Salesforce.com 2005 Annual Report Download - page 83

Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Circuit requesting a stay of appellate proceedings pending the district court's determination of lead plaintiff's motion for leave and defendants' motion to
strike. Defendants opposed that motion. On February 9, 2006, the Ninth Circuit denied the lead plaintiff's motion for a stay of appellate proceedings, without
prejudice to making a motion for limited remand. On March 1, 2006, the district court denied the lead plaintiff's motion for leave and defendants' motion to
strike on grounds of lack of jurisdiction. Also on March 1, 2006, the lead plaintiff filed a motion with the district court seeking certification to the Ninth
Circuit for limited remand. The Company does not believe that the lawsuit has any merit and intends to continue to defend the action and appeal vigorously.
On August 6, 2004, a shareholder derivative action was filed in the Superior Court of the State of California, San Francisco County, entitled Borrelli v.
Benioff, et al., against the Company's Chief Executive Officer, its Chief Financial Officer and members of its Board of Directors alleging breach of fiduciary
duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment under state common law. Subsequently, a substantially similar
complaint was filed in the same court based on the same facts and allegations, entitled Johnson v. Benioff, et al. The two actions were 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 has been extended repeatedly
by agreement of the parties, and is now set for June 15, 2006. During this time, no discovery or other proceedings have occurred in this case. 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 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. Since January 1, 2006, the Company has been contributing to the plan. The total
contributions during the last month of fiscal 2006 were $318,000.
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 nine 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.
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