Salesforce.com 2006 Annual Report Download - page 32

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Table of Contents
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203
imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15 percent or more of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices and principal office for domestic marketing, sales, professional services and development occupy approximately 240,000 square
feet in San Francisco, California under leases that expire at various times through June 2013. We also lease space in various locations throughout the United
States for local sales and professional services personnel. Our foreign subsidiaries lease office space for their operations including local sales and professional
services personnel.
We believe that our existing facilities and offices are adequate to meet our requirements for the foreseeable future. See Note 9, "Commitments and
Contingencies," in the Notes to the Consolidated Financial Statements for more information about our lease commitments. If we require additional space, we
believe that we will be able to obtain such space on acceptable, commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
On August 6, 2004, a shareholder derivative action was filed in the Superior Court of the State of California, San Francisco County, entitled Borrelli v.
Benioff, et al., against the Company's Chief Executive Officer, its Chief Financial Officer and members of its Board of Directors alleging breach of fiduciary
duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment under state common law. Subsequently, a substantially similar
complaint was filed in the same court based on the same facts and allegations, entitled Johnson v. Benioff, et al. The two actions were consolidated under the
caption Borrelli v. Benioff, Case No. CGC-04-433615 (Cal. Super. Ct., S.F. Cty.). On October 5, 2004, plaintiffs filed a consolidated complaint, and assert
that the defendants breached their fiduciary duties by making, or failing to prevent salesforce.com, inc. and its management from making, statements or
omissions that potentially subject the Company to liability and injury to its reputation. The action seeks damages on behalf of salesforce.com in an unspecified
amount, among other forms of legal and equitable relief. Salesforce.com is named solely as a nominal defendant against which no recovery is sought. The
plaintiff shareholders made no demand upon the Board of Directors prior to filing these actions. On June 15, 2006, defendants filed a demurrer to the
consolidated complaint on the grounds that plaintiffs lack standing to pursue the action because of their failure to make demand upon the Board of Directors.
The Court overruled defendants' demurrer. On October 3, 2006, defendants petitioned the California Court of Appeal for review of the trial court's decision to
overrule the demurrer. The Court of Appeal denied the petition on October 12, 2006. Defendants filed a petition for review of that decision with the California
Supreme Court on October 23, 2006, but the petition for review was denied on January 3, 2007. On December 22, 2006, the trial Court ordered that the
lawsuit be bifurcated into two phases. The first phase is a bench trial to decide the legal issues of (a) whether a duty to disclose internal forecasts in an IPO
registration statement exists in law, (b) if so, under what circumstances this duty exists, and (c) which party bears the burden of proof with respect to the
foregoing two issues. The second phase will address the remaining issues, if any. Accordingly, pursuant to the Court's order, on January 19, 2007 the parties
simultaneously filed briefs on the three legal issues listed above. Simultaneous reply briefs are due on February 23, 2007, and the Court will hear oral
argument on March 27, 2007. The Court ordered that all discovery be stayed unless and until the Court orders otherwise. To date, no discovery has occurred
in this case. It is not possible for the Company to quantify the extent of potential liability to the individual defendants, if any. Management does not believe
that the lawsuits have any merit and intends to defend the actions vigorously.
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