Salesforce.com 2004 Annual Report Download - page 81

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
allegations, entitled Johnson v. Benioff, et al. The two actions have been 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, which is based upon the same facts and circumstances as alleged in the
shareholder class action discussed above, and asserts 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. The
deadline for defendants to respond to the consolidated complaint is June 16, 2005. The derivative action is still in the preliminary stages, and 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.
Additionally, the Company is and may become involved in various legal proceedings arising from the normal course of its business activities. In
management's opinion, resolution of these matters is not expected to have a material adverse impact on the Company's consolidated results of operations, cash
flows or its financial position. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect
the Company's future results of operations, cash flows or financial position in a particular period.
9. Employee Benefit Plan
The Company has a 401(k) plan covering all eligible employees. The Company is not required to contribute to the plan and has made no contributions
through January 31, 2005.
10. Related-Party Transactions
In January 1999, the salesforce.com/foundation, commonly referred to as the Foundation, a non-profit public charity, was chartered to build
philanthropic programs that are particularly focused on youth and technology. The Company's chairman is the chairman of the Foundation. He, one of the
Company's executive officers and one of the Company's board members hold three of the Foundation's eight board seats. The Company is not the primary
beneficiary of the Foundation's activities, and accordingly, the Company does not consolidate the Foundation's statement of activities with its financial results.
Since the Foundation's inception, the Company has provided at no charge certain resources to Foundation employees such as office space. The value of
these items totals approximately $30,000 per quarter.
In addition to the resource sharing with the Foundation, the Company issued the Foundation warrants in August 2002 to purchase 500,000 shares of
common stock and has donated subscriptions to the Company's service to qualified non-profit organizations. The fair value of these donated subscriptions is
currently approximately $300,000 per month. The Company plans to continue providing free subscriptions to qualified nonprofit organizations.
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