Salesforce.com 2013 Annual Report Download - page 27

In addition, the fundamental change purchase rights applicable to our convertible notes, which will allow
note holders to require us to purchase all or a portion of their notes upon the occurrence of a fundamental change,
and 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of January 31, 2013, our executive offices and principal office for domestic marketing, sales,
professional services and development occupy over 950,000 square feet in the San Francisco Bay Area. We also
lease space in various locations throughout the United States for local sales and professional services personnel.
Our foreign subsidiaries lease office space for their operations including local sales and professional services
personnel.
We also own approximately 14 acres of undeveloped real estate in San Francisco, California, including
entitlements and improvements associated with the land.
We believe that our existing facilities and offices are adequate to meet our current requirements. See
Note 10, “Commitments,” in the Notes to the Consolidated Financial Statements for more information about our
lease commitments. If we require additional space, we believe that we will be able to obtain such space on
acceptable, commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we are involved in various legal proceedings and claims related to
alleged infringement of third-party patents and other intellectual property rights, commercial, corporate and
securities, labor and employment, wage and hour, and other claims. We have been, and may in the future be, put
on notice and/or sued by third parties for alleged infringement of their proprietary rights, including patent
infringement. For example, we have received a notice from a large non-practicing entity alleging that we infringe
upon certain of its patents. We continue to analyze the potential merits of such claim, if any, the potential
defenses and counterclaims to such claim and we have been engaged in discussions with this entity with respect
to these matters. No litigation has been filed to date.
We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counter
claims, settlement or litigation potential and the expected effect on us. Our technologies may be subject to
injunction if they are found to infringe the rights of a third party. In addition, many of our subscription
agreements require us to indemnify our customers for third-party intellectual property infringement claims,
which could increase the cost to us of an adverse ruling on such a claim.
The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and
other lawsuits, and the disposition of such claims and lawsuits, whether through settlement or litigation, could be
time-consuming and expensive to resolve, divert our attention from executing our business plan, result in efforts
to enjoin our activities, lead to attempts by third parties to seek similar claims and, in the case of intellectual
property claims, require us to change our technology, change our business practices and/or pay monetary
damages or enter into short- or long-term royalty or licensing agreements.
In general, the resolution of a legal matter could prevent us from offering our service to others, could be
material to our financial condition or cash flows, or both, or could otherwise adversely affect our operating
results.
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