Salesforce.com 2004 Annual Report Download - page 75

Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Utilization of the Company's net operating loss carryforwards may be subject to substantial annual limitation due to 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 2004 and the filing of the Company's amended and restated certificate of incorporation, the
Company's board of directors has the authority, without further action by stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series. The Company's board of directors may designate the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms, and number of shares constituting any series or the
designation of any series. The issuance of preferred stock could have the effect of restricting dividends on the Company's common stock, diluting the voting
power of its common stock, impairing the liquidation rights of its common stock, or delaying or preventing a change in control. The ability to issue preferred
stock could delay or impede a change in control. At January 31, 2005, no shares of preferred stock were outstanding and the Company has no plans to issue
any shares of preferred stock.
7. Stockholders' Equity
Stock Options Issued to Employees
In April 1999, the Company's Board of Directors adopted and stockholders approved the 1999 Stock Option Plan (the "1999 Plan") which provides for
the issuance of incentive and nonstatutory options to employees and nonemployees of the Company. Through June 22, 2004, the Company had reserved
38,000,000 shares of common stock for issuance under the 1999 Plan. As of January 31, 2005, there were 1,139,445 shares of common stock available for
grant under the 1999 Plan.
Additionally, in December 2003 in connection with the Company's initial public offering, the Company's Board of Directors approved the 2004 Equity
Incentive Plan, the 2004 Employee Stock Purchase Plan and the 2004 Outside Directors Stock Plan. These plans were approved by the Company's
stockholders in February 2004. The following number of shares were reserved under these plans:
Shares
2004 Equity Incentive Plan 4,000,000
2004 Employee Stock Purchase Plan 1,000,000
2004 Outside Directors Stock Plan 1,000,000
These plans, other than the 2004 Outside Directors Plan, provide for annual automatic increases on February 1 to the shares reserved for issuance based
on the lesser of (i) a specific percentage of the total number of shares outstanding at year end; (ii) a fixed number of shares; or (iii) a lesser number of shares
set by the Company's Board of Directors, all as specified in the respective plans. On February 1, 2005, the automatic increase to the shares reserved for the
2004 Equity Incentive Plan was 5,000,000 shares. The 2004 Employee Stock Purchase Plan will not be implemented unless and until the Company's Board of
Directors authorizes the commencement of one or more offerings under the plan. No offering periods have been authorized to date.
Options issued under the Company's stock option plans are generally for periods not to exceed 10 years, vest over 4 years and are generally issued at
fair value of the shares of common stock on the date of grant as determined by the Board of Directors. Following the initial public offering, the fair value of
the Company's
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