Salesforce.com 2014 Annual Report Download - page 29

The convertible note hedges and warrant transactions may affect the trading price of the notes and the
market price of our common stock.
We entered into privately negotiated convertible note hedge transactions with the hedge counterparties
concurrently with the pricing of the notes. We also entered into privately negotiated warrant transactions with the
hedge counterparties. Taken together, the convertible note hedge transactions and the warrant transactions are
expected, but not guaranteed, to reduce the potential dilution with respect to our common stock upon conversion
of the notes. If, however, the price of our common stock, as measured under the terms of the warrant
transactions, exceeds the exercise price of the warrant transactions, the warrant transactions will have a dilutive
effect on our earnings per share to the extent that the price of our common stock as measured under the warrant
transactions exceeds the strike price of the warrant transactions.
The hedge counterparties and their respective affiliates periodically modify their hedge positions from time
to time following the pricing of the notes (and are particularly likely to do so during any observation period
relating to a conversion of the notes) by entering into or unwinding various over-the-counter derivative
transactions with respect to our common stock, and/or by purchasing or selling shares of our common stock or
the notes in privately negotiated transactions and/or open market transactions. The effect, if any, of these
transactions and activities on the market price of our common stock or the trading price of the notes will depend
in part on market conditions and cannot be ascertained at this time. Any of these activities, however, could
adversely affect the market price of our common stock and the trading price of the notes.
We do not make any representation or prediction as to the direction or magnitude of any potential effect that
the transactions described above may have on the price of the notes or our common stock. In addition, we do not
make any representation that the counterparties to those transactions will engage in these transactions or activities or
that these transactions and activities, once commenced, will not be discontinued without notice; the counterparties
or their affiliates may choose to engage in, or discontinue engaging in, any of these transactions or activities with or
without notice at any time, and their decisions will be in their sole discretion and not within our control.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
The hedge counterparties are financial institutions or affiliates of financial institutions, and we will be
subject to the risk that these hedge counterparties may default under the convertible note hedge transactions. Our
exposure to the credit risk of the hedge counterparties will not be secured by any collateral. If one or more of the
hedge counterparties to one or more of our convertible note hedge transactions becomes subject to insolvency
proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the
time under those transactions. Our exposure will depend on many factors but, generally, the increase in our
exposure will be correlated to the increase in our stock price and in the volatility of our stock. In addition, upon a
default by one of the hedge counterparties, we may suffer adverse tax consequences and dilution with respect to
our common stock. We can provide no assurances as to the financial stability or viability of any of the hedge
counterparties.
Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might
discourage, delay or prevent a change of control of our company or changes in our management and,
therefore, depress the market price of our common stock.
Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the
market price of our common stock by acting to discourage, delay or prevent a change in control of our company
or changes in our management that the stockholders of our company may deem advantageous. These provisions
among other things:
• permit the board of directors to establish the number of directors;
• provide that directors may only be removed “for cause” and only with the approval of 66 2/3 percent of
our stockholders;
• require super-majority voting to amend some provisions in our amended and restated certificate of
incorporation and bylaws;
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