Period, the defendants,00 individually and in concert, directly and indirectly, engaged and

participated in a continuous course of conduct to misrepresent the

results of MicroStrategy i s operations, and to conceal adverse

.0 material information regarding the finances, financial condition,()cc

and results of operations of MicroStrategy as specified herein.

The defendants employed devices, schemes, and artifices to defraud,al=o<

and engaged in acts, practices, and a course of conduct as herein

tpfalleged in an effort to increase and maintain an artificially high

w0

8. market price MicroStrategy common stock. This included the0< formulation, making, and/or participation in the making of untrue

0statements of material facts, and the omission to state material

0

facts necessary in order to make the statements made, in light Of

cs,cs, the circumstances under which they were made, not misleading, which

operated as a fraud and deceit upon plaintiff and the other members

of the Class.

CLASS ACTION ALLEGATIONS

19. Plaintiff brings this case as a class action

pursuant to Rule 23 of the Federal Rules of Civil Procedure, on

8

behalf of himself and all other persons who purchased or otherwise

acquired MicroStrategy common stock through the June 11, 1998 IPO

or at any time between June 11, 1998 and March 20, 2000, inclusive.

Excluded from the Class are MicroStrategy, its subsidiaries and

affiliates, the Individual Defendants, members of the immediate

families of each of the Individual Defendants, any entities in

which any of the defendants have a controlling interest, and the

cs, legal representatives, heirs, successors, predecessors in interest,

affiliates or assigns of any of the defendants.0

• 20. This action is properly maintainable as a classcs'

action because:<

.5 a. During the Class Period, in excess of 78crW >E•

<c) million shares of MicroStrategy common stock were outstanding. TheF-

2 0Dzcommon stockstock was actively traded on impersonal and efficient

g<* trading markets during the Class Period. The members of the Class

for whose benefit this action is brought are dispersed throughout0Q. the United States, and are so numerous that joinder of all Class

0

members is impracticable. Thousands of MicroStrategy shares were0

publicly traded during the Class Period and, upon information and0

belief, there are hundreds of members of the Class;00cs,

b. Plaintiff's claims are typical of the claims of

the other members of the Class, and plaintiff and all members of

the Class sustained damages as a result of the defendants wrongful

conduct complained of herein;

c. Plaintiff is a representative party who will

fairly and adequately protect the interests of the other members of

9

the Class, and has retained counsel competent and experienced in

class action securities litigation. Plaintiff has no interests

antagonistic to, or in conflict with, the Class he seeks to

represent;

d. A class action is superior to other available

methods for the fair and efficient adjudication of the claims

asserted herein, because joinder of all members is impracticable.

Furthermore, because the damages suffered by the individual Claps

members may be relatively small, the expense and burden of

individual litigation make it virtually impossible for the Class

members to separately redress the wrongs done to them. The

2

5 likelihood of individual Class members prosecuting separate claimsw-.>

is remote;1.-

ZZ

zj. e. Plaintiff anticipates no unusual difficulties'oact

Z • in the: management of this action as a class action; and

a LT,f. The questions of law and fact common to the

D0

members of the Class predominate over any questions affecting any0=

individual members of the Class.

021. The questions of law and fact which are common to

0

the Class include, among others:

a. Whether the federal securities laws were

violated by the defendants' acts as alleged herein;

b. Whether the documents, releases, reports and/or

statements disseminated to the investing public and to

' MicroStrategy shareholders during the Class Period omitted or

10

misrepresented material facts about the financial condition,

business and income of MicroStrategy;

c. Whether the defendants acted with knowledge or

with reckless disregard for the truth in omitting to state and/or

misrepresenting material facts;

d. Whether, during the Class Period, the market

price of MicroStrategy common stock was artificially inflated due

0 to the non-disclosures and/or material misrepresentations60 complained of herein;0

e. Whether the defendants participated in and

pursued the common course of conduct complained of herein; and

.3 f. Whether the members of the Class have sustained0:5

4 0 damage's and, if so what is the proper measure thereof.21—

DZ

o3cc22. Plaintiff will rely, in part, upon the presumption

00.of reliance established by the fraud-on-market doctrine. The

02 1— market, for MicroStrategy common stock was at all times an efficientUlD=(f)00. market: for the following reasons, among others:

0a. MicroStrategy met the requirements for listing,

D00 and was listed on the NASDAQ National Market, a highly efficient00

and automated market;

b. As a regulated issuer, MicroStrategy filed

periodic public reports with the SEC and the NASD;

c. MicroStrategy's securities volume was

substantial during the Class Period;

11

d. MicroStrategy was followed by various

securities analysts who wrote reports which were available through

various automated data retrieval services;

e. MicroStrategy disseminated information on a

market-wide basis through various electronic media services,

including issuing press releases through various wire services; and

f. The market price of MicroStrategy securities

reacted efficiently to new information entering the market.

23. The foregoing facts clearly indicate the existence0

of an efficient market for trading of MicroStrategy securities and

make applicable the fraud-on-the-market doctrine. Similarly,

.o plaintiff and the other members of the Class are entitled to acc->

0 presumption of reliance with respect to the misstatements and

Dz0:3 omissions alleged herein.

I* SUBSTANTIVE ALLEGATIONS

24. MicroStrategy went public through its IPO on Junexu)o.

11, 1998. (the first day of the Class Period). In connection with0<

its IPO, defendants filed the Prospectus, and amendments thereto,0

which included financial statements that falsely inflated the0

3 Company's revenues and operating results. Each of the individual00

Defendants signed the Prospectus.

25. The Prospectus included financial statements for the

first quarter ended March 31, 1998 (the most recent closed quarter

to the date of the IPO) that reported net income of $542,000 or

$0.02 per share on revenues of approximately $19.9 million.

12

26. The statements contained in the Prospectus were

false and misleading because the defendants knew or recklessly

disregarded that the Company's reported income and earnings per

share were materially overstated due to the overstatement of

revenues in violation of Generally Accepted Accounting Principles

or "GAP."

27. SEC Regulation S-X requires that financial

0 statements filed with the SEC conform with GAAP. Financial

statements filed with the SEC which are not prepared in conformity

with GAAP are presumed to be misleading or inaccurate. 17 C.F.R.

§ 210.4-01(a) (1).

.o 28. GP, and specifically American Institute ofC., CCW ->

2o Certified Public Accountants ("AICPA") Statement of Position=i-ZODZ07,;VC ("SOP") 97-2, issued by the AICPA's Accounting Standards Executive

1. Committee, required that the Company spread the recognition of0°D.wzt revenue over the entire contract period for software sales thatLuDScr)

`'• include service relationships.0

29. In direct contradiction of GAAP, defendantsD

implemented a scheme whereby the Company overstated its revenues by00

improperly separating software sales/service contracts intoCs!

software and service components and immediately recognize revenue

from the software component. This scheme resulted in material

overstatements of net income and in the financial statements first

reported in the Prospectus and later financial statements and

results of operations reported throughout the Class Period.

13

30. On June 11, 1998, Defendants issued a press release

to announce the successful completion of the IPO through which 4

million shares (plus .600,000 additional shares to cover over-

allotments) were sold at $12 per share. The demand for the

Company's stock immediately following the IPO drove the price of

MicroStrategy common stock up $9-1/8 per share or 76 percent to

close at $22-1/8 per share on June 11, 1998.

31. On July 29, 1998, Defendants issued a press releasees,

to announce MicroStrategy's financial results for the 1998 second

quarter ended June 30, 1998 (the "July 29, 1998 Press Release").

The Company reported net income of $942,000 or $0.03 per share for2

the quarter on revenues of $23.8 million, representing a 672Licc0:5

cio percent increase in net income and a 100 percent increase inSF-ZoDZ

revenues. Defendant Saylor stated in the July 29, 1998 Press00.Fo Release that "[wile are pleased to announce strong revenue and nettuw wz income; growth for the second quarter, our first quarter as a public

to00 • company[.]"0

32. On August 14, 1998, Defendants caused MicroStrategy0

to file with the SEC its Second Quarter 1998 10-Q, signed by0

defendants Saylor and Lynch, and which largely repeated the results

first announced in the July 29, 1998 Press Release.

33. The statements contained in the July 29, 1998 Press

Release and Second Quarter 1998 10-Q were false and misleading

because the defendants knew or recklessly disregarded that the

Company's reported income and earnings per share were materially

14

overs .:ated due to the overstatement of revenues in violation of

GAAP.

34. On October 29, 1998, Defendants issued a press

release to announce MicroStrategy's financial results for the 1998

third quarter ended September 30, 1998 (the "October 29, 1998 Press

Release"). The Company reported net income of $1:9 million Or

$0.05 per share for the quarter on revenues of $27.0 million,

representing a 297 percent increase in net income and an 83 percent

increase in revenues. Defendant Saylor stated in the October 29,0

1998 Press Release that "[wle are pleased to announce our 11th

consecutive quarter of increased revenues[.1"

.0 35. On November 17, 1998, Defendants causedcc 5

MicroStrategy to file with the SEC its Third Quarter 1998 10-Q,z0=zin 7,

oti signed by defendants Saylor and Lynch, and which largely repeated

the results first announced in the October 29, 1998 Press Release.o°

Lll1.= 36. The statements contained in the October 29, 1998LuDx

o. Press Release and Third Quarter 1998 10-Q were false and misleading0a

because the defendants knew or recklessly disregarded that the0

Company's reported income and earnings per share were materially00

overstated due to the overstatement of revenues in violation of00

GAP.

37. On January 21, 1999, Defendants issued a press

release to announce MicroStrategy's financial results for the 1998

fourth quarter and year ended December 31, 1998 (the "January 21,

1999 Press Release"). The Company reported net income of $2.8

million or $0.07 per share for the quarter on revenues of $35.7

15

million, representing a 436 percent increase in net income and a 90

percent increase in revenues. For 1998, the Company reported net

income of $6.2 million or $0.16 per share on revenues of $106.4

million. Defendant Saylor stated in the January 21, 1999 Press

Release that "Me are pleased to announce our 12th consecutive

quarter of increased revenues[.1"

38. On March 25, 1999, Defendants caused MicroStrategy

to file with the SEC its 1998 10-K, signed by each of the

Individual Defendants, and which largely repeated the results first0

announced in the January 21, 1999 Press Release.‘c;

39. The statements contained in the January 21, 1999

.o Press Release and 1998 10-K were false and misleading because thecra".5

defendants knew or recklessly disregarded that the Company'sF-

2Z1-1

ea cc reported income and earnings per share were materially overstated

1-E8

due to the overstatement of revenues in violation of GAAP.00

40. On April 21, 1999, Defendants issued a press releasew0X u)0u. to announce MicroStrategy's financial results for the 1999 first

0quarter ended March 31, 1999 (the "April 21, 1999 Press Release").

00The Company reported net income of $1.9 million or $0.05 per share

0for the quarter on revenues of $35.8 million, representing a 243

00percent increase in net income and an 80 percent increase in

revenues. Defendant Saylor stated in the April 21, 1999 Press

Release that "Me are pleased to announce our 13th consecutive

quarter of increased revenues[.]"

41. On May 14, 1999, Defendants caused MicroStrategy to

file with the SEC its First Quarter 1999 10-Q, signed by defendants

16

Saylor and Lynch, and which largely repeated the results first

announced in the April 21, 1999 Press Release.

42. The statements contained in the April 21, 1999 Press

Release and First Quarter 1999 10-Q were false and misleading

because the defendants knew or recklessly disregarded that the

Company's reported income and earnings per share were materially

overstated due to the overstatement of revenues in violation of

GAAP.(-4

43. On July 21, 1999, Defendants issued a press release0to announce MicroStrategy's financial results for the 1999 second

quarter ended June 30 1999 (the "July 21, 1999 Press Release").

2. o The Company reported net income of $3.2 million or $0.08 per sharecg->4t o for the quarter on revenues of $45.6 million, representing a 241

-3 percent increase in net income and a 92 percent increase inOS cc

revenues. Defendant Saylor stated in the July 21, 1999 Pressc°

Release that "[vile are pleased to announce our 14th consecutiveW3Ito0

quarter of increased revenues[.1"0

44. On August 16, 1999, Defendants caused MicroStrategy0

to file with the SEC its Second Quarter 1999 10-Q, signed by0

defendants Saylor and Lynch, and which largely repeated the results00cs,

first announced in the July 21, 1999 Press Release.

45. The statements contained in the July 21, 1999 Press

Release and Second Quarter 1999 10-Q were false and misleading

because the defendants knew or recklessly disregarded that the

Company's reported income and earnings per share were materially

17

”

overstated due to the overstatement of revenues in violation of

GAAP.

46. On October 18, 1999, Defendants issued a press

release to announce MicroStrategy i s financial results for the 1999

third quarter ended September 30, 1999 (the "October 18, 1999 Press

Release"). The Company reported net income of $3.8 million or

$0.09 per share for the quarter on revenues of $54.6 million,

0 representing a 97 percent increase in net income and a 102 percent

increase in revenues.' Defendant Saylor stated in the October 18,0

1999 Press Release that "[w]e are pleased to announce our 15th

(.4 consecutive quarter of increased revenues [.1

.0 47. On November 15, 1999, Defendants causedcs

c1:5-

4 0 MicroStrategy to file with the SEC its Third Quarter 1999 10-Q,ZDzonet, cc signed: by defendants Saylor and Lynch, and which largely repeated00.

the results first announced in the October 18, 1999 Press Release.E 80

48. The statements contained in the October 18, 1999w

00 Press Release and Third Quarter 1999 10-Q were false and misleading0

because the defendants knew or recklessly disregarded that the00 Company's reported income and earnings per share were materially0

overstated due to the overstatement of revenues in violation of0N

GAAP.

49. On January 27, 2000, Defendants issued a preps

release to announce MicroStrategy's financial results for the 1999

fourth quarter and year ended December 31, 1999 (the "January 27,

2000 Press Release"), The Company reported net income of $5.5

milliOn or $0.13 per share for the quarter on revenues of $69.4

18

million, representing a 94 percent increase in revenues. For 1999,

the CoMpany reported net income of $14.4 million or $0.33 per share

on revenues of $205.3 million. Defendant Saylor stated in the

January 21, 1999 Press Release that "[w]e are pleased to announce

our 16th consecutive quarter of increased revenues[.]"

50. On March 20, 2000, Defendants issued a press release

to announce that MicroStrategy's financial results for the 1998 and0

1999 will have to be "revised" to comply with SOP 97-2. Defendantscs,

announced that the revision will include reducing 1999 reported0

revenue from $205.3 million to between approximately $150.0 million

and $155.0 million, and reducing 1999 reported net income per share

-0 from $0.15 to a diluted loss per share of between approximately(.4 CC

$0.43 and $0.51. Revisions to 1998 reported financial resultsmf2z

include reducing 1998 reported revenue from $106,4 million toCa CC00z • between approximately $95.9 million and $100.9 million, andE§0,w

z l- reducing 1999 reported net income per share from $0.08 to between(r)

0

0. approximately $0.04 and $0.01. The effects of the Company's0

revelations regarding the true state of its business were

0staggering. The price of MicroStrategy's common stock fell over

0§ 619.- frOm $226.75 per Share to only $88.00 per share.00

51. Thus, throughout Class Period, the defendants

disseminated press releases, financial statements and reports that

falsely portrayed MicroStrategy's financial condition and results

of operations in violation of GAAP. These documents contained

untrue statements of material fact, and omitted to state material

facts necessary in order to make the statements made, in light of

19

the circumstances under which they were made, not misleading as set

forth above.

COUNT I

VIOLATION OF SECTION 10(b) OF THESECURITIES EXCHANGE ACT AND RULE 10b-5 THEREUNDER

52. Plaintiff repeats and realleges each and every

allegation above as if set forth in full herein.

053. Throughout the Class Period, the defendants, singly

and in concert, directly or indirectly, engaged in a common plan,0

scheme and course of conduct described herein, pursuant to which

5they knowingly or recklessly engaged in acts, transactions,

<practices and a course of business which operated as a fraud upon

c4m

Cf; plaintiff and the other members of the Class; made various falsezozz

statements of material facts and omitted to state material facts tocox

0make the statements made not misleading to plaintiff and the other

g8o w.wz members of the Class; and employed manipulative or deceptiveZu'up00 . devices and contrivances in connection with the purchase and sale

0> of MicroStrategy securities.

0 54. The purpose and effect of the defendants' plan,

scheme and course of conduct was to artificially- inflate and00

maintain the market price of MicroStrategy securities.

55. Defendant Saylor, as the Company's President, CEO,

and Chairman of its Board of Directors, had actual knowledge of the

material omissions and/or the falsity of the material statements

set forth above, and intended to deceive plaintiff and the other

members of the Class, or, in the alternative, acted with reckless

20

disregard for the truth when he failed to ascertain and disclose

the true facts in the statements made by him or other MicroStrategy

personnel to the SEC, plaintiff, and other members of the Class.

56. Defendant Lynch, as the Company's CFO and Vice

President, Finance, had actual knowledge of the material omissions

and/or!the falsity of the material statements set forth above, and

intended to deceive plaintiff and the other members of the Class,

0 or, in the alternative, acted with reckless disregard for the truth

when he failed to ascertain and disclose the true .facts in the

statements made by him or other MicroStrategy personnel to the SEC,(7,

plaintiff, and other members of the Class.<2

. 0 57. Defendant Bansal, as the Company's COO, ExecutiveOccW -><0 Vice President and Director, had actual knowledge of the materialSH

030c omissions and/or the falsity of the material statements set forth0

Fabove,,and intended to deceive plaintiff and the other members of

' w the Class, or, in the alternative, acted with reckless disregardDIv)0for the truth when he failed to ascertain and disclose the true

0

facts in the statements made by him or other MicroStrategy

00 personnel to the SEC, plaintiff, and other members of the Class.0

58. MicroStrategy had actual knowledge of the material00

omissions and/or the falsity of material statements set forth

above,: and intended to deceive plaintiff and the other members of

the Class, or, in the alternative, acted with reckless disregard

for the truth when it failed or refused to ascertain and disclose

the true facts to the SEC, plaintiff, and the other members of

Class.:

21

59. The facts alleged herein provide a strong inference

that the defendants made material false and misleading statements

to the . investing public with scienter, in that the defendants knew

that the public statements issued or disseminated in the name of

the Company were materially false and misleading; knew br-

reckle8sly disregarded that such statements would be issued or

disseminated to the investing public; and knowingly and

substantially participated or acquiesced in the issuance or

dissemination of such statements as primary violators of the0

federal securities laws.

60. Insider selling is highly probative of the

2.0 defendants' scienter in their scheme, artifice to defraud, or acts,occ>

<0 practices or course of conduct in violation of Section 10(b) and1•-E(DDZOn Rule 10b-5. While the defendants were issuing false favorable

2.ES

statements about the Company's business and concealing or obscuringol32 1— negative information, Defendants and other Company insiders withfaDSco8 access to confidential information and awareness of the truth about

0

the Company and its financial condition, were benefitting from the

illegal course of business or course of conduct described herein by0

selling the Company's stock at artificially inflated prices.0

61. As a result of the foregoing, the market price of

MicroStrategy securities was artificially inflated during the Class

Period In ignorance of the falsity of the reports and statements,

and the deceptive and manipulative devices and contrivances

' employed by the defendants, plaintiff and the other members of the

Class .relied, to their damage, on the reports and statements

22

--

described above and/or the integrity of the market price of

MicroStrategy securities during the Class Period in purchasing

MicroStrategy securities at prices which were artificially inflated

as a result of the defendants' false and misleading statements.

62. Had plaintiff and the other members of the Class

known of the material adverse information which the defendants did

not disclose, they would not have purchased MicroStrategy

cs, securities at the artificially inflated prices that they did.

63. The defendants concealment of this material

• information served only to harm plaintiff and the other members of

the Class who purchased MicroStrategy securities in ignorance of

. 0 the financial risk to 'them as a result of such nondisclosures.

E•

<0 64. As a result of the wrongful conduct alleged herein,Z7J-

011 CC plaintiff and other members of the Class have suffered damages in0.

!§an amount to be established at trial.

LS. 65. By reason of the foregoing, the defendants have00. violated Section 10(b) of the Exchange Act and Rule 10b-5

0

promulgated thereunder and are liable to plaintiff and the other0

members of the Class for the substantial damages which they00

§ suffered in connection with their purchase of MicroStrategy00NN securities during the Class Period.

COUNT II

VIOLATION OF SECTION 20(A)OF THE SECURITIES EXCHANGE ACT

66. Plaintiff repeats and realleges each and every

allegation above as if set forth in full herein.

23

67. During the Class Period, each of the Individual

Defendants, by virtue of his office or offices at, and/or

directorship of MicroStrategy and his specific acts, was a

controlling person of MicroStrategy within the meaning of Section

20(a) of the Exchange Act.

68. Each of the Individual Defendants' position made him

privy to, and provided him or her with actual knowledge of, the0

material facts which MicroStrategy concealed from plaintiff and th e

other members of the Class during the Class Period.0

• 69. Each of the Individual Defendants had the power and

influence, and exercised the same, to cause MicroStrategy to engage

.0 in the unlawful conduct and practices complained of herein byocccc-.>

ac, causing MicroStrategy to disseminate the false and misleadingz0

oi ct information referred to above.

E.§ 70. By virtue of the foregoing, the Individual

zt Defendants have violated Section. 20(a) of the Exchange Act.LuD

o.71. By virtue of the conduct alleged above, the

0cc

defendants are liable to plaintiff and the other members of the

0cc Class for the substantial damages which they suffered in connection0

with their purchase of MicroStrategy common stock during the Class

Period.

WHEREFORE, plaintiff, on behalf of himself and the other

members of the Class, demands judgment against the defendants as

follow:

•

24

, A. Determining that this action is properly

maintainable as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure;

- B. Certifying plaintiff as the Class Representative and

his counsel as Class Counsel;

C. Declaring and determining that the defendants

violated the federal securities laws by reason of their conduct as00 alleged herein;

D. Awarding monetary damages against all of the0

• defendants, jointly and severally, in favor of plaintiff and thec7,

other Members of the Class for all losses and damages suffered as

• a result of the acts and transactions complained of herein,c4cE0.-s>

including punitive damages where appropriate, together with20

prejudgment interest from the date of the wrongs to the date of theco<o .

E 8 judgment herein;c2°°.wz E. Awarding plaintiff the costs, expenses, andIan

co0O. disbursements incurred in this action, including reasonable

0

attorneys' and experts' fees; and

0F. Awarding plaintiff and the other members of the

0

Class Such other and further relief as the Court may deem just and00

proper in light of all the circumstances of this case.

JURY DEMAND

72. Plaintiff demands a trial by jury.

Dated: March 20, 2000

25

Respectfully submitted,

COHEN, GETTINGS & DUNHAM, P.C.

--rvey Co en, Esq.2200 Wilson Boulevard, Su1,t,e,800Arlington, Virginia 22224 --.(703) 525-2260Counsel for Plaintiff

000

Of Counsel:0

• SCHIFFRIN & BARROWAY, LLPRichard S. SchiffrinThree Bala Plaza EastSuite 4002

. 0 Bala Cynwyd, Pennsylvania 19004-3481

41:5 (610) 667-7706!Szo ABBEY, 'GARDY & SQUITIERI, LLP07,-

o cr Mark C. Gardy0 James S. Notis0.

E g 212 EaSt 39th Street

0 0 New York, New York 10016(212) 889-3700w5

Mtn00.

CAULEYr& GELLER0 Paul J. Geller

7200 W. Camino Real

D Boca Raton, FL 334330

0 (561) 750-336400

0N

26