Salesforce.com 2014 Annual Report Download - page 96

If converted, holders will receive cash equal to the principal amount of the Notes, and at the Company’s
election, cash and/or shares of the Company’s common stock for any amounts in excess of the principal amounts.
Conversion
Rate per $1,000
Par Value
Initial
Conversion
Price per
Share Convertible Date
0.75% Senior Notes ................ 46.8588 $21.34 October 15, 2014
0.25% Senior Notes ................ 15.0512 $66.44 January 1, 2018
Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain
events, including any cash dividends. Holders of the Notes will not receive any cash payment representing
accrued and unpaid interest upon conversion of a Note. Accrued but unpaid interest will be deemed to be paid in
full upon conversion rather than cancelled, extinguished or forfeited. Holders may convert their Notes under the
following circumstances:
• during any fiscal quarter, if, for at least 20 trading days during the 30 consecutive trading day period
ending on the last trading day of the immediately preceding fiscal quarter, the last reported sales price
of the Company’s common stock for such trading day is greater than or equal to 130% of the applicable
conversion price on such trading day share of common stock on such last trading day;
• in certain situations, when the trading price of the Notes is less than 98% of the product of the sale
price of the Company’s common stock and the conversion rate;
• upon the occurrence of specified corporate transactions described under the Notes Indenture, such as a
consolidation, merger or binding share exchange; or
• at any time on or after the convertible dates noted above.
Holders of the Notes have the right to require the Company to purchase with cash all or a portion of the
Notes upon the occurrence of a fundamental change, such as a change of control, at a purchase price equal to
100% of the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate
transactions that constitute a change of control, the Company will increase the conversion rate for a holder who
elects to convert the Notes in connection with such change of control.
In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity
components. The carrying amount of the liability component was calculated by measuring the fair value of a
similar liability that does not have an associated convertible feature. The carrying amount of the equity
component representing the conversion option was determined by deducting the fair value of the liability
component from the par value of the Notes as a whole. The excess of the principal amount of the liability
component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes.
The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount
incurred to the liability and equity components based on their relative values. Transaction costs attributable to the
liability component are being amortized to expense over the term of the Notes, and transaction costs attributable
to the equity component were netted with the equity component in temporary stockholders’ equity and
stockholders’ equity. Additionally, the Company recorded a deferred tax liability of $51.1 million in connection
with the 0.75% Senior Notes.
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