Salesforce.com 2015 Annual Report Download - page 31

affect us. Some companies that have experienced volatility in the trading price of their stock have been the
subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial
costs and a diversion of management’s attention and resources.
We may issue additional shares of our common stock or instruments convertible into shares of our
common stock, including in connection with the conversion of the notes, and thereby materially and adversely
affect the market price of our common stock and the trading price of the notes.
We are not restricted from issuing additional shares of our common stock or other instruments convertible
into, or exchangeable or exercisable for, shares of our common stock during the life of the notes. If we issue
additional shares of our common stock or instruments convertible into shares of our common stock, it may
materially and adversely affect the market price of our common stock and, in turn, the trading price of the notes.
In addition, the conversion of some or all of the notes may dilute the ownership interests of existing holders of
our common stock, and any sales in the public market of any shares of our common stock issuable upon such
conversion of the notes could adversely affect the prevailing market price of our common stock. In addition, the
potential conversion of the notes could depress the market price of our common stock.
We may not have the ability to raise the funds necessary to pay the amount of cash due upon conversion
of the notes or the fundamental change purchase price due when a holder submits its notes for purchase upon
the occurrence of a fundamental change.
Upon the occurrence of a fundamental change, holders of the notes may require us to purchase, for cash, all
or a portion of their notes. In addition, if a holder converts its notes, we will generally pay such holder an amount
of cash before delivering to such holder any shares of our common stock.
There can be no assurance that we will have sufficient financial resources, or will be able to arrange
financing, to pay the fundamental change purchase price if holders submit their notes for purchase by us upon the
occurrence of a fundamental change or to pay the amount of cash due if holders surrender their notes for
conversion. In addition, agreements governing any future debt may restrict our ability to make each of the
required cash payments even if we have sufficient funds to make them. Furthermore, our ability to purchase the
notes or to pay cash upon the conversion of the notes may be limited by law or regulatory authority. If we fail to
purchase the notes, to pay interest due on, or to pay the amount of cash due upon conversion, we will be in
default under the indenture, which in turn may result in the acceleration of other indebtedness we may then have.
If the repayment of the other indebtedness were to be accelerated, we may not have sufficient funds to repay that
indebtedness and to purchase the notes or to pay the amount of cash due upon conversion. Our inability to pay for
the notes that are tendered for purchase or upon conversion could result in note holders receiving substantially
less than the principal amount of the notes, which could harm our reputation, financing opportunities and our
business.
The fundamental change provisions may delay or prevent an otherwise beneficial takeover attempt of us.
The fundamental change purchase rights will allow holders of the notes to require us to purchase all or a
portion of their notes upon the occurrence of a fundamental change. The provisions requiring an increase to the
conversion rate for conversions in connection with a make-whole fundamental change may, in certain
circumstances, delay or prevent a takeover of us and the removal of incumbent management that might otherwise
be beneficial to investors.
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 certain 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
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