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SALESFORCE COM INC (CRM)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/25/2005
Filed Period 01/31/2005

Table of contents

  • Page 1
    SALESFORCE COM INC (CRM) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/25/2005 Filed Period 01/31/2005

  • Page 2
    ... (Address of principal executive offices) Telephone Number (415) 901-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, par value $0.001 per share Name of each exchange on which registered New...

  • Page 3
    Table of Contents salesforce.com, inc. INDEX Page No. PART I Item 1. Item 2. Item 3. Item 4. Item 4A. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Business Properties Legal Proceedings Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant 1 ...

  • Page 4
    ...enterprise software implementations. As a result, our customers incur less risk and lower upfront costs. Our service helps customers more effectively manage and share information about critical operations including: sales force automation; customer service and support; marketing automation; document...

  • Page 5
    ... systems, networks, software licenses and maintenance. Additionally, customers typically must employ costly IT staff and consultants to deploy, integrate, customize, support, administer and upgrade these applications. In an attempt to address these challenges, many enterprise software application...

  • Page 6
    ... to cost-effectively scale to support a larger customer base. We believe the shift to on-demand application services provides significant benefits by reducing the risks and lowering the costs of purchasing and deploying information technology resources, managing software and hardware upgrades...

  • Page 7
    ... better track, manage and share information regarding their sales, customer service and support, and marketing operations. We provide our service to businesses through our proprietary, scalable and secure multi-tenant application architecture, which allows us to serve large numbers of customers cost...

  • Page 8
    ... a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users. Our multi-tenant application architecture maintains the integrity and separation of customer data while...

  • Page 9
    ...a weekly export service that permits a customer to download all data input by users into the service in a machine-readable format. It also includes our offline and wireless features that permit users to access information through laptops, PDAs and wireless devices. Professional Edition. Professional...

  • Page 10
    ... list views. Enterprise Edition and Professional Edition also offer multi-language support and multi-currency support. We derived approximately 90 percent or more of our revenues in fiscal 2005, 2004 and 2003 from subscriptions to and support for our service. The following table highlights the key...

  • Page 11
    ... our consulting and implementation engagements are billed on a time and materials basis. Training We offer a number of in-person and online educational classes that address topics such as implementing, using and administering our service. We also offer classes for administrators, users and partners...

  • Page 12
    ...user is not bound to a single server but can be routed in the most optimal way to any number of servers, with an advanced data caching layer. Our customers can access the service through any Web browser without installing any software or downloading Java applets or Microsoft ActiveX or .NET controls...

  • Page 13
    ... warranting certain levels of uptime reliability. Currently, we have an agreement with SunGard Data Systems, a provider of availability services, to provide access to a geographically remote disaster recovery facility that would provide access to hardware, software and Internet connectivity in the...

  • Page 14
    ...and solve any problems or issues with our service. The support program includes email support, an online repository of helpful information about our service, shared best practices for implementation and use, and telephone support. Telephone support is provided by technical support specialists on our...

  • Page 15
    ...; ease of use and rates of user adoption; low total cost of ownership and demonstrable cost-effective benefits for customers; product functionality; performance, security, scalability, flexibility and reliability of the service; ease of integration with existing applications; quality of customer...

  • Page 16
    ...agreements with our employees, consultants and other third parties and control access to software, documentation and other proprietary information. The following trademarks are registered in the United States and some are registered in foreign jurisdictions: salesforce.com "No Software" logo The End...

  • Page 17
    ....com, et al., against the Company, its Chief Executive Officer and its Chief Financial Officer. The complaint alleges 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...

  • Page 18
    ... Executive Vice President, Technology Executive Vice President, Legal Affairs and Corporate Development Chief Information Officer and Senior Vice President of Service Delivery Chief Technology Officer Senior Vice President and General Counsel Marc Benioff co-founded salesforce.com in February 1999...

  • Page 19
    ... Cavalieri worked as a consultant and systems engineer for EDS. Mr. Cavalieri received a B.S. from Cornell University. David Moellenhoff co-founded salesforce.com in February 1999 and served in senior technical positions since inception, most recently as our Chief Technology Officer. Mr. Moellenhoff...

  • Page 20
    ...2005 there were 1,168 stockholders of record of our common stock, including the Depository Trust Company, which holds shares of salesforce.com common stock on behalf of an indeterminate number of beneficial owners. Recent Sales of Unregistered Securities a. Securities Sold Since November 1, 2004, we...

  • Page 21
    ...-allotment option granted to the underwriters, were sold to the public at a price of $11.00 per share. All of the shares of common stock were sold by us and there were no selling shareholders in the offering. The offering did not terminate until after the sale of all of the securities registered by...

  • Page 22
    Table of Contents The customer and subscriber data are unaudited. Fiscal Year Ended January 31, 2005 (in thousands, except per share and customer and subscriber data) 2004 2003 2002 2001 Consolidated Statement of Operations: Revenues: Subscription and support Professional services and other ...

  • Page 23
    ...and test data center; expanding the number of locations around the world where we conduct business; adding to our infrastructure to support our growth; and expanding our operational systems to manage a growing business. We expect marketing and sales costs, which were 55 percent of our total revenues...

  • Page 24
    ...a number of classes on implementing, using and administering our service that are billed on a per person, per class basis. Our typical payment terms provide that our customers pay us within 30 days of invoice. Cost of Revenues and Operating Expenses Cost of Revenues. Cost of subscription and support...

  • Page 25
    ...to be our largest cost. General and Administrative. General and administrative expenses consist of salaries and related expenses for executive, finance and accounting, human resources and management information systems personnel, legal costs, professional fees, other corporate expenses and allocated...

  • Page 26
    ... on the commencement dates of each contract. Support revenues from customers who purchase our premium support offerings are recognized similarly over the term of the support contract. As part of their subscription agreements, customers benefit from new features and functionality with each release...

  • Page 27
    ...the noncancelable subscription contracts, which had terms ranging up to 5 years. Accounting for Stock-Based Awards. We recorded deferred stock-based compensation charges in the amount by which the exercise price of an option is less than the deemed fair value of our common stock at the date of grant...

  • Page 28
    ... and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total...

  • Page 29
    ... and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total...

  • Page 30
    Income (loss) before minority interest Minority interest in consolidated joint venture Net income (loss) 4 - 4% - 4 (20) 1 (19)% 4% 26

  • Page 31
    ... existing customer base, professional services personnel to support our consulting services, and developers to broaden and enhance our on-demand service. In June 2004, we completed our initial public offering and sold 11,500,000 shares of common stock at a price of $11.00 per share through which we...

  • Page 32
    ... outside service costs. Our general and administrative headcount increased by 64 percent since January 31, 2004 as we added personnel to support our growth. The increase in professional and outside service costs was due to the cost of being a public company and the added costs of managing a growing...

  • Page 33
    ...The increase was primarily due to increased marketable securities balances resulting from the proceeds from the sale of our common stock in our initial public offering in June 2004. Provision for Income Taxes. We recorded a provision for income tax expense of $1.2 million for fiscal 2005 as compared...

  • Page 34
    ... fiscal 2003. The increase in subscription and support revenues was due primarily to the increase in the number of paying subscribers to approximately 127,000 as of January 31, 2004 from approximately 76,000 as of January 31, 2003. Professional services and other revenues were $10.2 million, or 11...

  • Page 35
    ... million in employee-related costs and an increase of $900,000 in professional and outside service costs. Our general and administrative headcount increased by 29 percent from fiscal 2003 as we added personnel to support our growth. Lease Recovery. In December 2001, we abandoned excess office space...

  • Page 36
    ... activities has historically been affected by sales of subscriptions and support and professional services, changes in working capital accounts, particularly increases in accounts receivable and deferred revenue and the timing of commission and bonus payments, and add-backs of non-cash expense items...

  • Page 37
    ... 2005, we obtained additional software licenses for use in our business operations at a cost of $8.8 million. Additionally, we are currently in the process of obtaining additional business continuity services, additional data center capacity and a development and test data center. We expect these...

  • Page 38
    ... result in interruptions in our service. We have an agreement with SunGard Data Systems, a provider of availability services, to provide access to a geographically remote disaster recovery facility that would provide us access to hardware, software and Internet connectivity in the event the Qwest...

  • Page 39
    ... in the revenue mix of editions of our service; technical difficulties or interruptions in our service; general economic conditions in our geographic markets; the timing of additional investments in our on-demand application service and in our consulting service; regulatory compliance costs; payment...

  • Page 40
    ...migrate to an on-demand application service; the price and performance of our service; the level of customization we can offer; the availability, performance and price of competing products and services; reluctance by enterprises to trust third parties to store and manage their internal data; and 36

  • Page 41
    ...concerns regarding the risks associated with security capabilities, among other things, of the technology delivery model associated with these services. If enterprises do not perceive the benefits of on-demand application services, then the market for these services may not develop at all, or it may...

  • Page 42
    ... and professional services resources to a smaller number of larger transactions, while at the same time requiring us to delay revenue recognition on some of these transactions until the technical requirements have been met. In addition, larger enterprise customers may seek volume discounts and price...

  • Page 43
    ... the timely completion, introduction and market acceptance of the feature or edition. Failure in this regard may significantly impair our revenue growth. In addition, because our service is designed to operate on a variety of network hardware and software platforms using a standard browser, we...

  • Page 44
    ... and technical knowledge we need. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of direct sales personnel. New hires require significant training and may, in some cases, take...

  • Page 45
    ... to replace or which could cause errors or failures of our service. We rely on hardware purchased or leased and software licensed from third parties in order to offer our service, including database software from Oracle Corporation. This hardware and software may not continue to be available...

  • Page 46
    ... for CRM solutions and restricting our ability to store, process and share data with our customers. In addition, taxation of services provided over the Internet or other charges imposed by government agencies or by private organizations for accessing the Internet may also be imposed. Any regulation...

  • Page 47
    ... regulations regarding corporate governance and public disclosure that have increased both our costs and the risk of noncompliance. We are subject to rules and regulations by various governing bodies, including the Securities and Exchange Commission, New York Stock Exchange and Public Company...

  • Page 48
    ... complexity of our service and technologies. We do not have employment agreements with any of our executive officers, key management, development or operations personnel and, therefore, they could terminate their employment with us at any time. We do not maintain key person life insurance policies...

  • Page 49
    ...we could be required to repurchase securities sold in our initial public offering. In a New York Times article dated May 9, 2004 and entitled "It's Not Google. It's That Other Big I.P.O.," information regarding our initial public offering and salesforce.com, our development and our business strategy...

  • Page 50
    ... Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock. Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the trading price of...

  • Page 51
    ... and instruments, corporate notes and bonds, government securities and other debt securities with strong credit ratings. The unrestricted cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative...

  • Page 52
    Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS The following financial statements are filed as part of this Report: Page No. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of January 31, 2005 ...

  • Page 53
    Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of salesforce.com, inc. We have audited the accompanying consolidated balance sheets of salesforce.com, inc. as of January 31, 2005 and 2004, and the related consolidated statements of ...

  • Page 54
    Table of Contents salesforce.com, inc. Consolidated Balance Sheets (in thousands, except share and per share data) January 31, January 31, 2005 2004 Assets Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, net of allowance for doubtful accounts of $750...

  • Page 55
    Table of Contents salesforce.com, inc. Consolidated Statements of Operations (in thousands, except per share data) Fiscal Year Ended January 31, 2005 2004 2003 Revenues: Subscription and support Professional services and other Total revenues Cost of revenues (1): Subscription and support ...

  • Page 56
    51

  • Page 57
    Table of Contents salesforce.com inc. Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (in thousands, except share and per share data) Convertible Preferred Stock Shares Balances at January 31, 2002 58,024,345 Deferred compensation related to the issuance of...

  • Page 58
    ... and stock grants to board members for - - 4,126,845 board services Tax benefits from employee - - - stock plans Repurchase of unvested - - (191,000) shares Fair value of stock awards issued to nonemployees - - - for services Accrued interest on stockholder notes - - - receivable Collection of...

  • Page 59
    Unrealized loss on marketable securities Net income Comprehensive income, year ended January 31, 2005 Balances at January 31, 2005 - - - - - - - - - - - - - - (749) - - 7,346 (749) 7,346 (749) 7,346 - - - - - - - - - 6,337 - - $ - 104,990,816 $ 105 $217,248 $ (5,908) $ (...

  • Page 60
    ... costs incurred Proceeds from the exercise of stock options Collection of notes receivables from stockholders Principal payments on capital lease obligations Repurchase of unvested shares Proceeds from subsidiary stock offerings Net cash provided by financing activities Effect of exchange rate...

  • Page 61
    Transfer of capital lease to operating Cancellation of stockholder notes receivable for unvested common stock options See accompanying Notes to Consolidated Financial Statements. 54 $ $ - - $ $ - - $ $ 569 109

  • Page 62
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements 1. Summary of Business and Significant Accounting Policies Description of Business Salesforce.com, inc. (the "Company") is the leading provider, based on market share, of application services that allow organizations ...

  • Page 63
    ... has an agreement with SunGard Data Systems, a provider of availability services, to provide access to a geographically remote disaster recovery facility that would provide the Company with access to hardware, software and Internet connectivity in the event the Web hosting facility in Sunnyvale...

  • Page 64
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) Marketable Securities Management determines the appropriate classification of investments in marketable securities at the time of purchase in accordance with Statement of Financial Accounting Standards No....

  • Page 65
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) Software and Website Development Costs The Company follows the guidance of Emerging Issues Task Force ("EITF") Issue No. 00-2, Accounting for Web Site Development Costs ("EITF 00-2"), and EITF Issue No. 00...

  • Page 66
    ... of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) Had compensation cost for the Company's stock-based compensation plans been determined using the fair-value method at the grant date for awards under those plans calculated using the Black-Scholes pricing model...

  • Page 67
    ... fees from customers accessing its on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services and other revenue. Other revenues consist primarily of training fees...

  • Page 68
    ...commencement date of each contract. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Professional services and other revenues, when sold with subscription and support offerings...

  • Page 69
    ...Company generally invoices its customers in annual or quarterly installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multi-year, noncancelable subscription agreements. Deferred Commissions Deferred commissions are the incremental costs that...

  • Page 70
    ...exercise price. These provisions result in variable accounting for the plan, as the number of options awarded is not fixed and no measurement date currently exists. The Board of Directors of the joint venture authorized options to purchase 40,000 shares to be issued under a new stock option plan. In...

  • Page 71
    ... obligations under the joint venture agreement, which are not cured in a timely manner, SunBridge can require the Company to purchase all of its shares in the joint venture. The purchase price for SunBridge's shares would be the then fair market value plus a specified premium. In the event that...

  • Page 72
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) The unrealized losses are attributable to changes in interest rates. None of the investments have been in an unrealized loss position for 12 months or longer. Management has the ability to hold these ...

  • Page 73
    ... of unvested employee stock options Accrued taxes payable Accrued professional costs Accrued rent $ 16,836 $ 6,560 278 591 5,146 2,241 815 32,467 $ 8,980 3,812 477 749 2,304 695 665 17,682 $ 4. Initial Public Offering In June 2004, the Company completed the sale of 11,500,000 shares of common...

  • Page 74
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) A reconciliation of income taxes at the statutory federal income tax rate to net income taxes... for stock plan deductions which will be credited to additional capital and the provision for income taxes if ...

  • Page 75
    ... the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. 6. Preferred Stock After the consummation of the initial public offering in June...

  • Page 76
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) common stock is determined by the trading price of such stock on the New York Stock Exchange. The 1999 Plan provides for grants of immediately exercisable options; however, the Company has the right to ...

  • Page 77
    ...2005 was collected in full from the remaining individuals in February 2005. 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 remeasured as the shares vest and was recorded over the...

  • Page 78
    ... recorded as general and administrative expense. Common Stock The following shares of common stock are available for future issuance at January 31, 2005: Options outstanding Warrants outstanding Stock available for future grant: 1999 Stock Option Plan 2004 Equity Incentive Plan 2004 Employee Stock...

  • Page 79
    Table of Contents salesforce.com, inc. Notes to Consolidated Financial Statements-(Continued) In addition, the Company had two additional letters of credit outstanding related to office leases as of January 31, 2005, which were collateralized by certificates of deposit in the aggregate of $391,000 ...

  • Page 80
    ....com, et al., against the Company, its Chief Executive Officer and its Chief Financial Officer. The complaint alleges 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...

  • Page 81
    ...is not required to contribute to the plan and has made no contributions through January 31, 2005. 10. Related-Party Transactions In January 1999, the salesforce.com/foundation, commonly referred to as the Foundation, a non-profit public charity, was chartered to build philanthropic programs that are...

  • Page 82
    ...(in thousands, except per share data and customer and subscriber metrics) Fiscal 2005 Revenues Gross profit Lease abandonment (recovery) Income from operations Net income Basic net income per share Diluted net income per share As of each quarter-end date: Approximate number of customers Approximate...

  • Page 83
    ... of implementing what we believe will be sufficient internal control structures and procedures for our financial reporting such that our management can provide the required certifications as to these structures and procedures in our Annual Report on Form 10-K for our fiscal year ending January...

  • Page 84
    ..., salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105 or by calling (415) 536-6250. We plan to post on our Web site at the address described above any future amendments or waivers of our Code of Conduct. ITEM 11. EXECUTIVE COMPENSATION The information required...

  • Page 85
    Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this Report: 1. Financial Statements: The information concerning our financial statements and Report of Independent Registered Public Accounting Firm required by this ...

  • Page 86
    Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 25, 2005 salesforce.com, inc. /s/ MARC BENIOFF ...

  • Page 87
    ... Directors Stock Plan Office Lease dated as of June 23, 2000 between salesforce.com, inc. and TMG/One Market, L.P., and amendments thereto Sublease Agreement dated as of August 5, 2003 between salesforce.com, inc. and Vignette Corporation Web Hosting and Internet Access Service Agreement dated...

  • Page 88
    Table of Contents (1) (2) (3) (4) Incorporated by reference from the Company's registration statement on Form S-1 (No. 333-111289), Amendment No. 3, as filed with the Securities and Exchange Commission on April 20, 2004. Incorporated by reference from the Company's initial registration statement ...

  • Page 89
    ...granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. (d) "Company" means SalesForce.com, Inc., a Delaware corporation, or any successor corporation thereto. (e) "Consultant...

  • Page 90
    ... service as a Director nor payment of a director's fee shall be sufficient to constitute employment for purposes of the Plan. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (j) "Fair Market Value" means, as of any date, the value of a share of Stock or other property...

  • Page 91
    ...a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof. (p) "Optionee" means a person who has been granted one or more Options. (q) "Parent Corporation" means...

  • Page 92
    ... powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its discretion: (a) to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to...

  • Page 93
    ... other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan; (e) to approve one or more forms of Option Agreement; (f) to amend, modify, extend, cancel, renew, reprice or otherwise adjust the exercise price of, or grant a new Option...

  • Page 94
    ..., "Employees," "Consultants" and "Directors" shall include prospective Employees, prospective Consultants and prospective Directors to whom Options are granted in connection with written offers of an employment or other service relationships with the Participating Company Group. Eligible persons may...

  • Page 95
    ... certificates representing each such portion shall be issued upon the exercise of the Option. 6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form, as the Board shall from time to time establish...

  • Page 96
    ..., or attestation to the ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the...

  • Page 97
    ... of any law. Any permitted promissory note shall be on such terms, as the Board shall determine at the time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon...

  • Page 98
    ... Optionee's Service terminated, but in any event no later than the Option Expiration Date. (b)Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.6(a) is prevented by the provisions of Section...

  • Page 99
    ... Option immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. In the event the Acquiring Corporation elects not to assume or substitute for...

  • Page 100
    ... to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is...

  • Page 101
    ... is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule. 14. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum aggregate number of shares of Stock issuable...

  • Page 102
    the Board. Options granted prior to shareholder approval of the Plan or in excess of the Authorized Shares previously approved by the stockholders shall become exercisable no earlier than the date of shareholder approval of the Plan or such increase in the Authorized Shares, as the case may be. 14

  • Page 103
    ..., and set forth in the Option Agreement (or amendment thereto) evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 Registration Statement under the Securities Act.

  • Page 104
    SALESFORCE.COM, INC. TERMS OF STOCK OPTION AGREEMENT The Company has granted to the Optionee, pursuant to a Stock Option Grant Agreement (the "Grant Agreement") and the Company's 1999 Stock Option Plan (the "Plan"), an Option to purchase certain shares of Stock, upon the terms and conditions set ...

  • Page 105
    ... Company to repurchase such shares at the Optionee's original purchase price if the Optionee's Service terminates, or (b) the Optionee is an Insider and, under certain circumstances, exercises the Option within six (6) months of the Date of Option Grant (if a class of equity security of the Company...

  • Page 106
    ... or attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for...

  • Page 107
    ... of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT...

  • Page 108
    ... more than three (3) months after the date on which the Optionee's Service as an Employee terminated as a result of a Disability other than a permanent and total disability as defined in Section 22(e)(3) of the Code, the Option will be treated as a Nonstatutory Stock Option and not as an Incentive...

  • Page 109
    ... to terminate the Optionee's Service as an Employee or Consultant, as the case may be, at any time. 8. UNVESTED SHARE REPURCHASE OPTION. 8.1 Grant of Unvested Share Repurchase Option. (NOTE: IGNORE Section 8 unless this Option is designated as Immediately Exercisable in the Grant Agreement). If...

  • Page 110
    ..., any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee's ownership of Unvested Shares shall be immediately subject to the Unvested Share Repurchase Option and included in the terms "Stock" and "Unvested Shares" for all...

  • Page 111
    ...the number of Transfer Shares, the name and address of the proposed transferee (the "Proposed Transferee") and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift...

  • Page 112
    ... the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company. 9.9 Early Termination of Right of First Refusal. The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall...

  • Page 113
    ...the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee's ownership of shares of Stock acquired upon exercise...

  • Page 114
    ... may at any time place legends referencing the Unvested Share Repurchase Option, the Right of First Refusal, and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Agreement. The Optionee shall...

  • Page 115
    ... date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. The Optionee shall be subject to this Section provided and only if the officers and directors...

  • Page 116
    ...Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address shown on the Notice or at such other address as such party may designate in writing from time to time to the other party. 19. INTEGRATED AGREEMENT. The Grant Agreement, this Agreement...

  • Page 117
    ... (the "Option") to purchase shares of Common Stock of SalesForce.com, Inc. (the "Company") pursuant to this Stock Option Grant Agreement, the Company's 1999 Stock Option Plan (the "Plan") and a standard form of the Terms of Stock Option Agreement (the "Option Agreement"), the provisions of all of...

  • Page 118
    ... of the Company's trade secrets or proprietary information. To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records. You will be required to sign a Employee Inventions and...

  • Page 119
    We look forward to working with you at Salesforce.com. Welcome aboard! Sincerely, /s/ MARC BENIOFF Marc Benioff Chairman of the Board AGREED TO AND ACCEPTED [NAME]

  • Page 120
    ... (i) accelerated vesting of 6 months of her original stock option grant or (ii) monthly vesting through her termination date, plus 12 months of COBRA. This schedule sets forth the material terms of the offer letters with certain executive officers of salesforce.com, inc. The form is filed herewith.

  • Page 121
    ... 21.1 Subsidiaries of salesforce.com, inc. Kabushiki Kaisha salesforce.com SFDC (EMEA) Limited SFDC International Limited SFDC Ireland Limited salesforce.com SÃ rl SFDC UK Ltd. SFDC Luxembourg SÃ rl SFDC Australia Pty Limited SFDC Singapore Pte. Ltd. Salesforce.com Canada Corporation Japan Ireland...

  • Page 122
    ... Plan, 2004 Outside Directors Stock Plan, and the 2004 Employee Stock Purchase Plan of salesforce.com, inc., of our report dated February 15, 2005, with respect to the consolidated financial statements and schedule of salesforce.com, inc. included in this Annual Report (Form 10-K) for the year ended...

  • Page 123
    ... the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 25, 2005 /s/ MARC...

  • Page 124
    ... the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 25, 2005 /s/ STEVE...

  • Page 125
    ... 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO...Annual Report of salesforce.com, inc. on Form 10-K for the period ended January 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information...