Salesforce.com 2016 Annual Report Download - page 36

We do not make any representation or prediction as to the direction or magnitude of any potential effect that
the transactions described above may have on the price of the notes or our common stock. In addition, we do not
make any representation that the counterparties to those transactions will engage in these transactions or
activities or that these transactions and activities, once commenced, will not be discontinued without notice; the
counterparties or their affiliates may choose to engage in, or discontinue engaging in, any of these transactions or
activities with or without notice at any time, and their decisions will be in their sole discretion and not within our
control.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
The hedge counterparties are financial institutions or affiliates of financial institutions, and we will be
subject to the risk that these hedge counterparties may default under the convertible note hedge transactions. Our
exposure to the credit risk of the hedge counterparties will not be secured by any collateral. If one or more of the
hedge counterparties to one or more of our convertible note hedge transactions becomes subject to insolvency
proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the
time under those transactions. Our exposure will depend on many factors but, generally, the increase in our
exposure will be correlated to the increase in our stock price and the volatility of our stock. In addition, upon a
default by one of the hedge counterparties, we may suffer adverse tax consequences and dilution with respect to
our common stock. We can provide no assurances as to the financial stability or viability of any of the hedge
counterparties.
Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might
discourage, delay or prevent a change of control of our company or changes in our management and,
therefore, depress the market price of our common stock.
Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the
market price of our common stock by acting to discourage, delay or prevent a change in control of our company
or changes in our management that the stockholders of our company may deem advantageous. These provisions
among other things:
• permit the board of directors to establish the number of directors;
• provide that directors may only be removed with the approval of holders of 66 2/3 percent of our
outstanding capital stock;
• require super-majority voting to amend some provisions in our amended and restated certificate of
incorporation and bylaws;
• authorize the issuance of “blank check” preferred stock that our board could use to implement a
stockholder rights plan (also known as a “poison pill”);
• prohibit the ability of our stockholders to call special meetings of stockholders;
• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a
meeting of our stockholders;
• provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
• establish advance notice requirements for nominations for election to our board or for proposing
matters that can be acted upon by stockholders at annual stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a
change in control of our company. Section 203 imposes certain restrictions on merger, business combinations
and other transactions between us and holders of 15 percent or more of our common stock.
In addition, the fundamental change purchase rights applicable to the 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
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