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Public Offering Registration - SALESFORCE COM INC - 12-18-2003

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As filed with the Securities and Exchange Commission on December 18, 2003 Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-1 REGISTRATION STATEMENT
Under The Securities Act of 1933

salesforce.com, inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

7372
(Primary Standard Industrial Classification Code number)

94-3320693
(I.R.S. Employer Identification No.)

The Landmark @ One Market, Suite 300 San Francisco, California 94105 (415) 901-7000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Marc Benioff Chairman and Chief Executive Officer salesforce.com, inc. The Landmark @ One Market, Suite 300 San Francisco, California 94105 (415) 901-7000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to: Gregory M. Gallo, Esq. Peter M. Astiz, Esq. David A. Hubb, Esq. Gray Cary Ware & Freidenrich LLP 2000 University Avenue East Palo Alto, CA 94303-2248 (650) 833-2000 David Schellhase, Esq. Vice President and General Counsel salesforce.com, inc. The Landmark @ One Market, Suite 300 San Francisco, CA 94105 (415) 901-7000 Gordon K. Davidson, Esq. Jeffrey R. Vetter, Esq. Fenwick & West LLP Silicon Valley Center 801 California Street Mountain View, CA 94041 (650) 988-8500

Approximate date of commencement of proposed sale to the public: effective.

As soon as practicable after the Registration Statement becomes

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement number for the same offering.  If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If delivery of the Prospectus is expected to be made pursuant to Rule 434, check the following box. 

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price (1)

Amount of Registration Fee

Common Stock $0.001 par value

$115,000,000

$9,303.50

(1) Estimated solely for the purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registratio n statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion) Issued December 18, 2003

Shares

COMMON STOCK

Salesforce.com, inc. is offering shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share.

We expect to apply to list our common stock on either the New York Stock Exchange or the Nasdaq National Market under the symbol “ .”

Investing in our common stock involves risks. See “ Risk Factors ” beginning on page 5.

PRICE $

A SHARE

Price to Public

Underwriting Discounts and Commissions

Proceeds to salesforce.com

Per Share Total We have granted the underwriters the right to purchase up to an additional

$ $ $

$ $ shares of common stock to cover over-allotments.

$

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 2004.

MORGAN STANLEY DEUTSCHE BANK SECURITIES UBS INVESTMENT BANK WACHOVIA SECURITIES

WILLIAM BLAIR & COMPANY
, 2004

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Prospectus Summary Risk Factors Special Note Regarding Forward-Looking Statements Use of Proceeds Dividend Policy Capitalization Dilution Selected Consolidated Financial Data Management‘s Discussion and Analysis of Financial Condition and Results of Operations Business Management Certain Relationships and Related Party Transactions Principal Stockholders Description of Capital Stock Shares Eligible for Future Sale Underwriters Legal Matters Experts Change in Independent Accountants Where You Can Find Additional Information Index to Consolidated Financial Statements

1 5 19 20 20 21 22 23 25 41
Page

55 69 72 74 78 80 83 83 83 83 F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. Until , 2004 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

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PROSPECTUS SUMMARY You should read the following summary together with the entire prospectus, including the more detailed information in our consolidated financial statements and related notes appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in “Risk Factors.” SALESFORCE.COM, INC. Salesforce.com is the leading provider of application services that allow organizations to easily share customer information on demand. We provide a comprehensive customer relationship management, or CRM, service to businesses of all sizes and industries worldwide. By designing and developing our service to be a low-cost, easy-to-use application that is delivered through a standard Web browser, we substantially reduce many of the traditional expenses and complexities of enterprise software implementations. As a result, our customers incur less risk and lower upfront costs. Our service helps customers more effectively manage critical operations including: sales force automation; customer service and support; marketing automation; document management; analytics; and custom application development. We market our services on a subscription basis, primarily through our direct sales efforts and also indirectly through partners. From the introduction of our service in February 2000 through October 31, 2003, our customer base had grown to approximately 8,000 subscribing customers, with an aggregate of over 110,000 paying subscribers in approximately 70 countries. The pervasiveness of the Internet, along with the dramatic declines in the pricing of computing technology and network bandwidth, have enabled a new generation of enterprise computing in which substantial components of information technology, or IT, infrastructure can be provisioned and delivered dynamically on an outsourced basis. This new computing paradigm is sometimes referred to as utility computing, while the outsourced software applications are referred to as on-demand application services. On-demand application services enable businesses to subscribe to a wide variety of application services that are developed specifically for, and delivered over, the Internet on an as-needed basis with little or no implementation services required and without the need to install and manage third-party software in-house. The market for on-demand application services is projected to grow from $425 million in 2002 to $2.6 billion in 2007, which represents a compounded annual growth rate of 44 percent, according to a May 2003 report by International Data Corporation, or IDC, an independent market research firm. We believe that the CRM applications market, which was approximately $7.1 billion in 2002 according to a July 2003 report by IDC, is one of the first to benefit from on-demand application services. CRM applications are intended to enable businesses to automate sales, customer service and support and marketing. Despite the significant potential benefits that can be attained from CRM, many enterprises have failed to successfully deploy the CRM applications that they have purchased for a variety of reasons including the difficulty and relatively high cost of implementing and maintaining enterprise applications, as well as the historically low rates of user adoption and lack of ubiquitous access that have contributed to lower returns on investment in CRM deployments. From inception, our service has been specifically designed to provide customers with robust CRM solutions on an outsourced basis through our proprietary, scalable and secure multi-tenant application architecture. Key benefits of our solution include:  Rapid deployment. Our service can be deployed rapidly and provisioned easily, since our customers do not have to spend time installing or maintaining the servers, networking equipment, security products or other infrastructure hardware and software necessary to ensure a scalable and reliable service. Enable high levels of user adoption. We have designed our service to be easy-to-use and intuitive. Since our service contains many tools and features recognizable to users of popular websites such as 1

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those of Amazon.com, eBay and Yahoo!, it has a more familiar interface than typical CRM applications. As a result, our users do not require substantial training on how to use and benefit from our service.  Lower total cost of ownership. We enable customers to achieve significant savings relative to the traditional enterprise software model. Our service enables customers to automate sales, customer service and support and marketing processes without having to make large and risky upfront investments in software, hardware and implementation services and additional IT staff. Extensive features, functionality and configurability. We offer a comprehensive array of CRM capabilities across sales, customer service and support and marketing that meet the needs of businesses of any size. We also enable customers to tailor important characteristics of our service to meet their unique requirements without the use of significant IT resources. Secure, scalable and reliable delivery platform. We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users. Ease of integration. We have developed a set of application programming interfaces, or APIs, which we provide on a platform we call sforce, that enable customers and independent developers to integrate our service with existing third-party, custom and legacy applications and write their own application services that integrate with our service.

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

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Our objective is to be the leading provider of on-demand application services for businesses worldwide. To achieve this objective we intend to:      continue to lead the industry transformation to on-demand application services; strengthen and extend our service offering; pursue new customers and new territories aggressively; deepen relationships with our existing customer base; and encourage the development of third-party applications on our sforce platform.

We were incorporated in Delaware in February 1999. Unless otherwise indicated, as used in this prospectus, the terms ―salesforce.com,‖ ―we,‖ ―us‖ and ―our‖ refer to salesforce.com, inc., a Delaware corporation, and its subsidiaries. The address of our principal executive office is The Landmark @ One Market, Suite 300, San Francisco, California 94105 and our telephone number is (415) 901-7000. Our website address is www.salesforce.com. The information on, or that can be accessed through, our website is not part of this prospectus. Our No Software logo, salesforce.com and sforce are our trademarks in the United States and other countries. All other trademarks, trade names or service marks appearing in this prospectus are the property of their respective owners. 2

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THE OFFERING Common stock offered Common stock to be outstanding after this offering Use of proceeds shares shares We expect to use the net proceeds for general corporate purposes, including working capital and capital expenditures. We may also use a portion of the net proceeds to fund possible investments in, or acquisitions of, complementary businesses, services or technologies. See ―Use of Proceeds.‖

Proposed symbol The number of shares to be outstanding immediately after the offering is based on 89,063,519 shares of common stock outstanding as of October 31, 2003, which assumes the conversion of all of our outstanding shares of our convertible preferred stock into 58,024,345 shares of common stock, and excludes:   14,876,392 shares of common stock issuable upon the exercise of options outstanding as of October 31, 2003, with exercise prices ranging from $0.02 to $4.00 per share and a weighted average exercise price of $1.63 per share; 4,000,000 shares of common stock to be available for issuance under our 2004 Equity Incentive Plan, 1,000,000 shares of common stock to be available for issuance under our 2004 Outside Directors Stock Plan and 1,000,000 shares of common stock to be available for issuance under our 2004 Employee Stock Purchase Plan, each plan to be effective upon completion of the offering; 1,299,496 shares of common stock issuable upon the exercise of warrants outstanding as of October 31, 2003, with exercise prices ranging from $1.10 to $3.89 per share and a weighted average exercise price of $2.43 per share; and 2,400,334 shares of common stock reserved for future grants under our 1999 Stock Option Plan at October 31, 2003.

 

Except as otherwise indicated, all information contained in this prospectus assumes:     an initial public offering price of $ per share;

the automatic conversion of all outstanding shares of our convertible preferred stock into 58,024,345 shares of common stock upon the closing of this offering; that the underwriters do not exercise their over-allotment option; and the filing of our amended and restated certificate of incorporation following the conversion of our convertible preferred stock. 3

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SUMMARY CONSOLIDATED FINANCIAL DATA The following tables provide summary consolidated financial data and should be read in conjunction with ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and related notes appearing elsewhere in this prospectus.
Nine Months Ended October 31, 2003 2002 (unaudited) (in thousands, except per share data) Consolidated Statement of Operations Data: Revenues (Loss) income from operations (1) Net (loss) income (1) Net (loss) income per share: Basic Diluted Pro forma (unaudited) Weighted-average shares used in computing per share amounts: Basic (2) Diluted (2) Pro forma (unaudited) (2) $ 5,435 (33,600 ) (31,671 ) (2.38 ) (2.38 ) $ 22,409 (30,154 ) (29,238 ) (1.39 ) (1.39 ) $ 50,991 (10,123 ) (9,339 ) (0.35) (0.35) (0.11) 26,375 26,375 84,399 $ 35,425 (7,535 ) (7,171 ) (0.28 ) (0.28 ) $ 65,970 4,731 4,689 0.16 0.05 0.05 29,267 98,975 98,975 2003

Fiscal Year Ended January 31, 2001 2002

$

$

$

$

$

13,314 13,314

21,039 21,039

25,901 25,901

(1)

(2)

Income from operations and net income for fiscal 2002 include a $7.7 million non-cash charge for office space that we abandoned in fiscal 2002. Income from operations and net income for the nine months ended October 31, 2003 include non-cash income of $4.3 million associated with the release of future obligations associated with a portion of the office space that we abandoned. For information regarding the computation of per share amounts, refer to notes 1 and 10 of the notes to our consolidated financial statements.

The pro forma per share amounts in the consolidated statement of operations data table above give effect to the automatic conversion of all outstanding shares of our convertible preferred stock into common stock upon the closing of this offering.
As of October 31, 2003 Pro Forma (unaudited) (in thousands) Consolidated Balance Sheet Data: Cash, cash equivalents and short-term marketable securities Working capital Total assets Convertible preferred stock Accumulated deficit Total stockholders‘ (deficit) equity $ 30,486 6,690 67,872 61,137 (71,011 ) (46,848 ) $ 30,486 6,690 67,872 — (71,011 ) 14,289 $ Pro Forma As Adjusted

Actual

— (71,011 )

The pro forma column of the consolidated balance sheet data table above reflects the automatic conversion of all outstanding shares of our convertible preferred stock into common stock upon the closing of this offering. The pro forma as adjusted column in the consolidated balance sheet data table above reflects the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, resulting in estimated net proceeds of $ after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. 4

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RISK FACTORS Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations would suffer. In this case, the trading price of our common stock would likely decline and you might lose all or part of your investment in our common stock. The risks described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations. Risks Related to Our Business and Industry We are an early-stage company in an emerging market with an unproven business model, a new and unproven enterprise technology model and a short operating history, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment. We have only a limited operating history upon which to base an evaluation of our current business and future prospects. We were founded in February 1999 and began offering our on-demand CRM application service in February 2000. Our limited operating history makes an evaluation of our business and prospects very difficult. You must consider our business and prospects in light of the risks and difficulties we encounter as an early-stage company in the new and rapidly evolving market of on-demand CRM application services. These risks and difficulties include, but are not limited to, the following:            our new and unproven business and technology models; a limited number of service offerings and risks associated with developing new service offerings; the difficulties we face in managing rapid growth in personnel and operations; the limited acceptance by enterprises of on-demand application services; a failure of our physical infrastructure or internal systems caused by a denial of service, third-party attack, employee error or malfeasance, or other causes; a general failure of the Internet that impairs our ability to deliver our service; a loss or breach of confidentiality of customer data; the negative impact on our brand, reputation or trustworthiness caused by any significant unavailability of our service; the systematic failure of a core component of our service from which it would be difficult for us to recover; the timing and success of new service introductions and new technologies by our competitors; and our ability to build brand awareness in a highly competitive market.

We may not be able to successfully address any of these risks or others. Failure to adequately do so could seriously harm our business and cause our operating results to suffer. We have incurred significant operating losses in the past and may incur significant operating losses in the future. We incurred significant losses in each fiscal quarter from our inception in February 1999 through fiscal 2003. Although we have recently been slightly profitable, our business does not have an established record of 5

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profitability and we may not continue to be profitable. In addition, we expect our operating expenses to increase in the future as we, among other things:        hire additional personnel, including sales and marketing personnel, engineers and other technical staff; hire senior executives and members of our senior management team; expand our domestic and international selling and marketing activities; expand our service offerings; expand the number of locations around the world where we conduct business; increase our research and development efforts to upgrade our existing service and develop new services and technologies; and upgrade our operational and financial systems, procedures and controls.

If our revenue does not grow to offset these expected increased expenses, we will not continue to be profitable. You should not consider recent quarterly revenue growth as indicative of our future performance. In fact, in future quarters we may not have any revenue growth, and our revenue could decline. Furthermore, if our operating expenses exceed our expectations, our financial performance will be adversely affected. If we experience significant fluctuations in our operating results and rate of growth and fail to meet revenue and earnings expectations, our stock price may fall rapidly and without advance notice. Due to our limited operating history, our evolving business model and the unpredictability of our emerging industry, we may not be able to accurately forecast our rate of growth. We base our current and future expense levels and our investment plans on estimates of future revenue and future rate of growth. Our expenses and investments are, to a large extent, fixed and we expect that these expenses will increase in the future. We may not be able to adjust our spending quickly enough if our revenue falls short of our expectations. Our results of operations depend on both the continued growth of demand for the services we offer and the general economic and business conditions throughout the world. A softening of demand for our on-demand application service for any reason will harm our operating results. Terrorist attacks, armed hostilities and war have in the past created, and may in the future create, economic and business uncertainty that may also adversely affect our results of operations. Our revenue and operating results may also fluctuate due to other factors, including:            our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers‘ requirements; the renewal rates for our service; changes in our pricing policies; the introduction of new features to our service; the rate of expansion and effectiveness of our sales force; the length of the sales cycle for our service; new product and service introductions by our competitors; seasonality in our markets; our success in selling our service to large enterprises; variations in the mix of editions of our service; technical difficulties or interruptions in our service; 6

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general economic conditions in our geographic markets; additional investment in our service or operations; and regulatory compliance costs.

As a result of these and other factors, we expect that our operating results may fluctuate significantly on a quarterly basis. Revenue growth may not be sustainable and may decrease in the future. We believe that period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance. Interruptions or delays in service from our third-party co-location facility could impair the delivery of our service and harm our business. We provide our service through computer hardware that is currently located in a third-party co-location facility in Sunnyvale, California. We do not control the operation of this facility, and it is subject to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. It is also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Despite precautions taken at the facility, the occurrence of a natural disaster, a decision to close the facility without adequate notice or other unanticipated problems at the facility could result in lengthy interruptions in our service. In addition, the failure by our co-location facility to provide our required data communications capacity could result in interruptions in our service. Our back-up computer hardware and systems located in our San Francisco headquarters have not been tested under actual disaster conditions. In addition, this facility may not be geographically remote enough to avoid risks similar to those faced by the facility in Sunnyvale, and we believe there could be a delay in bringing our service back online in the event of an outage at the co-location facility. We have begun the process of securing another co-location facility; however, we do not believe we will have a fully-redundant, geographically-remote facility in operation before June 2004 at the earliest. Any damage to, or failure of, our systems could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates. Our business will be harmed if our customers and potential customers believe our service is unreliable. If our security measures are breached and unauthorized access is obtained to a customer’s data, our service may be perceived as not being secure and customers may curtail or stop using our service. Our service involves the storage and transmission of customers‘ proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to one of our customers‘ data, our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and customers. If our on-demand application service is not widely accepted, our operating results will be harmed. Historically, we have derived substantially all of our revenue from subscriptions to our on-demand application service, and we expect this will continue for the foreseeable future. As a result, widespread acceptance of our service is critical to our future success. Factors that may affect market acceptance of our service include:   potential reluctance by enterprises to migrate to an on-demand application service; the price and performance of our service; 7

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the level of customization we can offer; the availability, performance and price of competing products and services; and potential reluctance by enterprises to trust third parties to store and manage their internal data.

Many of these factors are beyond our control. The inability of our service to achieve widespread market acceptance would harm our business. The market for our technology delivery model and on-demand application services is immature and volatile, and if it does not develop or develops more slowly than we expect, our business will be harmed. The market for on-demand application services is new and unproven, and it is uncertain whether these services will achieve and sustain high levels of demand and market acceptance. Our success will depend to a substantial extent on the willingness of enterprises, large and small, to increase their use of on-demand application services in general and for CRM, in particular. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to on-demand application services. Furthermore, some enterprises may be reluctant or unwilling to use on-demand application services because they have concerns regarding the risks associated with security capabilities, among other things, of the technology delivery model associated with these services. If enterprises do not perceive the benefits of on-demand application services, then the market for these services may not develop at all, or it may develop more slowly than we expect, either of which would significantly adversely affect our operating results. In addition, as a new company in this unproven market, we have limited insight into trends that may develop and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business. Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our operating results. We recognize revenue from customers monthly over the terms of their subscription agreements, which are typically 12 to 24 months, although terms can range from one to 48 months. As a result, much of the revenue we report in each quarter is deferred revenue from subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter will not necessarily be fully reflected in the revenue in that quarter and will negatively affect our revenue in future quarters. In addition, we may be unable to adjust our cost structure to reflect these reduced revenues. Accordingly, the effect of significant downturns in sales and market acceptance of our service may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be amortized over the applicable subscription term. We do not have an adequate history with our subscription model to predict the rate of customer subscription renewals and the impact these renewals will have on our revenue or operating results. Our customers have no obligation to renew their subscriptions for our service after the expiration of the initial subscription period and in fact, some customers have elected not to do so. In addition, our customers may renew for a lower priced edition of our service or for fewer users. We have limited historical data with respect to rates of customer subscription renewals, so we cannot accurately predict customer renewal rates. Our customers‘ renewal rates may decline or fluctuate as a result of a number of factors, including their dissatisfaction with our service and their ability to continue their operations and spending levels. If our customers do not renew their subscriptions for our service, our revenue may decline and our business will suffer. 8

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Our future success also depends in part on our ability to sell additional features or enhanced editions of our service to our current customers. This may require increasingly sophisticated and costly sales efforts that are targeted at senior management. If these efforts are not successful, our business may suffer. We derive a significant portion of our revenue from small businesses, which have a greater rate of attrition and non-renewal than medium-sized and large enterprise customers. Our small business customers, which account for a significant portion of our revenue, typically have shorter initial subscription periods and, based on our limited experience to date, have had a higher rate of attrition and non-renewal as compared to our medium-sized and large enterprise customers. If we cannot replace our small business customers that do not renew their subscriptions for our service with new customers quickly enough, our revenue could decline. Our limited operating history may impede acceptance of our service by medium-sized and large customers. Our ability to increase revenue and maintain profitability depends, in large part, on widespread acceptance of our service by medium-sized and large businesses. Our efforts to sell to these customers may not continue to be successful. In particular, because we are a relatively new company with a limited operating history, these target customers may have concerns regarding our viability and may prefer to purchase critical CRM applications from one of our larger, more established competitors. Even if we are able to sell our service to these types of customers, they may insist on additional assurances from us that we will be able to provide adequate levels of service, which could harm our business. As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more time-consuming and expensive, potentially diverting resources and harming our business. As we target more of our sales efforts at larger enterprise customers, we will face greater costs, longer sales cycles and less predictability in completing some of our sales. In this market segment, the customer‘s decision to use our service may be an enterprise-wide decision and, if so, these types of sales would require us to provide greater levels of education to prospective customers regarding the use and benefits of our service. In addition, larger customers may demand more customization, integration services and features. As a result of these factors, these sales opportunities may require us to devote greater sales support and professional services resources to individual sales, driving up costs and time required to complete sales and diverting sales and professional services resources to a smaller number of larger transactions. The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed. The market for CRM applications is intensely competitive and rapidly changing, and barriers to entry in our market are relatively low. With the introduction of new technologies and market entrants, we expect competition to intensify in the future. Some of our principal competitors offer their products at a lower price, which has resulted in pricing pressures. If we are unable to maintain our current pricing, our operating results could be negatively impacted. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our service to achieve or maintain more widespread market acceptance, any of which could harm our business. Our current principal competitors include:   enterprise software application vendors including Amdocs Limited, E.piphany, Inc., IBM Corporation, Microsoft Corporation, Oracle Corporation, PeopleSoft, Inc., SAP AG and Siebel Systems, Inc.; packaged CRM software vendors, some of whom offer hosted services, such as BMC Software Corporation, FrontRange Solutions, Inc., Onyx Software Corp., Pivotal Corporation, which has signed 9

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an agreement to be acquired by CDC Software Corporation, a subsidiary of chinadotcom corporation, and Sage Group plc;   on-demand CRM application service providers such as ACCPAC International, Inc., a subsidiary of Computer Associates International, NetSuite, Inc., RightNow Technologies, Inc. and Salesnet, Inc.; and enterprise application service providers including British Telecom, Corio, Inc. and IBM.

In addition, we face competition from businesses that develop their own CRM applications internally, as well as from enterprise software vendors and online service providers who may develop and/or bundle CRM products with their products in the future. We also face competition from some of our larger and more established competitors who historically have been packaged CRM software vendors, but who are developing directly competitive on-demand CRM application services offerings, such as Siebel Systems through Siebel CRM OnDemand and through its recent acquisition of UpShot Corporation. Our professional services organization competes with a broad range of large systems integrators, including Accenture Ltd., BearingPoint, Inc. and IBM, as well as smaller independent consulting firms specializing in CRM implementations. We have relationships with many of these consulting companies and frequently work cooperatively on projects with them, even as we compete for business in other customer engagements. Many of our potential competitors enjoy substantial competitive advantages, such as:     greater name recognition, longer operating histories and larger marketing budgets and resources; established marketing relationships and access to larger customer bases; substantially greater financial, technical and other resources; and major distribution agreements with consultants, system integrators and resellers.

As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Furthermore, because of these advantages, even if our service is more effective than the products that our competitors offer, potential customers might accept competitive products and services in lieu of purchasing our service. For all of these reasons, we may not be able to compete successfully against our current and future competitors. Our future financial performance will depend on the introduction and widespread acceptance of new features to, and enhanced editions of, our service. Our future financial performance will depend on our ability to develop and introduce new features to, and new editions of, our service. The success of new features and editions depends on several factors, including the timely completion, introduction and market acceptance of the feature or edition. Failure in this regard may significantly impair our revenue growth. In addition, the market for our service may be limited if prospective customers, particularly large customers, require customized features or functions that are incompatible with our on-demand application delivery model. If we are unable to develop new features or enhanced editions of our service that achieve widespread levels of market acceptance or if prospective customers require customized features or functions, our business will suffer. Any efforts we may make in the future to expand our service beyond the CRM market may not succeed. To date, we have focused our business on providing on-demand application services for the CRM market, but we may in the future seek to expand into other markets. However, any efforts to expand beyond the CRM market may never result in significant revenue growth for us. In addition, efforts to expand our on-demand application service beyond the CRM market may divert management resources from existing operations and require us to commit significant financial resources to an unproven business, which may harm our business. 10

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We may not be able to develop enhancements to our existing service or acceptable new services or keep pace with technological developments. Our future success depends on our ability to develop enhancements to our existing service and new services that keep pace with rapid technological developments. Although our service is designed to operate on a variety of network hardware and software platforms using a standard browser, we will need to continuously modify and enhance our service to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies. We may not be successful in either developing these modifications and enhancements or in timely bringing them to market. In addition, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technology, could increase our research and development expenses. Any failure of our service to operate effectively with future network platforms and technologies could reduce the demand for our service, result in customer dissatisfaction and harm our business. If we fail to develop our brand cost-effectively, our business may suffer. We believe that developing and maintaining awareness of the salesforce.com brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful services at competitive prices. In the past, our efforts to build our brand have involved significant expense. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer. Any failure to adequately expand our direct sales force will impede our growth. We expect to be substantially dependent on our direct sales force to obtain new customers, particularly large enterprise customers, and to manage our customer base. We believe that there is significant competition for direct sales personnel with the advanced sales skills and technical knowledge we need. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient direct sales personnel. New hires require significant training and may, in some cases, take more than a year before they achieve full productivity. Our recent hires and planned hires may not become as productive as we would like, and we may be unable to hire sufficient numbers of qualified individuals in the future in the markets where we do business. If we are unable to hire and develop sufficient numbers of productive sales personnel, sales of our service will suffer. Sales to customers outside the United States expose us to risks inherent in international sales. Sales in Europe and Asia Pacific represented approximately 14 percent and 17 percent of our total revenue in fiscal 2003 and the nine months ended October 31, 2003, respectively. We intend to expand our international sales efforts. As a result, we will be subject to risks and challenges that we would otherwise not face if we conducted our business only in the United States. These risks and challenges include:      localization of our service, including translation into foreign languages and associated expenses; laws and business practices favoring local competitors; more established competitors with greater resources; compliance with multiple, conflicting and changing governmental laws and regulations, including tax, privacy and data protection laws and regulations; different employee/employer relationships and the existence of workers‘ councils and labor unions; 11

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    

foreign currency fluctuations; different pricing environments; difficulties in staffing and managing foreign operations; longer accounts receivable payment cycles and other collection difficulties; and regional economic and political conditions.

These factors could harm our future international sales. Some of our international subscription fees are currently denominated in U.S. dollars and paid in local currency. As a result, fluctuations in the value of the U.S. dollar and foreign currencies may make the service more expensive for international customers, which could harm our business. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuation. Defects in our service could diminish demand for our service and subject us to substantial liability. Because our service is complex, it may have errors or defects that users identify after they begin using it, which could harm our reputation and our business. Internet-based services frequently contain undetected errors when first introduced or when new versions or enhancements are released. We have from time to time found defects in our service and new errors in our existing service may be detected in the future. Since our customers use our service for important aspects of their business, any errors, defects or other performance problems with our service could hurt our reputation and may damage our customers‘ businesses. If that occurs, customers could elect not to renew, or delay or withhold payment to us, we could lose future sales or customers may make warranty claims against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation. Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand. Intellectual property is critical to our success, and if we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology. We rely upon trademark, copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. We currently have no issued patents and may be unable to obtain patent protection in the future. In addition, if any patents are issued in the future, they may not provide us with any competitive advantages, or may be challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our service is available. The laws of some foreign countries may not be as protecti ve of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. Any such infringement or misappropriation could have a material adverse effect on our business, results of operations and financial condition. We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel. We may be sued by third parties for alleged infringement of their proprietary rights. The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of 12

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intellectual property rights. As the number of entrants into our market increases, the possibility of an intellectual property claim against us grows. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention from executing our business plan. In addition, many of our subscription agreements require us to indemnify our customers for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling in such a claim. An adverse determination could also prevent us from offering our service to others. We rely on third-party hardware and software that may be difficult to replace or which could cause errors or failures of our service. We rely on hardware purchased or leased and software licensed from third parties in order to offer our service, including database software from Oracle Corporation. This hardware and software may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our service until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which could harm our business. If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results. We may acquire or make investments in complementary companies, services and technologies in the future. We have not made any acquisitions or investments to date, and therefore our ability as an organization to make acquisitions or investments is unproven. Acquisitions and investments involve numerous risks, including:        difficulties in integrating operations, technologies, services and personnel; diversion of financial and managerial resources from existing operations; risk of entering new markets; potential write-offs of acquired assets; potential loss of key employees; inability to generate sufficient revenue to offset acquisition or investment costs; and delays in customer purchases due to uncertainty.

In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted which could affect the market price of our stock. As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed. Evolving regulation of the Internet may affect us adversely. As Internet commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes more likely. For example, we believe increased regulation is likely in the area of data privacy, and laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information could affect our customers‘ ability to use and share data, potentially reducing demand for CRM solutions and restricting our ability to store, process and share data with our customers. In addition, taxation of services provided over the Internet or other charges imposed by government agencies or by private organizations for accessing the Internet may also be i mposed. Any regulation imposing greater fees for Internet use or restricting information exchange over the Internet could result in a decline in the use of the Internet and the viability of Internet-based services, which could harm our business. 13

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The success of our business depends on the continued growth and acceptance of the Internet as a business tool. Expansion in the sales of our service depends on the continued acceptance of the Internet as a communications and commerce platform for enterprises. The Internet could lose its viability as a business tool due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility, and quality-of-service. The performance of the Internet and its acceptance as a business tool has been harmed by ―viruses,‖ ―worms,‖ and similar malicious programs and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If for any reason the Internet does not remain a widespread communications medium and commercial platform, the demand for our service would be significantly reduced, which would harm our business. Our growth could strain our personnel and infrastructure resources, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan. We are currently experiencing a period of rapid growth in our headcount and operations, which has placed, and will continue to place, a significant strain on our management, administrative, operational and financial infrastructure. We anticipate that further growth will be required to address increases in our customer base, as well as our expansion into new geographic areas. Our success will depend in part upon the ability of our senior management to manage this growth effectively. To do so, we must continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. The additional headcount and capital investments we are adding will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term. If we fail to successfully manage our growth, we will be unable to execute our business plan. We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner. Our success depends largely upon the continued services of our executive officers and other key personnel, particularly Marc Benioff, our Chief Executive Officer and Chairman of the Board. We are also substantially dependent on the continued service of our existing development personnel because of the complexity of our service and technologies. We do not have employment agreements with any of our executive officers, key management or development personnel that require them to remain our employees and, therefore, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our key employees could seriously harm our business. Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth. To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for engineers with high levels of experience in designing and developing software and Internet-related services and senior sales executives. We may not be successful in attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of 14

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the companies with which we compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in the Internet and high-technology industries, job candidates often consider the value of the stock options they are to receive in connection with their employment. Significant volatility in the price of our stock after this offering may, therefore, adversely affect our ability to attract or retain key employees. Furthermore, proposed changes to accounting principles generally accepted in the United States relating to the expensing of stock options may discourage us from granting the size or type of stock options awards that job candidates require to join our company. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed. Negative economic conditions in the United States and in the other countries and geographic areas in which we offer our service may significantly, rapidly and unexpectedly negatively affect our ability to maintain profitability. In recent periods, the United States and other international markets in which we offer our service have experienced a significant economic downturn. In addition, the United States and other countries have suffered significant acts of hostility and terror. These or similar acts have in the past increased or prolonged, and may in the future increase or prolong, the negative economic conditions. The economic downturn may impact our ability to maintain profitability by:   negatively affecting demand for our service; or decreasing renewal rates of subscriptions.

In addition, economic downturns can force companies to prioritize expenditures, and these companies may decide not to purchase our service in a slowing economy. We have experienced lessened demand for and greater attrition of subscriptions for our service in the past due to economic downturns. We might require additional capital to support business growth, and this capital might not be available. We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new services or enhance our existing service, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock, including shares of common stock sold in this offering. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States. Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the Securities and Exchange Commission, or SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. For example, we currently are not required to record stock-based compensation charges if the employee‘s stock option exercise price is equal to or exceeds the deemed fair value of our common stock at the date of grant. 15

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However, several companies have recently elected to change their accounting policies and begun to record the fair value of stock options as an expense. Although the standards have not been finalized and the timing of a final statement has not been established, FASB has announced its support for recording expense for the fair value of stock options granted. If we were required to change our accounting policy in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure , and retroactively restate prior periods as if we had adopted these standards for all periods presented, then our cost of revenues and operating expenses would have increased by approximately $1.7 million for fiscal 2003 and $2.6 million for the nine months ended October 31, 2003. Compliance with recently enacted and proposed changes in securities laws and regulations are likely to increase our costs. The Sarbanes-Oxley Act of 2002 and rules and regulations promulgated by the SEC, the New York Stock Exchange and the Nasdaq National Market have increased the scope, complexity and cost of our corporate governance, reporting and disclosure practices. We believe these rules and regulations will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers. Risks Related to this Offering The trading price of our common stock is likely to be volatile, and you might not be able to sell your shares at or above the initial public offering price. The trading prices of the securities of technology companies have been highly volatile. Accordingly, the trading price of our common stock is likely to be subject to wide fluctuations. Further, our common stock has no prior trading history. Factors affecting the trading price of our common stock will include:      variations in our operating results; announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors; recruitment or departure of key personnel; changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; and market conditions in our industry, the industries of our customers and the economy as a whole.

In addition, if the market for technology stocks or the stock market in general experiences continued or greater loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. lf securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline. The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. If one or more of the analysts who cover us downgrade our stock, our stock price would likely decline rapidly. If one or more of these analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. 16

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Future sales of shares by existing stockholders could cause our stock price to decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the 180-day contractual lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline below the initial public offering price. Based on shares outstanding as of October 31, 2003, upon completion of this offering, we will have outstanding shares of common stock, assuming no exercise of the underwriters‘ over-allotment option. Of these shares, only shares of common stock sold in this offering will be freely tradable, without restriction, in the public market. Morgan Stanley & Co. Incorporated may, in its sole discretion, permit our officers, directors, employees and current stockholders to sell shares prior to the expiration of the lock-up agreements. After the lock-up agreements pertaining to this offering expire 180 days from the date of this prospectus, an additional 89,063,519 shares will be eligible for sale in the public market, 39,983,955 of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements. In addition, the 1,299,496 shares subject to outstanding warrants and the 23,276,726 shares subject to outstanding options and reserved for future issuance under our 1999 Stock Option Plan, 2004 Equity Incentive Plan, 2004 Outside Directors Stock Plan, and 2004 Employee Stock Purchase Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline. The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters. We anticipate that our executive officers, directors, current 5 percent or greater stockholders and affiliated entities will together beneficially own approximately percent of our common stock outstanding after this offering. As a result, these stockholders, acting together, will have control over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial. Our management will have broad discretion to use the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. They might not apply the net proceeds of this offering in ways that increase the value of your investment. We expect to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures, and for possible investments in, or acquisitions of, complementary services or technologies. We have not allocated these net proceeds for any specific purposes. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will experience immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering. The initial public offering price of our common stock will be substantially higher than the book value per share of the outstanding common stock after this offering. Therefore, based on an assumed offering price of $ per share, if you purchase our common stock in this offering, you will suffer immediate and substantial dilution of approximately $ per share. If the underwriters exercise their over-allotment option, or if outstanding options and warrants to purchase our common stock are exercised, you will experience additional dilution. 17

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Provisions in our amended and restated certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock. Delaware corporate law and our amended and restated certificate of incorporation and bylaws contain provisions that could 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:         establish a classified board of directors so that not all members of our board are elected at one time; provide that directors may only be removed ―for cause‖ and only with the approval of 66 / 3 percent of our stockholders;
2

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 issue to increase the number of outstanding shares and to discourage a takeover attempt; limit 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 stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. 18

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus, including particularly in the sections entitled ―Prospectus Summary,‖ ―Risk Factors,‖ ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations‖ and ―Business,‖ contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as ―may,‖ ―will,‖ ―should,‖ ―expects,‖ ―intends,‖ ―plans,‖ ―anticipates,‖ ―believes,‖ ―estimates,‖ ―predicts,‖ ―potential,‖ ―continue‖ or the negative of these terms or other comparable terminology. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under ―Risk Factors‖ and elsewhere in this prospectus. You should specifically consider the numerous risks discussed under ―Risk Factors.‖ These statements are only predictions based on our current expectations and projections about future events and we cannot guarantee future results, levels of activity, performance or achievements. You should read this prospectus and the documents that we reference in this prospectus and that are filed as exhibits to the registration statement on Form S-1, of which this prospectus is a part, that we have filed with the SEC, completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 19

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USE OF PROCEEDS We estimate that our net proceeds from the sale of the shares in this offering will be approximately $ million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that our net proceeds will be approximately $ million. The principal purposes of this offering are to obtain additional capital, to create a public market for our common stock and to facilitate our future access to the public equity markets. We anticipate that we will use the net proceeds for general corporate purposes, including working capital and capital expenditures, but we have not designated any specific uses. We may also use a portion of the net proceeds to fund possible investments in, or acquisitions of, complementary businesses, services or technologies. We have no current agreements or commitments with respect to any investment or acquisition, and we currently are not engaged in negotiations with respect to any investment or acquisition. In addition, the amount and timing of what we actually spend for these purposes may vary significantly and will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in ―Risk Factors.‖ Accordingly, our management will have broad discretion in applying the net proceeds of this offering. Pending these uses, we intend to invest the net proceeds in high quality, investment grade, short-term fixed income instruments which include corporate, financial institution, federal agency or U.S. government obligations. DIVIDEND POLICY We have never paid any cash dividends on our common stock. Our board of directors currently intends to retain any future earnings to support operations and to finance the growth and development of our business and does not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of the board. 20

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CAPITALIZATION The following table summarizes our cash, cash equivalents and short-term marketable securities, and capitalization as of October 31, 2003:    on an actual basis; on a pro forma basis assuming the conversion of all outstanding shares of our convertible preferred stock into 58,024,345 shares of our common stock upon the closing of this offering; and on a pro forma as adjusted basis to give effect to receipt of the net proceeds from the sale by us in this offering of shares of common stock at an assumed initial public offering price of $ per share, after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

You should read this table in conjunction with ―Selected Consolidated Financial Data,‖ ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and related notes included elsewhere in this prospectus.
As of October 31, 2003 Pro Forma As Adjusted

Actual

Pro Forma (unaudited) (in thousands)

Cash, cash equivalents and short-term marketable securities Convertible preferred stock, $0.001 par value; 63,738,843 shares authorized, 58,024,345 shares issued and outstanding, actual; 5,000,000 shares authorized, none issued and outstanding, pro forma and pro forma, as adjusted Stockholders‘ equity (deficit): Common stock, $0.001 par value; 200,000,000 shares authorized, 31,039,174 shares issued and outstanding, actual; 400,000,000 shares authorized, 89,063,519 issued and outstanding, pro forma; and 400,000,000 shares authorized, shares issued and outstanding, pro forma as adjusted Additional paid-in capital Deferred stock-based compensation Notes receivables from stockholders Accumulated other comprehensive income Accumulated deficit Total stockholders‘ equity (deficit) Total capitalization The number of shares shown as issued and outstanding in the table above excludes:  

$

30,486

$

30,486

$

$

61,137

$

—

$

—

31 34,834 (9,093 ) (1,639 ) 30 (71,011 ) (46,848 ) $ 14,289 $

89 95,913 (9,093 ) (1,639 ) 30 (71,011 ) 14,289 14,289 $

(9,093 ) (1,639 ) 30 (71,011 )

14,876,392 shares of common stock issuable upon the exercise of options outstanding as of October 31, 2003, with exercise prices ranging from $0.02 to $4.00 per share and a weighted average exercise price of $1.63 per share; 4,000,000 shares of common stock to be available for issuance under our 2004 Equity Incentive Plan, 1,000,000 shares of common stock to be available for issuance under our 2004 Outside Directors Stock Plan and 1,000,000 shares of common stock to be available for issuance under our 2004 Employee Stock Purchase Plan, each plan to be effective upon the completion of the offering; 1,299,496 shares of common stock issuable upon the exercise of warrants outstanding as of October 31, 2003, with exercise prices ranging from $1.10 to $3.89 per share and a weighted average exercise price of $2.43 per share; and 2,400,334 shares of common stock reserved for future grants under our 1999 Stock Option Plan as of October 31, 2003.

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DILUTION If you invest in our common stock in this offering, your ownership interest in salesforce.com will be diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per share after this offering. Our net tangible book value as of October 31, 2003 was $14.3 million, or $0.16 per share of our common stock. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of shares of common stock outstanding, after giving effect to the automatic conversion of all shares of our outstanding preferred stock. After giving effect to our sale of the shares in this offering at an assumed initial public offering price of $ per share and deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on October 31, 2003 would have been $ million, or $ per share of our common stock. This amount represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate and substantial dilution in net tangible book value of $ per share to new investors purchasing shares in this offering at the assumed initial public offering price. The following table illustrates this per share dilution: Assumed initial public offering price per share Net tangible book value per share before offering Increase per share attributable to new investors As adjusted net tangible book value per share after offering Dilution per share to new investors To the extent any outstanding options or warrants are exercised, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders. The following table summarizes, as of October 31, 2003, the differences between the number of shares purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by new investors. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders paid. The table below assumes an initial public offering price of $ per share for shares purchased in this offering and excludes estimated underwriting discounts and commissions and estimated offering expenses payable by us:
Average Price Per Share Percent

$ $ 0.16

$

Shares Purchased Number Percent

Total Consideration Amount

Existing stockholders New investors Total

89,063,519

% 100 %

$ $

94,363,000

% 100 %

$

1.06

The number of shares to be outstanding immediately after the offering is based on 89,063,519 shares of common stock outstanding as of October 31, 2003, which assumes the conversion of all of our outstanding shares of convertible preferred stock into 58,024,345 shares of common stock, and excludes:   14,876,392 shares of common stock issuable upon the exercise of options outstanding as of October 31, 2003, with exercise prices ranging from $0.02 to $4.00 per share and a weighted average exercise price of $1.63 per share; 4,000,000 shares of common stock to be available for issuance under our 2004 Equity Incentive Plan, 1,000,000 shares of common stock to be available for issuance under our 2004 Outside Directors Stock Plan and 1,000,000 shares of common stock to be available for issuance under our 2004 Employee Stock Purchase Plan, each plan to be effective upon the completion of the offering; 1,299,496 shares of common stock issuable upon the exercise of warrants outstanding as of October 31, 2003, with exercise prices ranging from $1.10 to $3.89 per share and a weighted average exercise price of $2.43 per share; and





2,400,334 shares of common stock reserved for future grants under our 1999 Stock Option Plan as of October 31, 2003. 22

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SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with ―Management‘s Discussion and Analysis of Financial Condition and Results of Operations‖ following this section and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended January 31, 2001, 2002 and 2003, and the selected consolidated balance sheet data as of January 31, 2002 and 2003, are derived from our audited consolidated financial statements included in this prospectus. The consolidated statement of operations data for the period from inception (February 3, 1999) to January 31, 2000 and the selected consolidated balance sheet data as of January 31, 2000 and 2001 are derived from audited consolidated financial statements not included in this prospectus. The consolidated statement of operations data for the nine months ended October 31, 2002 and 2003 and the consolidated balance sheet data as of October 31, 2003 are derived from our unaudited consolidated financial statements included in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. The historical results are not necessarily indicative of results to be expected in any future period and the results for the nine months ended October 31, 2003 should not be considered indicative of results expected for the full fiscal year.
Period from inception (February 3, 1999) to January 31, 2000 2001

Fiscal Year Ended January 31, 2002 2003 2002

Nine Months Ended October 31, 2003 (unaudited)

(in thousands, except per share data)

Consolidated Statement of Operations: Revenues: Subscription and support Professional services and other Total revenues Cost of revenues(1): Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses(1): Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture Net (loss) income

$

— — — — — — — 1,089 2,499 1,976 — 5,564 (5,564 ) 121 (3 ) (6 ) (5,452 ) — (5,452 ) —

$

5,022 413 5,435 1,730 1,692 3,422 2,013 3,366 25,392 6,855 — 35,613 (33,600 ) 1,715 (42 ) 63 (31,864 ) — (31,864 ) 193

$

21,513 896 22,409 3,718 2,329 6,047 16,362 5,308 25,234 8,317 7,657 46,516 (30,154 ) 755 (272 ) 8 (29,663 ) — (29,663 ) 425

$

47,656 3,335 50,991 7,199 3,164 10,363 40,628 4,648 33,145 12,958 — 50,751 (10,123 ) 572 (178 ) 98 (9,631 ) — (9,631 ) 292

$ 33,022 2,403 35,425 5,320 1,786 7,106 28,319 3,353 23,069 9,432 — 35,854 (7,535 ) 459 (140 ) (130 ) (7,346 ) — (7,346 ) 175 $ (7,171 )

$ 58,994 6,976 65,970 5,559 6,292 11,851 54,119 4,805 37,288 11,637 (4,342 ) 49,388 4,731 360 (122 ) 207 5,176 385 4,791 (102 ) $ 4,689

$

(5,452 )

$

(31,671 ) 23

$

(29,238 )

$

(9,339 )

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Period from inception (February 3, 1999) to January 31, 2000 2001

Fiscal Year Ended January 31, 2002 2003 2002

Nine Months Ended October 31, 2003 (unaudited)

(in thousands, except per share data)

Net (loss) income per share: Basic Diluted Pro forma (unaudited) Weighted-average shares used in computing per share amounts: Basic(2) Diluted(2) Pro forma (unaudited)(2)

$

(0.55 ) (0.55 )

$

(2.38 ) (2.38 )

$

(1.39 ) (1.39 )

$

(0.35 ) (0.35 ) (0.11 )

$

(0.28 ) (0.28 )

$

0.16 0.05 0.05

10,000 10,000

13,314 13,314

21,039 21,039

26,375 26,375 84,399

25,901 25,901

29,267 98,975 98,975

The pro forma per share amounts in the consolidated statement of operations data table above give effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 58,024,345 shares of our common stock upon the closing of this offering.
As of October 31, 2003 2002 2003 (unaudited) (in thousands)

As of January 31, 2000 2001

Consolidated Balance Sheet Data: Cash, cash equivalents and short-term marketable securities Working capital Total assets Convertible preferred stock Accumulated deficit Total stockholders‘ deficit (1)

$ 12,609 12,053 14,196 17,156 (5,452 ) (3,878 )

$

22,200 20,163 37,047 59,852 (37,123 ) (29,329 )

$

11,709 5,867 29,084 61,137 (66,361 ) (51,977 )

$

16,009 1,310 39,421 61,137 (75,700 ) (56,127 )

$

30,486 6,690 67,872 61,137 (71,011 ) (46,848 )

Cost of revenues and operating expenses include stock-based expenses, consisting of:
Period from inception (February 3, 1999) to January 31, 2000 2001

Fiscal Year Ended January 31, 2002 2003

Nine Months Ended October 31, 2002 (unaudited) 2003

(in thousands)

Cost of revenues Research and development Marketing and sales General and administrative Total stock-based expenses (2)

$

— 214 386 267 867

$

345 431 1,350 1,326

$

369 436 1,422 2,224

$

428 402 1,696 2,241

$

274 287 1,512 1,294

$

489 353 1,564 757

$

$ 3,452

$ 4,451

$ 4,767

$ 3,367

$ 3,163

For information regarding the computation of per share amounts, refer to notes 1 and 10 of the notes to our consolidated financial statements. 24

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.” Overview We are the leading provider of application services that allow organizations to easily share customer information on demand. We provide a comprehensive CRM service to businesses of all sizes and industries worldwide. We were founded in February 1999 and began offering our on-demand CRM application service in February 2000. Our revenues have grown from $5.4 million in fiscal 2001 to $51.0 million in fiscal 2003. As of October 31, 2003, our customer base had grown to approximately 8,000 subscribing customers, with an aggregate of over 110,000 paying subscribers in approximately 70 countries. Fiscal Year Our fiscal year ends on January 31. References to fiscal 2003, for example, refer to the fiscal year ended January 31, 2003. Sources of Revenues We derive our revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing our on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services and other revenues, consisting primarily of training fees. Subscription and support revenues accounted for more than 90 percent of our total revenues in fiscal 2001, 2002 and 2003, and 89 percent of our total revenues during the nine months ended October 31, 2003. Subscription revenues are driven primarily by the number of paying subscribers of our service and the subscription price of our service. None of our customers accounted for more than 5 percent of our revenues in any fiscal year. Subscription and support revenues are recognized on a monthly basis over the life of the contract. The typical subscription and support term is 12 to 24 months, although terms range from one to 48 months. Our subscription and support contracts are non-cancelable, though customers typically have the right to terminate their contracts for cause if we fail to perform. We generally invoice our customers in annual or quarterly installments. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue, or in revenue depending on whether the revenue recognition criteria have been met. In general, we collect our billings in advance of the subscription service period. We market our on-demand application service primarily through direct sales efforts and also indirectly through partners. We offer our customers three principal editions of our on-demand application service:   Enterprise Edition, which is our most fully-featured offering and which is targeted at large companies that have several different divisions or departments; Professional Edition, which is targeted at medium-sized and large businesses that need a robust CRM solution but do not need some of the more advanced features and integration capabilities of Enterprise Edition; and 25

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

Team Edition, which is targeted primarily at small businesses that seek a robust sales force automation solution without the more sophisticated features of our other editions.

Professional services and other revenues consist of fees associated with consulting and implementation services and training. Our consulting and implementation engagements are typically billed on a time and materials basis. We also offer a number of classes on implementing, using and administering our service that are billed on a per person, per class basis. Cost of Revenues and Operating Expenses Cost of Revenues . Cost of subscription and support revenues primarily consists of expenses related to hosting our service and providing support, depreciation expense associated with computer equipment, costs associated with website development activities, allocated overhead and amortization expense associated with capitalized software. To date, the expense associated with capitalized software has not been material to our cost of revenues. We allocate overhead such as rent and occupancy charges, employee benefit costs and depreciation expense to all departments based on headcount. As such, general overhead expenses are reflected in each cost of revenue and operating expense category. Cost of professional services and other revenues consists primarily of employee-related costs associated with these services and allocated overhead. The cost associated with providing professional services is significantly higher as a percentage of revenue than for our on-demand subscription service due to the labor costs associated with providing consulting services. To the extent that our customer base grows, we intend to continue to invest additional resources in our on-demand application service and in our consulting services. The timing of these additional expenses could affect our cost of revenues, both in terms of absolute dollars and as a percentage of revenues, in a particular quarterly period. For example, we plan to add a geographically remote back-up data center that will become operational during fiscal 2005, and we plan to increase the number of employees who are fully dedicated to consulting services. Research and Development . Research and development expenses consist primarily of salaries and related expenses, the cost of third-party service providers, principally for usability and translation activities, and allocated overhead. We have focused our research and development efforts on increasing the functionality and enhancing the ease of use of our on-demand application service. Because of our proprietary, scalable and secure multi-tenant architecture, we are able to provide all of our customers with a service based on a single version of our application. As a result, we do not have to maintain multiple versions, which enables us to have relatively low research and development expenses as compared to traditional enterprise software business models. We expect that in the future, research and development expenses will increase in absolute dollars. Marketing and Sales . Marketing and sales expenses consist primarily of salaries and related expenses for our sales and marketing staff, including commissions, payments to partners, marketing events, corporate communications, advertising, other brand building and product marketing expenses and allocated overhead. We plan to continue to invest in marketing and sales and increase the number of direct sales personnel in order to add new customers and increase penetration within our existing customer base, build brand awareness and sponsor additional marketing events. We expect that in the future, marketing and sales expenses will increase in absolute dollars. General and Administrative . General and administrative expenses consist of salaries and related expenses for executive, finance and accounting, and management information systems personnel, professional fees, other corporate expenses and allocated overhead. We expect that in the future, general and administrative expenses will increase in absolute dollars as we add personnel and incur additional professional fees and insurance costs related to the growth of our business and to our operations as a public company. Lease Abandonment and Recovery. In December 2001, we abandoned excess office space in San Francisco, California and recorded a $7.7 million charge in the fourth quarter of fiscal 2002 pertaining to the 26

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estimated future obligations under the non-cancelable lease. In August 2003, we entered into an agreement releasing us from future obligations for some of the abandoned space in connection with the landlord‘s lease of this space to another tenant. Accordingly, we recorded a $4.3 million credit in the third quarter of fiscal 2004 to reflect the reversal of the remaining accrued liability that was directly associated with this space. Stock-Based Expenses . Our cost of revenues and operating expenses include stock-based expenses related to options and warrants issued to non-employees and option grants to employees in situations where the exercise price was less than the deemed fair value of our common stock at the date of grant. These charges have been significant and are reflected in the historical financial results. Joint Venture We currently own a 64 percent interest in a Japanese joint venture, Kabushiki Kaisha salesforce.com. Because of this majority interest, we consolidate the venture‘s financial results, which are reflected in each revenue, cost of revenues and expense category in our consolidated statement of operations. We then record minority interest, which reflects the minority investors‘ interest in the venture‘s results. Critical Accounting Policies Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, which are described in note 1 of the notes to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition . We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, ―Revenue Recognition in Financial Statements.‖ On August 1, 2003, we adopted Emerging Issues Task Force, or EITF, Issue No. 00-21, ―Revenue Arrangements with Multiple Deliverables.‖ We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the collection of our fees is probable; and (4) the amount of fees to be paid by the customer is fixed or determinable. We recognize revenues from subscription contracts each month over the lives of the contracts. Support revenues from customers who purchase our premium support offerings are recognized ratably over the term of the support contract. Consulting services and training revenues are accounted for separately from subscription and support revenues because these services have value to the customer on a standalone basis and there is objective and reliable evidence of their fair value of the undelivered elements. Our arrangements do not contain general rights of return. Consulting revenues are recognized upon completion of the contracts that are of short duration (generally less than 60 days) and as the services are rendered for contracts of longer duration. Training revenues are recognized after the services are performed. Accounting for Commission Payments . At the start of fiscal 2003, we began to recognize up-front commission payments to our direct sales force as expense over the same period that the related subscription service revenues are recognized. This was done in order to better match commission expense with the subscription revenues. Previously, we had recognized this expense when the commissions were paid. During fiscal 2003, we capitalized $5.3 million of expenditures as a prepayment and amortized $2.1 million to marketing 27

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and sales expense. During the first nine months of fiscal 2004, we capitalized $8.6 million of expenditures as a prepayment and amortized $5.3 million to expense. As of October 31, 2003, prepaid commissions on our consolidated balance sheet totaled $6.5 million, and we expect this amount to fluctuate consistently with fluctuations in our deferred revenue. Accounting for Stock-Based Awards. We record deferred stock-based compensation charges in the amount by which the exercise price of an option is less than the deemed fair value of our common stock at the date of grant. Because there has been no public market for our stock, our board of directors has determined the fair value of our common stock based upon several factors, including, but not limited to, our operating and financial performance, private sales of our common and preferred stock between third parties, issuances of convertible preferred stock and appraisals performed by an appraisal firm. We amortize the deferred compensation charges ratably over the four-year vesting period of the underlying option awards. As of October 31, 2003, we had an aggregate of $9.1 million of deferred stock-based compensation remaining to be amortized. We currently expect this deferred stock-based compensation balance to be amortized as follows: $900,000 during the remainder of fiscal 2004; $3.2 million during fiscal 2005; $2.9 million during fiscal 2006; $1.9 million during fiscal 2007; and $200,000 during fiscal 2008. We have elected not to record stock-based compensation expense when employee stock options are awarded at exercise prices equal to the deemed fair value of our common stock at the date of grant. The impact of expensing employee stock awards using the Black-Scholes option-pricing model is further described in note 1 of the notes to our consolidated financial statements. In the past, we have awarded a limited number of stock options and warrants to non-employees. For these options and warrants, we recognize the stock-based compensation expense over the vesting periods of the underlying awards, based on an estimate of their fair value on the vesting dates using the Black-Scholes option-pricing model. As of October 31, 2003, we had recognized compensation expense on all options and warrants issued to non-employees except for options for 105,000 shares of our common stock, substantially all of which will fully vest by July 2007 and have a weighted average exercise price of $2.50 per share. 28

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Results of Operations The following tables set forth selected consolidated statements of operations data for each of the periods indicated.
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) (in thousands) 2003

Revenues: Subscription and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture Net (loss) income

$

5,022 413 5,435 1,730 1,692 3,422 2,013 3,366 25,392 6,855 — 35,613 (33,600 ) 1,715 (42 ) 63 (31,864 ) — (31,864 ) 193

$

21,513 896 22,409 3,718 2,329 6,047 16,362 5,308 25,234 8,317 7,657 46,516 (30,154 ) 755 (272 ) 8 (29,663 ) — (29,663 ) 425

$

47,656 3,335 50,991 7,199 3,164 10,363 40,628 4,648 33,145 12,958 — 50,751 (10,123 ) 572 (178 ) 98 (9,631 ) — (9,631 ) 292

$ 33,022 2,403 35,425 5,320 1,786 7,106 28,319 3,353 23,069 9,432 — 35,854 (7,535 ) 459 (140 ) (130 ) (7,346 ) — (7,346 ) 175 $ (7,171 )

$ 58,994 6,976 65,970 5,559 6,292 11,851 54,119 4,805 37,288 11,637 (4,342 ) 49,388 4,731 360 (122 ) 207 5,176 385 4,791 (102 ) $ 4,689

$

(31,671 )

$

(29,238 )
As of January 31,

$

(9,339 )

As of October 31, 2003 2002 2003

2001

2002

(unaudited) (in thousands, except customer and subscriber data)

Balance sheet data: Cash, cash equivalents and short-term marketable securities Deferred revenue Customer and subscriber data (unaudited): Number of subscribing customers Number of paying subscribers

$ 22,200 1,780 1,563 30,451 29

$ 11,709 7,128 3,534 53,056

$ 16,009 19,171 5,740 76,724

$

9,964 14,247 5,180 69,245

$

30,486 34,408 7,931 111,866

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Nine Months Ended October 31, 2003 2002 (unaudited) (in thousands) 2003

Fiscal Year Ended January 31, 2001 2002

Cash flow provided by (used in) operating activities

$

(26,686 )

$ (13,166 )

$

5,213

$

(374 )

$ 15,715

Fiscal Year Ended January 31, 2001 2002 2003

Nine Months Ended October 31, 2002 (unaudited) 2003

(in thousands)

Revenues by geography: Americas Europe Asia Pacific

$

5,310 123 2 5,435

$

20,305 1,680 424 22,409

$ 43,855 5,345 1,791 $ 50,991

$ 30,463 3,658 1,304 $ 35,425

$ 54,601 7,897 3,472 $ 65,970

$

$

Cost of revenues and operating expenses include the following amounts related to stock-based awards:
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) (in thousands) 2003

Stock-based expenses: Cost of revenues Research and development Marketing and sales General and administrative Total stock-based expenses 30

$

345 431 1,350 1,326

$

369 436 1,422 2,224

$

428 402 1,696 2,241

$

274 287 1,512 1,294

$

489 353 1,564 757

$ 3,452

$ 4,451

$ 4,767

$ 3,367

$ 3,163

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The following tables set forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenues.
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Revenues: Subscription and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture Net (loss) income

92 % 8 100 32 31 63 37 62 467 126 — 655 (618 ) 32 (1 ) 1 (586 ) — (586 ) 3 (583 )%

96 % 4 100 17 10 27 73 24 113 37 34 208 (135 ) 3 (1 ) — (133 ) — (133 ) 2 (131 )%

93 % 7 100 14 6 20 80 9 65 26 — 100 (20 ) 1 — — (19 ) — (19 ) 1 ) (18 %

93 % 7 100 15 5 20 80 9 65 27 — 101 (21 ) 1 (1 ) — (21 ) — (21 ) 1 (20 )%
Nine Months Ended October 31,

89 % 11 100 8 10 18 82 7 57 18 (7 ) 75 7 1 — — 8 (1 ) 7 — 7%

Fiscal Year Ended January 31, 2001 2002 2003

2002 (unaudited)

2003

Revenues by geography: Americas Europe Asia Pacific

98 % 2 — 100 %

91 % 7 2 100 %

86 % 10 4 100 %

86 % 10 4 100 %
Nine Months Ended October 31,

83 % 12 5 100 %

Fiscal Year Ended January 31, 2001 2002 2003

2002

2003

(unaudited)

Stock-based expenses: Cost of revenues Research and development Marketing and sales General and administrative Total stock-based expenses

7% 8 25 25 65 % 31

2% 2 6 10 20 %

1% 1 3 4 9%

1% 1 4 4 10 %

1% 1 2 1 5%

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Overview of Results of Operations for the Nine Months Ended October 31, 2003 Revenues during the nine months ended October 31, 2003 were $66.0 million, an increase of 86 percent over the comparable period a year ago. Gross profit during this period was $54.1 million, or 82 percent of revenues, and operating income was $4.7 million. Operating income included non-cash income of $4.3 million related to the release of future obligations associated with office space that we had abandoned in fiscal 2002. Operating income also included non-cash stock-based expense of $3.2 million. During the comparable period a year ago, we generated gross profit of $28.3 million, or 80 percent of revenues, and incurred an operating loss of $7.5 million. The operating loss included $3.4 million of non-cash stock-based expense. The increase in revenues was primarily due to increases in the number of subscription customers, international expansion and expansion of our consulting services and training offerings. During the nine months ended October 31, 2003, we continued to invest in our operations and increase revenues. We added sales personnel to focus on adding new customers and increasing penetration within our existing customer base, professional services personnel to support our consulting services and developers to broaden and enhance our on-demand service. With the increase in personnel and international expansion efforts, we also added office space under various operating leases. In addition, we incurred costs associated with corporate governance and regulatory compliance, such as required by the Sarbanes-Oxley Act of 2002. We intend to continue to invest heavily in marketing and sales in order to pursue new customers and expand relationships with existing customers. We also plan to expand our infrastructure, including the addition of a geographically remote back-up data center in fiscal 2005, and to continue to invest in research and development activities to upgrade and extend our service offerings. During the nine months ended October 31, 2003, we generated $15.7 million of cash from operating activities, as compared to $400,000 of cash used in operating activities during the comparable period a year ago. At October 31, 2003, we had cash, cash equivalents and short-term marketable securities of $30.5 million, accounts receivable of $16.6 million and deferred revenue of $34.4 million. Nine Months Ended October 31, 2003 and 2002 Revenues. Total revenues were $66.0 million for the nine months ended October 31, 2003, compared to $35.4 million during the same period a year ago, an increase of $30.6 million, or 86 percent. The increase in revenues was due to the growth in the number of our subscription customers, international expansion and expansion of our consulting services and training offerings. Revenues in Europe and Asia Pacific accounted for $11.4 million, or 17 percent of total revenues, during the nine months ended October 31, 2003, compared to $5.0 million, or 14 percent of total revenues, during the same period a year ago, an increase of $6.4 million, or 128 percent. Cost of Revenues . Cost of revenues was $11.9 million, or 18 percent of total revenues, during the nine months ended October 31, 2003, compared to $7.1 million, or 20 percent of total revenues, during the same period a year ago, an increase of $4.8 million. The increase was primarily due to an increase of $3.7 million in employee-related costs resulting from increased professional services and other revenues and an increase of $500,000 in service delivery costs. The increase in our gross margin was the result of our ability to leverage our existing infrastructure to serve new customers and paying subscribers. Research and Development . Research and development expenses were $4.8 million, or 7 percent of total revenues, during the nine months ended October 31, 2003, compared to $3.4 million, or 9 percent of total revenues, during the same period a year ago, an increase of $1.4 million. The increase was primarily due to an increase of $1.2 million in employee-related costs. Marketing and Sales . Marketing and sales expenses were $37.3 million, or 57 percent of total revenues, during the nine months ended October 31, 2003, compared to $23.1 million, or 65 percent of total revenues, 32

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during the same period a year ago, an increase of $14.2 million. The increase was primarily due to an increase of $12.7 million in employee-related costs as we hired additional sales personnel to focus on adding new customers and increasing penetration within our existing customer base. General and Administrative . General and administrative expenses were $11.6 million, or 18 percent of total revenues, during the nine months ended October 31, 2003, compared to $9.4 million, or 27 percent of total revenues, during the same period a year ago, an increase of $2.2 million. The increase was primarily due to an increase of $1.5 million in employee-related costs and an increase of $600,000 in professional and outside service costs. Lease Recovery. In December 2001, we abandoned excess office space in San Francisco, California and recorded a $7.7 million charge in the fourth quarter of fiscal 2002 pertaining to the estimated future net obligations under the non-cancelable lease. Since the space was not leased to a subtenant, there were no immediate cash savings from the abandonment. In August 2003, we entered into an agreement, releasing us from future obligations for some of the space abandoned, in connection with the landlord‘s lease of this space to another tenant. Accordingly, we recorded a $4.3 million credit to reflect the reversal of the remaining accrued liability that was directly associated with this space. Interest Income . Interest income consists of investment income on cash and marketable securities balances and interest income on outstanding loans made to individuals who early exercised their stock options. Interest income was $400,000 during the nine months ended October 31, 2003 compared to $500,000 during the same period a year ago, a decrease of $100,000. The decrease was primarily due to declining interest rates and the mix of marketable securities investments, substantially offset by higher cash and marketable securities balances. Interest Expense . Interest expense consists of interest on our capital lease obligations. Interest expense was $100,000 during each of the nine months ended October 31, 2003 and 2002. Other Income (Expense). Other income was $200,000 during the nine months ended October 31, 2003, compared to other expense of $100,000 during the same period a year ago. The increase of $300,000 was due to realized gains on foreign currency transactions. Provision for Income Taxes . The provision for income taxes of $400,000 during the nine months ended October 31, 2003 represented federal alternative minimum taxes of $100,000 and various state income taxes of $300,000. During the nine months ended October 31, 2003, we recorded a deferred income tax asset of $2.2 million based on our ability to obtain a refund of the projected current U.S. federal income tax liability for the period, and we recorded a valuation allowance for the remaining deferred tax assets. This net deferred tax asset is not otherwise dependent upon projections of future U.S. federal taxable income for realization. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. If we were to determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would increase our income or reduce our loss and increase stockholders‘ equity in the quarter when such determination is made. Likewise, if we were to determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the quarter when such determination is made. Minority Interest in Consolidated Joint Venture . The minority interest expense was $100,000 during the nine months ended October 31, 2003 compared to minority interest income of $200,000 during the same period a year ago. 33

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Fiscal Years Ended January 31, 2003 and 2002 Revenues. Total revenues were $51.0 million in fiscal 2003 compared to $22.4 million in fiscal 2002, an increase of $28.6 million, or 128 percent. The increase was primarily the result of an increase in subscription customers. During fiscal 2003, we began offering consulting services. The growth in the number of customers increased demand for our consulting, support and training services. Professional services and other revenues were $3.3 million, or 7 percent of total revenues in fiscal 2003, compared to $900,000, or 4 percent of total revenues, in fiscal 2002. Revenues in Europe and Asia Pacific accounted for $7.1 million, or 14 percent of total revenues, in fiscal 2003, compared to $2.1 million, or 9 percent of total revenues, in fiscal 2002, an increase of $5.0 million, or 238 percent. Cost of Revenues . Cost of revenues was $10.4 million, or 20 percent of total revenues, in fiscal 2003, compared to $6.0 million, or 27 percent of total revenues, in fiscal 2002, an increase of $4.4 million. The increase was primarily due to increases of $2.2 million in employee-related costs resulting from increased services and support revenues, $1.2 million in service delivery costs, $400,000 in allocated overhead and $300,000 in depreciation and amortization expense. Research and Development . Research and development expenses were $4.6 million, or 9 percent of total revenues, in fiscal 2003, compared to $5.3 million, or 24 percent of total revenues, in fiscal 2002, a decrease of $700,000. The decrease was primarily due to reductions of $200,000 in employee-related costs and $200,000 in allocated overhead because of a lower proportion of research and development headcount to our total headcount and an increase of $200,000 in the capitalization of development costs. Marketing and Sales. Marketing and sales expenses were $33.1 million, or 65 percent of total revenues, in fiscal 2003, compared to $25.2 million, or 113 percent of total revenues, in fiscal 2002, an increase of $7.9 million. The increase was primarily due to an increase of $9.3 million in employee-related costs and commission expense and an increase of $200,000 in allocated overhead, offset in part by lower marketing and promotional spending. At the start of fiscal 2003, we began to recognize upfront commission payments to our direct sales force as expense over the same period that the subscription service revenues are recognized. During fiscal 2003, we capitalized $5.3 million of expenditures as a prepayment and amortized $2.1 million to marketing and sales expense. General and Administrative. General and administrative expenses were $13.0 million, or 26 percent of total revenues, in fiscal 2003, compared to $8.3 million, or 37 percent of total revenues, in fiscal 2002, an increase of $4.7 million. The increase was due primarily to an increase of $1.9 million in employee-related costs, $1.2 million in increased professional and outside service costs and $400,000 in depreciation expense. Interest Income . Interest income was $600,000 in fiscal 2003 compared to $800,000 in fiscal 2002, a decrease of $200,000. The decrease was primarily due to declining interest rates, partially offset by higher cash and marketable securities balances. Interest Expense . fiscal 2002. Interest expense associated with our capital lease obligations was $200,000 in fiscal 2003 compared to $300,000 in Other income was $100,000 in fiscal 2003 and consisted primarily of realized gains on foreign currency

Other Income (Expense). transactions.

Minority Interest in Consolidated Joint Venture . The minority interest income was $300,000 in fiscal 2003 compared to $400,000 in fiscal 2002. 34

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Fiscal Years Ended January 31, 2002 and 2001 Revenues. Total revenues were $22.4 million in fiscal 2002 compared to $5.4 million in fiscal 2001, an increase of $17.0 million, or 315 percent. The increase was primarily due to an increase in subscription customers. Revenues in Europe and Asia Pacific accounted for $2.1 million, or 9 percent of total revenues, in fiscal 2002, compared to $100,000, or 2 percent of total revenues, in fiscal 2001, an increase of $2.0 million. Cost of Revenues . Cost of revenues was $6.0 million, or 27 percent of total revenues, in fiscal 2002, compared to $3.4 million, or 63 percent of total revenues, in fiscal 2001, an increase of $2.6 million. The increase was due to increases of $500,000 in employee-related costs, $1.0 million in service delivery costs, $700,000 in depreciation and amortization expense and $400,000 in allocated overhead. Research and Development . Research and development expenses were $5.3 million, or 24 percent of total revenues, in fiscal 2002, compared to $3.4 million, or 62 percent of total revenues, in fiscal 2001, an increase of $1.9 million. The increase was primarily due to increases of $1.5 million in employee-related costs and $300,000 in allocated overhead. Marketing and Sales. Marketing and sales expenses were $25.2 million, or 113 percent of total revenues, in fiscal 2002, compared to $25.4 million, or 467 percent of total revenues, in fiscal 2001, a decrease of $200,000. The decrease was primarily due to lower marketing and promotional spending, offset in part by increases of $3.8 million in employee-related costs and $1.5 million in allocated overhead. General and Administrative. General and administrative expenses were $8.3 million, or 37 percent of total revenues, in fiscal 2002, compared to $6.9 million, or 126 percent of total revenues, in fiscal 2001, an increase of $1.4 million. The increase was primarily due to increases of $3.1 million in employee-related costs, including $900,000 related to increased stock-based compensation expense and $800,000 in depreciation expense, offset in part by higher allocations of general expenses of $2.4 million. Interest Income . Interest income was $800,000 in fiscal 2002, compared to $1.7 million in fiscal 2001, a decrease of $900,000. The decrease was primarily due to higher cash and marketable securities balances in fiscal 2001 resulting from the proceeds of convertible preferred stock issuances. Interest Expense . Interest expense was $300,000 in fiscal 2002, compared to $100,000 in fiscal 2001, an increase of $200,000. The increase was due to expanded capital lease financing of computer and other equipment. Other Income (Expense). Other income (expense) was approximately the same in both fiscal 2002 and 2001.

Minority Interest in Consolidated Joint Venture . The minority interest income was $400,000 in fiscal 2002, compared to $200,000 in fiscal 2001. 35

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Quarterly Results of Operations The following tables set forth selected unaudited quarterly consolidated statement of operations data for the seven most recent quarters, as well as the percentage of total revenues for each line item shown. The information for each of these quarters has been prepared on the same basis as the audited consolidated financial statements included in this prospectus and, in the opinion of management, includes all adjustments necessary for the fair presentation of the results of operations for such periods. This data should be read in conjunction with the audited consolidated financial statements and the related notes included in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for any future period.
Quarter Ended Apr. 30, 2002 Jul. 31, 2002 Oct. 31, 2002 Jan. 31, 2003 (unaudited) (in thousands) Apr. 30, 2003 Jul. 31, 2003 Oct. 31, 2003

Revenues: Subscription and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture

$

8,810 541 9,351

$

11,275 608 11,883

$

12,937 1,254 14,191

$

14,634 932 15,566

$

16,922 1,991 18,913

$

19,592 2,031 21,623

$

22,480 2,954 25,434

1,451 292 1,743 7,608

1,517 635 2,152 9,731

2,352 859 3,211 10,980

1,879 1,378 3,257 12,309

1,597 1,758 3,355 15,558

1,819 2,009 3,828 17,795

2,143 2,525 4,668 20,766

1,075 5,816 2,192 — 9,083 (1,475 ) 137 (48 ) (60 )

1,173 7,287 2,531 — 10,991 (1,260 ) 167 (51 ) 67

1,105 9,966 4,709 — 15,780 (4,800 ) 155 (42 ) (136 )

1,295 10,076 3,526 — 14,897 (2,588 ) 113 (37 ) 227

1,240 10,585 3,601 — 15,426 132 107 (38 ) 315

1,685 12,147 3,761 — 17,593 202 123 (38 ) (70 )

1,880 14,556 4,275 (4,342 ) 16,369 4,397 130 (46 ) (38 )

(1,446 ) — (1,446 )

(1,077 ) — (1,077 )

(4,823 ) — (4,823 )

(2,285 ) — (2,285 )

516 — 516

217 7 210

4,443 378 4,065

43

77

55

117

16

(5 )

(113 )

Net (loss) income

$

(1,403 ) $

(1,000 ) $

(4,768 ) $ 36

(2,168 ) $

532

$

205

$

3,952

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As a percentage of total revenues:
Quarter Ended Apr. 30, 2002 Jul. 31, 2002 Oct. 31, 2002 Jan. 31, 2003 (unaudited) Apr. 30, 2003 Jul. 31, 2003 Oct. 31, 2003

Revenues: Subscription and support Professional services and other Total revenues Cost of revenues: Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture Net (loss) income

94 % 6 100

95 % 5 100

91 % 9 100

94 % 6 100

89 % 11 100

91 % 9 100

88 % 12 100

16 3 19 81

12 6 18 82

17 6 23 77

12 9 21 79

8 10 18 82

8 10 18 82

8 10 18 82

11 62 24 — 97 (16 ) 1 — —

10 61 21 — 92 (10 ) 1 — —

8 70 33 — 111 (34 ) 1 — (1 )

8 65 23 — 96 (17 ) 1 — 1

7 56 18 — 81 1 1 — 1

8 56 17 — 81 1 — — —

8 57 17

(17 ) 65 17 — — —

(15 ) — (15 ) — ) (15 %

(9 ) — (9 )

(34 ) — (34 ) — ) (34 %

(15 ) — (15 )

3 — 3 — 3%

1 — 1 — 1%

17

(1 ) 16 —

1 ) (8 %

1 ) (14 %

16 %

Revenues increased sequentially in each of the quarters presented, due to increases in the number of subscription customers, international expansion and the expansion of our consulting services and training offerings. The 106 percent increase in professional services and other revenues for the quarter ended October 31, 2002 over the preceding quarter reflected the formal introduction of our consulting services operation over the second and third quarters of fiscal 2003 and continued growth in the size of our customer base.

Gross profit in absolute dollars also generally increased sequentially for the quarters presented due primarily to revenue growth. As a percentage of revenues, gross margins have been 82 percent during the three most recent quarters presented. The $800,000 increase in cost of subscription and support revenues for the quarter ended October 31, 2002 over the preceding quarter was primarily due to investments made to improve the delivery of our on-demand service. The $300,000 decrease in cost of subscription and support revenues for the quarter ended April 30, 2003 over the preceding quarter was primarily the result of our ability to leverage our infrastructure to serve new customers and paying subscribers. Operating expenses in total have fluctuated between quarters due to the timing of employee-related spending, new on-demand application service offerings and marketing events. For example, marketing and sales 37

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expenses for the quarter ended October 31, 2002 increased by $2.7 million over the preceding quarter, primarily due to the hiring of additional sales personnel. General and administrative expenses for the quarter ended October 31, 2002 increased by $2.2 million over the preceding quarter primarily due to stock compensation expenses associated with warrants that we issued and the costs associated with hiring additional staff. Additionally, operating income for the quarter ended October 31, 2003 included non-cash income of $4.3 million related to the release of future obligations associated with office space that we abandoned in fiscal 2002. Our quarterly operating results are likely to fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenues and operating results to fluctuate from quarter to quarter include:               our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers‘ requirements; the renewal rates for our service; changes in our pricing policies; the introduction of new features to our service; the rate of expansion and effectiveness of our sales force; the length of the sales cycle for our service; new product and service introductions by our competitors; seasonality in our markets; our success in selling our service to large enterprises; variations in the mix of editions of our service; technical difficulties or interruptions in our service; general economic conditions in our geographic markets; additional investment in our service or operations; and regulatory compliance costs.

The occurrence of one or more of these factors might cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenues and operating results may not be meaningful and should not be relied upon as an indication of future performance. Liquidity and Capital Resources At October 31, 2003, our principal sources of liquidity were cash, cash equivalents and short-term marketable securities totaling $30.5 million and accounts receivable of $16.6 million. At January 31, 2003, our cash, cash equivalents and short-term marketable securities balance was $16.0 million and our accounts receivable balance was $9.6 million. From our inception in February 1999 through the end of fiscal 2002, we funded our operations primarily through issuances of convertible preferred stock, which provided us with aggregate net proceeds of $61.1 million. Since the end of fiscal 2002, we have funded our operations through cash flow generated by the operating activities of our business. Net cash provided by operating activities was $15.7 million during the nine months ended October 31, 2003. During fiscal 2003, cash provided by operating activities was $5.2 million as compared to $13.2 million of cash used during fiscal 2002 and $26.7 million of cash used during fiscal 2001. Cash provided by or used in operating activities has historically resulted from sales of subscriptions, support and professional services, changes in working capital accounts and add-backs of non-cash expense items such as depreciation and amortization and the expense associated with stock-based awards. 38

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Net cash used in investing activities was $18.4 million during the nine months ended October 31, 2003, $9.9 million during fiscal 2003, $700,000 during fiscal 2002 and $9.4 million during fiscal 2001. These amounts primarily related to the investment of excess cash in high quality, investment grade fixed income securities and capital expenditures associated with computer equipment and furniture and fixtures in support of expanding our infrastructure and work force. Additionally, as described below, during fiscal 2001 we deposited $3.5 million with a financial institution to collateralize a letter of credit. Net cash provided by financing activities was $500,000 during the nine months ended October 31, 2003, primarily consisting of proceeds from employee stock option exercises. Net cash provided by financing activities was $1.4 million during fiscal 2003 and $3.5 million during fiscal 2002. The proceeds from stock option exercises and the proceeds from the sale of stock by our Japanese joint venture in these years were offset by principal payments on capital lease obligations and the repurchase of unvested shares of common stock from terminated employees. Net cash provided by financing activities during fiscal 2001 was $45.7 million, primarily consisting of proceeds from issuances of convertible preferred stock and employee stock option exercises. During fiscal 2001, we established a $3.5 million letter of credit in favor of our principal office landlord. This letter of credit is collateralized by a certificate of deposit, which is maintained at the granting financial institution, for the same amount. We have reflected this certificate of deposit as restricted cash on our consolidated balance sheet. As of October 31, 2003, the letter of credit was outstanding and, to date, no amounts have been drawn against it. The letter of credit renews annually through December 31, 2010 or expires upon the successful completion of an initial public offering. In addition, we had two letters of credit outstanding as of October 31, 2003, both of which are collateralized by certificates of deposit totaling $400,000 at the granting financial institution, for the same amount. Both letters of credit have renewal provisions and expire at various dates through June 2006. We do not have any special purpose entities, and other than operating leases for office space and computer equipment, which are described below, we do not engage in off-balance sheet financing arrangements. Additionally, we currently do not have a bank line of credit. We generally do not enter into binding purchase commitments. Our principal commitments consist of obligations under leases for office space, computer equipment and furniture and fixtures. At January 31, 2003, the future minimum lease payments under these commitments were as follows:
Capital Leases (in thousands) Operating Leases

Fiscal Year ending January 31, 2004 Fiscal Year ending January 31, 2005 Fiscal Year ending January 31, 2006 Fiscal Year ending January 31, 2007 Fiscal Year ending January 31, 2008 Thereafter Total minimum lease payments

$

560 80 — — — — 640

$

5,477 5,403 5,064 4,833 4,807 14,683 40,267

$

$

We believe our existing cash, cash equivalents and short-term marketable securities and cash provided by operating activities will be sufficient to meet our working capital and capital expenditure needs over the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the timing and extent of spending to support product development efforts and expansion into new territories, the timing of introductions of new services and enhancements to existing services, and the continuing market acceptance of our services. To the extent that funds generated by this public offering, together with existing cash and securities and cash from operations, are 39

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insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Although we are currently not a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all. Quantitative and Qualitative Disclosures about Market Risk Foreign currency exchange risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British pound, Canadian dollar and Japanese yen. We have a risk management policy that allows us to utilize foreign currency forward and option contracts to manage currency exposures that exist as part of our ongoing business operations. To date, we have not entered into any hedging contracts since exchange rate fluctuations have had little impact on our operating results and cash flows. If we were to enter into hedging contracts, the contracts by policy would have maturities of less than three months and settle before the end of each quarterly period. Additionally, by policy we would not enter into any hedging contracts for trading or speculative purposes. Interest rate sensitivity We had unrestricted cash, cash equivalents and short-term marketable securities totaling $30.5 million at October 31, 2003 and $16.0 million at January 31, 2003. These amounts were invested primarily in money market funds and high quality, investment grade, variable-rate municipal bonds. The unrestricted cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future investment income. 40

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BUSINESS Overview Salesforce.com is the leading provider of application services that allow organizations to easily share customer information on demand. We provide a comprehensive customer relationship management, or CRM, service to businesses of all sizes and industries worldwide. By designing and developing our service to be a low-cost, easy-to-use application that is delivered through a standard Web browser, we substantially reduce many of the traditional expenses and complexities of enterprise software implementations. As a result, our customers incur less risk and lower upfront costs. Our service helps customers more effectively manage critical operations including: sales force automation; customer service and support; marketing automation; document management; analytics; and custom application development. We market our services to businesses on a subscription basis, primarily through our direct sales efforts and also indirectly through partners. From the introduction of our service in February 2000 through October 31, 2003, our customer base had grown to approximately 8,000 subscribing customers, with an aggregate of over 110,000 paying subscribers in approximately 70 countries. Industry Background The Enterprise Application Software Market Advances in computing and communications technology have enabled businesses to automate and improve their basic business processes. Many businesses have purchased, built and deployed a wide range of enterprise software applications in such areas as enterprise resource planning, or ERP, and CRM. While technology improvements have brought increased processing power and functionality to enterprise software applications, businesses have been challenged to realize the benefits of these applications for a variety of reasons, including the following:   Difficulty of deployment . The increasing number and complexity of applications, operating systems, networks and computer systems have made it difficult and time consuming for businesses to implement and use enterprise software applications. High cost of ownership . Enterprise software applications carry a high total cost of ownership. Customers must make significant investments, both initially and on an ongoing basis, in applications and IT infrastructure, including computer systems, networks, software licenses and maintenance. Additionally, customers typically must employ costly IT staff and consultants to deploy, integrate, customize, support, administer and upgrade these applications.

In an attempt to address these challenges, many enterprise software application vendors have adapted their products to be accessible over the Internet. However, as these products were not originally designed to be delivered over the Internet as a service, they have failed to address these challenges. In addition, because they are not easy-to-use, users have been hesitant to adopt these complex, non-intuitive applications. Emergence of On-Demand Application Services The pervasiveness of the Internet, along with the dramatic declines in the pricing of computing technology and network bandwidth, have enabled a new generation of enterprise computing in which substantial components of IT infrastructure can be provisioned and delivered dynamically on an outsourced basis. This new computing paradigm is sometimes referred to as utility computing, while the outsourced software applications are referred to as on-demand application services. On-demand application services enable businesses to subscribe to a wide variety of application services that are developed specifically for, and delivered over, the Internet on an as-needed basis with little or no implementation services required and without the need to install and manage third-party software in-house. Key attributes of successful on-demand application services include:   a fully outsourced service accessible over the Internet; rapid and simple deployment, configuration and training; 41

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   

a comprehensive set of application features; a scalable, secure and reliable application architecture that can economically support tens of thousands of customers simultaneously; the ability to integrate with businesses‘ existing third-party and internally developed enterprise applications and databases; and the ability to tailor the appearance, policy settings, workflow and other characteristics of the service to meet the needs of a diverse customer base.

On-demand application services contrast with the traditional enterprise software model, which requires each customer to install, configure, manage and maintain the hardware, software and network services to implement the software application in-house. Enterprise software vendors must maintain support for numerous legacy versions of their software and compatibility with a wide array of hardware devices and operating environments. These services also contrast with solutions offered by first-generation application service providers, commonly referred to as ASPs, which host third-party enterprise applications on behalf of their customers. Since these ASPs are deploying traditional third-party software applications with each customer typically running on a separate instance, or copy, of the software, ASPs remain challenged by the time and expense problems associated with purchasing, implementing, integrating, maintaining and supporting these applications. Additionally, because ASP hosting typically involves the installation of one dedicated server or set of servers to support a small number of customers, ASPs are challenged to cost-effectively scale to support a larger customer base. We believe the shift to on-demand application services will provide significant benefits by reducing the risks and lowering the costs of purchasing and deploying information technology resources, managing software and hardware upgrades, and hiring expensive IT personnel to maintain applications. As a result, we believe the emergence of on-demand application services will bring about a fundamental transformation in the enterprise software industry as businesses will be able to replace their purchased software with subscriptions to a wide range of application services. The market for on-demand application services is projected to grow from $425 million in 2002 to $2.6 billion in 2007, which represents a compounded annual growth rate of 44 percent, according to a May 2003 IDC report. The Opportunity for On-Demand CRM Application Services One category of enterprise software applications in which businesses have made significant investments is CRM. CRM software is intended to enable businesses to automate three key functional areas: sales, customer service and support and marketing. The objective of CRM is to improve interactions with customers by providing a means for managing, accessing and analyzing information regarding all aspects of a company‘s interactions with its customers. In 2002, the market for CRM software was approximately $7.1 billion, according to a July 2003 IDC report. The difficulties that companies have faced in deploying and maintaining enterprise software applications in general are particularly relevant to CRM. Despite the significant potential benefits that can be attained from CRM, many enterprises have failed to successfully deploy the CRM software they have purchased. In a December 2002 study by AMR Research, an independent market research firm, AMR Research interviewed 80 of the top 12 CRM vendors‘ premier reference accounts as identified by AMR Research. According to a June 2003 report by AMR Research referencing this study, 12 percent of CRM projects failed to ever be implemented, usually for technical reasons. An additional 47 percent of projects had significant end-user adoption problems even though the projects were successful from a technical implementation standpoint. Finally, another 25 percent of projects met technical and user standards but did not provide value because they were either only as good as the replaced systems or the benefits were difficult to define. 42

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We believe that traditional CRM applications have generally suffered from the following challenges:  Low deployment rates and low user adoption . Customers have been reluctant to deploy traditional CRM applications because of the complexity involved in implementing them and because end users have not been willing to invest the considerable time and effort required to learn to use traditional CRM applications. Lack of ubiquitous access . Given the mobility and geographic diversity of most enterprise sales organizations, ubiquitous access to customer information and application functionality is critical to the effectiveness of CRM applications. As enterprise CRM software application functionality has not been available or has been difficult to access over the Internet and through laptops, PDAs and wireless devices, full realization of the benefits of sharing access to information and resources has been hindered. Low return on investment . The cost, time and effort required to implement an enterprise CRM application, combined with low user adoption, have made it difficult for companies to quickly, or ever, realize the benefits of their investment. Inability to serve all businesses . Many small and medium-sized businesses seeking the benefits of CRM have been unable to afford the costs associated with traditional enterprise software applications.

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We believe that the CRM market is one of the first markets to benefit from the new on-demand application services delivery model. As a result of the high total cost of ownership, low deployment and usage rates, and poor return on investment of traditional CRM software, we believe that businesses are especially open to a new delivery model for CRM. The emergence of on-demand application services, combined with the deficiencies associated with traditional CRM software applications, have created an opportunity for a vendor that can provide on-demand CRM application services that have been specifically designed and built to be delivered over the Internet. Our Solution We are the leading provider of on-demand CRM delivered over the Internet as an application service, helping companies better track and manage their sales, customer service and support and marketing operations. We provide our service to businesses through our proprietary, scalable and secure multi-tenant application architecture, which allows us to serve large numbers of customers cost-effectively by leveraging a single instance of our application for multiple customers. By subscribing to our service, our customers do not have to make large and risky upfront investments in software, additional hardware, extensive implementation services, and additional IT staff. As a result, our service enables businesses to achieve higher productivity from, and a lower total cost of ownership for, their CRM solutions. Key advantages of our solution include:  Rapid deployment. Our service can be deployed rapidly and provisioned easily, since our customers do not have to spend time installing or maintaining the servers, networking equipment, security products or other infrastructure hardware and software necessary to ensure a scalable and reliable service. We believe the average time that a customer requires to deploy our service is significantly shorter than typical traditional CRM software deployments. We also offer complementary consulting and training services to assist customers in rapidly deploying and optimizing their use of our service. Enable high levels of user adoption. We have designed our service to be easy-to-use and intuitive. Since our service contains many tools and features recognizable to users of popular websites such as those of Amazon.com, eBay and Yahoo!, it has a more familiar interface than typical CRM enterprise applications. As a result, our users do not require substantial training on how to use and benefit from our service. We conduct extensive surveys of our users to gauge their experiences with our service so that we may determine potential areas of improvement. In addition, because of the nature of our service, we receive automatic feedback as to which features customers use. 43

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Lower total cost of ownership. We enable customers to achieve significant savings relative to the traditional enterprise software model. Our service enables customers to automate sales, customer service and support and marketing processes without having to make large and risky upfront investments in software, hardware and implementation services, and additional IT staff. In addition, because all upgrades are implemented by us on our servers they automatically become part of our service and therefore benefit all of our customers immediately. Extensive features, functionality and configurability. We offer a comprehensive array of CRM features that meet the needs of businesses of any size. Our service supports the three key functional areas within CRM—sales, customer service and support and marketing automation. We also offer additional functionality such as file and document management capabilities, which enable businesses to centralize the storage and retrieval of customer-related documents. Furthermore, most features of our service can be accessed through a variety of devices, including laptop computers, PDAs and wireless devices. For example, we offer an offline version of our service that can be used on any PC or laptop and a wireless version for mobile access via wireless devices. Finally, our service is highly configurable, enabling our customers to tailor its appearance, policy settings, language, workflow and other characteristics without the use of significant IT resources or consultants. Secure, scalable and reliable delivery platform. The delivery platform for our service has been designed to provide our customers with high levels of reliability, performance and security. The IT systems within our data center have fail-over redundancy. We have built a comprehensive security infrastructure, including firewalls, intrusion detection systems and encryption for transmissions over the Internet, which we monitor and test on a regular basis. We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously. Our architecture also enables us to segment access privileges across our user base. Ease of integration. Our platform is designed to enable IT professionals to integrate our service with existing applications quickly and seamlessly. Our sforce platform provides a set of APIs that enable customers and independent developers to integrate our service with existing third-party, custom and legacy applications and write their own application services that integrate with our service. For example, many of our customers use the sforce APIs to move customer-related data from custom-developed and legacy applications into our service on a periodic basis to provide greater visibility into their activities. In addition, through our relationship with TIBCO Software, our salesforce.com Integration Server enables our customers to quickly integrate their existing software applications with our service using custom-built connectors.

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Our Strategy Our objective is to be the leading provider of on-demand application services for businesses worldwide. Key elements of our strategy include:  Continue to lead the industry transformation to on-demand application services. We believe that the market transformation to on-demand application services enabled by utility computing is an emerging trend in the technology industry. We believe we have established a leadership position in this new industry both as a successful vendor of on-demand application services and also as a key thought leader helping to define the architecture and vision of utility computing. We seek to extend our leadership position in this industry by continuing to innovate and bring new on-demand application services and value-added technologies to market. Strengthen and extend our service offering. We designed our service to easily accommodate new features and functions as well as the release of entirely new application services. For example, while our service in 2000 offered only sales force automation functionality, by 2002 we had added marketing 44

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automation and customer support functionality. More recently, we added file and document management capabilities and enhanced analytics tools to enable businesses to track and analyze data to better understand the health of their customer relationships. We intend to continue to add CRM features and functionality to our service that we will make available to customers at no additional charge. For example, in our most recent release, we added contract management, dashboards and workflow automation. We may also offer advanced modules for an additional subscription fee to customers that require enhanced CRM capabilities. In addition to accommodating new CRM features, we believe that our technology infrastructure is able to support entirely different, non-CRM application capabilities.  Pursue new customers and new territories aggressively. We believe that our on-demand CRM application service provides significant value for businesses of any size, from small businesses to the largest Fortune 500 corporations. As a result, we will continue to aggressively target businesses of all sizes, primarily through our direct sales force. We have steadily increased and plan to continue to increase the number of direct sales professionals we employ, and we intend to develop additional distribution channels for our service. We have created several editions of our service to address the distinct requirements of businesses of different sizes. We also believe that there is a substantial market opportunity for our service outside of North America. We plan to continue to aggressively market to customers outside of North America by recruiting local sales and support professionals, building partnerships that help us add customers in these regions and increasing the number of languages we support. As of October 31, 2003, we offered our service in 11 languages and had paying subscribers in approximately 70 countries. Deepen relationships with our existing customer base. We believe there is significant opportunity to leverage our relationships with existing customers. We seek to attract more users from existing customers by targeting additional functional areas and business units within the customer organization, pursuing enterprise-wide deployments and providing consulting offerings that are complementary to our service. In addition, by continuously enhancing the functionality of our service, we believe that customers will find more uses for our service and therefore purchase additional subscriptions, continue to renew their existing subscriptions and upgrade to more fully featured versions such as our Enterprise Edition. Encourage the development of third-party applications on our sforce platform. Our sforce platform enables existing customers and third-party developers to develop and deliver applications complementary to our core service offering. Sforce enhances the attractiveness of our service, particularly to enterprise customers, by enabling them to accelerate the integration of our service with their existing applications. We plan to continue to augment the sforce tools and services we provide to developers and foster their development of new applications.

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The salesforce.com Service We provide a comprehensive array of on-demand CRM application services for businesses of all sizes and industries worldwide. These services enable companies and individuals to systematically record, store and act upon customer data, helping businesses manage their customer accounts, track sales leads, evaluate marketing campaigns and provide post-sales service. We also enable companies to generate reports and summaries of this data and share them with authorized employees across functional areas. CRM includes sales, customer service and support and marketing automation:  Sales force automation enables salespeople to be more productive by automating manual and repetitive tasks and providing them with better, more organized data about their current and prospective customers. It permits companies to establish a system and a process for recording, tracking and sharing information about sales opportunities, sales leads, sales forecasts, the sales process and closed business. Customer service and support automation allows companies to interact better, more efficiently and professionally with their existing customers in a variety of areas, such as requests for repairs, advice 45

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about products and services, complaints about faulty goods, warranty management and the need for additional goods and services.  Marketing automation enables companies to manage marketing campaigns from initiation through the development of leads that are passed to the sales team and enables them to determine the effectiveness of each campaign by quantifying the revenue generated as a result of specific marketing activities.

We offer three principal editions of our service, each targeted at a different market segment: Enterprise Edition, Professional Edition and Team Edition. Enterprise Edition . Enterprise Edition is our most fully featured service offering and is targeted primarily at large companies that have several different divisions or departments. It includes many administrative features that are particularly useful to large companies, such as workflow, the ability to customize views for different departments and a set of controls that allows a system administrator to designate which users have access and modification rights to the different types of information within the system. It also includes a Web services-standard XML API that enables companies to readily integrate our CRM service with ERP applications, Web services and other data sources and a weekly export service that permits a customer to download all data input by users into the service in a machine-readable format. It also includes our offline and wireless features that permit users to access information through laptops, PDAs and wireless devices. Professional Edition . Professional Edition is targeted primarily at medium-sized and large businesses that need a robust CRM solution but do not need some of the more advanced administrative features and integration capabilities of Enterprise Edition. The offline and selected other features of Enterprise Edition that are not included in Professional Edition are available to Professional Edition customers for an additional charge. Team Edition . Team Edition is targeted primarily at small businesses that seek a robust sales force automation solution without the more sophisticated features that are required by larger companies, such as integration, analytics and workflow. Team Edition includes sales force automation and case management but does not include customer service and support or marketing automation features. Enterprise Edition, Professional Edition and Team Edition offer customizable fields and pick lists, customizable reports and customizable list views. Enterprise Edition and Professional Edition also offer multi-language support and multi-currency support. The amount of storage offered for each edition also varies. 46

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The following table summarizes the functionality provided in each of our three principal editions.
Feature Enterprise Edition Professional Edition Team Edition

Account Management Contact Management Opportunity Management Case Management Activity Management Email Templates MS Office Integration MS Outlook Integration Palm Synchronization Reports Analytics Forecasting Lead Management Mass Email Advanced Case Management Solution Management Record-based Security Multi-currency Support Documents and Attachments Campaigns Offline Wireless Weekly Data Export Sforce (Web services API) Multiple Business Processes Product and Annuity Forecasting Self-service Customer Portal Multi-department Customization ―Available‖ means available for an additional charge.

                           

                   Available Available Available Available Available Available

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Our offline functionality enables users to readily access and use key account, contact, opportunity and other information when traveling or otherwise when an Internet connection is not readily accessible. Users access the offline functionality using a browser and the same user interface as our online editions. We also offer wireless functionality that enables access to a subset of a user‘s data through a variety of devices, including the RIM BlackBerry, Pocket PC and Palm operating system-based wireless devices and WAP-enabled mobile phones. Our wireless functionality permits interaction with our service both through free-form text queries and through a graphical user interface. As part of our marketing programs, we recently released our Personal Edition service which includes a contact management database and several other features that are useful to individual sales representatives and others who need a centralized way to organize contact data and access that data over the Internet. It is intended for use by a single user and is currently available at no charge. As of October 31, 2003, approximately 10,000 users had activated Personal Edition accounts. In addition, we offer a service called Developer Edition, currently at no charge, to developers and others interested in building applications on our sforce platform. As of October 31, 2003, approximately 1,500 users had activated Developer Edition accounts. 47

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Professional Services We offer a range of professional services, principally consulting and implementation services and training, that complement our on-demand application service. Consulting and Implementation Services We offer consulting and implementation services to our customers to facilitate the adoption of our on-demand CRM application service. Consulting services consist of services such as business process mapping, project management services and guidance on best practices in using our service. Implementation services include systems integration, configuration and data conversion. Our typical consulting and implementation engagements are generally billed on a time and materials basis. Training We offer a number of in-person and online educational classes that address topics such as implementing, using and administering our service. We also offer classes for administrators, users and partners who implement our service on behalf of our customers. Our typical in-person training courses are billed on a per person, per class basis. Sforce In June 2003, we introduced sforce, a Web services-based API platform that enables third parties, including customers and independent software vendors, or ISVs, to customize tables and page views within our service, more fully integrate a customer‘s data in our service with other software applications, extend our service‘s CRM functionality with customer-specific business functionality, and permit development of standalone applications that interoperate with our service. Examples of use of the sforce platform include: a customer has used sforce to integrate our service with multiple ERP systems including Oracle financial software and Siebel customer support software; an ISV has used sforce to integrate a customer‘s sales force automation and content management data to enhance the usefulness of the professional services management system the ISV has built; and a customer has used sforce to integrate CRM functionality into a custom application for the consumer mortgage industry that the customer intends to market independently. As part of our sforce offering, we have collaborated with Microsoft, Sun Microsystems, Borland and BEA to make available to the sforce developer community a variety of development tools for building applications upon our platform. As of October 31, 2003, over 500 developers had joined our sforce developers program. We currently do not charge users of our Enterprise Edition a license fee or royalty on sforce or applications developed with sforce. Technology, Development and Operations Technology We believe that our on-demand application service enables us to develop functionality and deliver it to customers more efficiently than traditional enterprise software vendors. We do not provide software that must be written to different hardware, operating system and database platforms, or that depends upon a customer‘s unique systems environment. Rather, we have optimized our service to run on a specific database and operating system using the tools and platforms best suited to serve our customers. Performance, functional depth and usability of our service drive our technology decisions and product direction. We built our service as a highly scalable, multi-tenant application written in Java and Oracle PL/SQL. The application server is custom-built and runs on a lightweight Java Servlet and Java Server Pages engine. We have custom-built core services such as database connection pooling and user session management tuned to our specific architecture and environment, allowing us to continue to scale our service. We have combined a stateless environment, in which a user is not bound to a single server but can be routed in the most optimal way to any 48

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number of servers, with an advanced data caching layer. Our customers can access the service through any Web browser without installing any software or downloading Java applets or Microsoft ActiveX or .NET controls. Our service treats all customers as logically separate tenants in central applications and databases. As a result, we are able to spread the cost of delivering our service across our user base. In addition, because we do not have to manage thousands of distinct applications with their own business logic and database schemas, we believe that we can scale our business faster than traditional software vendors, even those that have modified their products to be accessible over the Internet. Moreover, we can focus our resources on building new functionality to deliver to our customer base as a whole rather than on maintaining an infrastructure to support each of their distinct applications. Our service is also flexible. Every page is dynamically rendered for each specific user, including a choice of 11 languages and a number of currencies with dynamic currency conversion support. In addition, our service can display different views of the data based upon a number of factors, including user, department and area of responsibility in the company. Our service also allows customers to create multiple subtypes or subclasses of our business objects and tie views to each record type. This customization extends to the data model of our service, as our service allows customers to extend existing tables in our database as well as create new tables without actually modifying the underlying physical database schema. We have also developed extensive reporting and analytics functionality in our service that operates on the OLTP database system to provide real-time analysis of the user‘s data. While users can customize any report or dashboard in the service, we dynamically tune the database based upon specific attributes of the user, the data model, the data security layer and the specific customizations to each report or dashboard. Our service is addressable by other applications on the Internet and applications behind our firewall. Through our sforce platform, we allow customers and partners to insert, update, delete and query any information in our service. Our full text search engine, which allows users to perform natural language queries on all the data through a browser, is also exposed as a Web service. We also have mechanisms to protect our service not only from malicious abuse, but also from poorly written applications that put undue strain on the service. Each user session is encrypted and we actively monitor our system to detect intrusion by unauthorized users. Development Our research and development efforts are focused on improving and enhancing our existing service offerings as well as developing new proprietary services. In addition, from time to time we supplement our internal research and development activities with outside development resources. Because of our common, multi-tenant application architecture, we are able to provide all of our customers with a service based on a single version of our application. As a result, we do not have to maintain multiple versions of our application and are able to maintain relatively low research and development expenses. Our research and development expenses were $3.4 million in fiscal 2001, $5.3 million in fiscal 2002 and $4.6 million in fiscal 2003 and $4.8 million for the nine months ended October 31, 2003. Operations We serve all of our customers and users from a single, third-party co-location facility located in Sunnyvale, California. The facility is designed to withstand an earthquake of magnitude 8.0 on the Richter scale, is secured by around-the-clock guards, biometric access screening and escort-controlled access, and is supported by on-site backup generators in the event of a power failure. We regularly rotate tapes of customer data out of the facility and store them in a secure location in the event of data loss at the facility. We continuously monitor the performance of our service. The monitoring features we have built or licensed include centralized performance consoles, automated load distribution and various self-diagnostic tools and 49

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programs. We have entered into service level agreements with a small number of our customers warranting certain levels of uptime reliability and permitting those customers to receive credits or terminate their agreements in the event that we fail to meet those levels. To date, no customer has received credits or terminated its agreement pursuant to any service level agreement. Currently, we have redundant systems located in our San Francisco headquarters that can be used to provide our service in the event that our current third-party co-location facility were to become unavailable, although in such circumstances, our service may be interrupted during the transition. In addition, we are currently planning a geographically remote redundant data center to be co-located at a different third-party hosting company. When complete, this data center will be our primary back-up facility and will be designed to support our service to all customers and users in the event that our primary data center is unavailable with little or no interruption. We expect the new data center to be completed before June 2004. In the interim, we have entered into an agreement with SunGard Data Systems to provide certain disaster recovery and backup services in the event our primary data center and our backup data center in San Francisco are unavailable. Customers As of October 31, 2003, we had approximately 8,000 subscribing customers, with an aggregate of over 110,000 paying subscribers in approximately 70 countries. We believe that during the nine months ended October 31, 2003, we generated approximately 40 percent of our revenues from small businesses (companies with fewer than 200 employees), 30 percent of our revenues from medium-size businesses (200 or more employees and up to $500 million in annual revenues), and 30 percent of our revenues from large businesses (over $500 million in annual revenues). The number of subscribers at each of our customers ranges from one to more than 800. Representative Customers The following table lists our five largest customers by revenue for the period of February 1, 2003 through October 31, 2003 in a variety of different industries:
Business Services Consumer Services Financial

Charter Business Networks Concord EFS, Inc. GE Capital IT Solutions, Inc. Paymentech, L.P. Spherion Pacific Enterprises LLC
Healthcare/Pharmaceuticals

Cendant Car Rental Group, Inc. CIGNA Corporation Homestore.com, Inc. Kinko‘s, Inc. Olan Mills, Inc.
Manufacturing

Fidelity National Financial, Inc. Harland Financial Solutions, Inc. Mellon Financial Corporation The PMI Group, Inc. Travelex plc
Media/Internet

American Medical Response, Inc. athenahealth, Inc. CIGNA Health Corporation Innovex UK Ltd. MedImpact Healthcare Systems, Inc.
Technology

Fujitsu Computer Products of America, Inc. Honeywell International Inc. Invensys Systems, Inc. NSK Corporation Panduit Corporation
Telecom

AOL Interactive Marketing Expedia, Inc. Lightpath Technologies Lycos Europe GmbH The Weather Channel Interactive, Inc.
Transportation/Logistics

Electronics for Imaging, Inc. F5 Networks, Inc. NetScreen Technologies, Inc. Polycom, Inc. SunGard Data Systems Inc.

Cable & Wireless plc Genesys S.A. Genesys Telecommunications Laboratories, Inc. Inter-Tel, Incorporated Stratos Global Corporation 50

Eagle Global Logistics Garrett Aviation Intermec Technologies Corporation Navis LLC SIRVA, Inc.

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None of our customers accounted for more than 5 percent of our revenues in fiscal 2003 or during the nine months ended October 31, 2003. Sales, Marketing and Customer Support We organize our sales and marketing programs by geographic regions, including North America, Europe, Japan and the Asia Pacific region (other than Japan). Direct Sales We sell subscriptions to our service primarily through our direct sales force comprised of inside sales, telesales and field sales personnel. Our small business, general business and enterprise account executives and account managers focus their efforts on small, medium-size and large enterprises, respectively. Our account executives are responsible for initial sales to new prospects, while our account managers concentrate on growing pre-existing relationships. Sales representatives in our small business group sell to smaller companies, primarily over the phone. We also have a group that is responsible for generating leads and assisting in sales to large enterprises. We have field sales offices in more than 20 major cities worldwide. Referral Sales We have a network of partners who refer customer prospects to us and assist us in selling to them. These include consulting firms, other technology vendors and systems integrators. In return, we typically pay these partners a percentage of the first-year subscription revenue generated by the customers they refer. Marketing Our marketing strategy is to generate qualified sales leads, build our brand and raise awareness of salesforce.com as a leading provider of on-demand CRM application services. Our marketing programs include a variety of advertising, events, public relations activities and Web-based seminar campaigns targeted at key executives and decision makers within businesses. Our principal marketing initiatives include:       launch events to publicize our service to existing customers and prospects; direct mail and email campaigns; participation in, and sponsorship of, user conferences, trade shows and industry events; cooperative marketing efforts with partners, including Web link exchanges, joint press announcements, joint trade show activities, channel marketing campaigns and joint seminars; using our website to offer free trials of our service and to provide product and company information; and advertising in newspapers, CRM trade magazines, management journals and other business-related periodicals.

Customer Service and Support We believe that superior customer support is critical to retaining and expanding our customer base. Our customer support group handles both general customer inquiries, such as questions about the ordering process or the status of an order or payment, technical questions or questions relating to how to use our service, and is available to customers by telephone or email or over the Web. We offer basic and more advanced classes on how to use, administer and customize our service over the Web free of charge to our customers on a weekly or monthly basis, depending on the class. 51

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We have a comprehensive technical support program to assist our customers in the use of our service and to identify, analyze and solve any problems or issues with our service. The support program includes email support, an online repository of helpful information about our service and shared best practices for implementation and use and telephone support. Telephone support is provided by technical support specialists on our staff, who are extensively trained in the use of our service and who are located at our three global support centers in San Francisco, Dublin and Tokyo. Basic customer support during business hours is available at no charge to customers that purchase our Team Edition, Professional Edition or Enterprise Edition. International Sales In fiscal 2003 and the nine months ended October 31, 2003, we generated approximately 14 percent and 17 percent of our total revenues, respectively, from customers in Europe and Asia Pacific. We expect international markets to provide increased opportunities for our applications and services in the future. Our current international efforts are focused on strengthening our direct sales and marketing presence in Europe and Asia Pacific, and generating more revenues from these regions. We maintain sales offices in 11 countries outside of North America. Competition The market for CRM applications, and enterprise business applications generally, is highly competitive, rapidly evolving and fragmented, and subject to changing technology, shifting customer needs and frequent introductions of new products and services. We compete primarily with vendors of packaged CRM software, whose software is installed by the customer directly or hosted by a first generation ASP on the customer‘s behalf, and companies offering on-demand CRM applications. We also compete with internally developed applications and face, or expect to face, competition from enterprise software vendors and online service providers who may develop and/or bundle CRM products with their products in the future. Our current principal competitors include:   enterprise software application vendors including Amdocs Limited, E.piphany, Inc., IBM Corporation, Microsoft Corporation, Oracle Corporation, PeopleSoft, Inc., SAP AG and Siebel Systems, Inc.; packaged CRM software vendors, some of whom offer hosted services, such as BMC Software Corporation, FrontRange Solutions, Inc., Onyx Software Corp., Pivotal Corporation, which has signed an agreement to be acquired by CDC Software Corporation, a subsidiary of chinadotcom corporation, and Sage Group Plc; on-demand CRM application service providers such as ACCPAC International, Inc., a subsidiary of Computer Associates International, NetSuite, Inc., RightNow Technologies, Inc. and Salesnet, Inc.; and enterprise application service providers including British Telecom, Corio, Inc. and IBM.

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We believe the principal competitive factors in our market include the following:         speed and ease of implementation; ease of use and rates of user adoption; low total cost of ownership and demonstrable cost-effective benefits for customers; product functionality; performance, security, scalability, flexibility and reliability of the service; ease of integration with existing applications; quality of customer support; availability and quality of implementation, consulting and training services; 52

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vendor reputation; sales and marketing capabilities of the vendor; and financial stability of the vendor.

We believe that we compete favorably with our competitors on the basis of these factors. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. In addition, many of our competitors and potential competitors have greater name recognition, longer operating histories and significantly greater resources. They may be able to devote greater resources to the development, promotion and sale of their products than we can to ours, which could allow them to respond more quickly than we can to new technologies and changes in customer needs. We cannot assure you that our competitors will not offer or develop products or services that are superior to ours or that achieve greater market acceptance. Our professional services organization competes with a broad range of large systems integrators, including Accenture Ltd., BearingPoint, Inc. and IBM as well as smaller independent consulting firms specializing in CRM implementations. We have relationships with many of these consulting companies and frequently work cooperatively on projects with them, even as we compete for business in other customer engagements. Intellectual Property We rely on a combination of trademark, copyright, trade secret laws and disclosure restrictions to protect our intellectual property rights. We have U.S. patent applications pending and no issued patents. We also enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties and control access to software, documentation and other proprietary information. The following are our U.S. registered trademarks: salesforce.com ―No Software‖ logo The End of Software SFDC Asia Pacific The following are unregistered trademarks that we use: Team Edition Success. Not Software. Success. On Demand. sforce If a claim is asserted that we have infringed the intellectual property of a third party, we may be required to seek licenses to that technology. In addition, we license third-party technologies that are incorporated into some elements of our services. Licenses from third-party technologies may not continue to be available to us at a reasonable cost, or at all. Additionally, the steps we have taken to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our proprietary rights. Competitors may also independently develop technologies that are substantially equivalent or superior to the technologies we employ in our services. If we fail to protect our proprietary rights adequately, our competitors could offer similar services, potentially significantly harming our competitive position and decreasing our revenues. Employees As of October 31, 2003, we had 412 full-time equivalent employees. None of our employees is represented by a labor union. We consider our relationship with our employees to be good. 53

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Legal Proceedings Generally, we are involved in various legal proceedings arising from the normal course of business activities. In our opinion, resolution of these matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows or our financial position. However, depending on the amount and timing, an unfavorable resolution of a matter could materially affect our future results of operations, cash flows or financial position in a particular period. Facilities Our executive offices and principal office for domestic marketing, sales and development occupies approximately 84,000 square feet in San Francisco, California under leases that expire in 2006 and 2011. 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. If we require additional space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms. 54

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MANAGEMENT Executive Officers and Directors Our executive officers and directors, and their ages and positions as of December 17, 2003 are as follows:
Name Age Position

Marc Benioff Jim Steele Steve Cakebread Jim Cavalieri David Moellenhoff Parker Harris David Schellhase Alan Hassenfeld (1) Craig Ramsey (2) Sanford R. Robertson (1), (3) Stratton Sclavos Larry Tomlinson (1), (3) Magdalena Yesil (2) (1) (2) (3) Member of the Audit Committee. Member of the Compensation Committee.

39 48 52 34 35 36 40 55 57 72 42 63 45

Chairman of the Board of Directors and Chief Executive Officer President, Worldwide Operations Chief Financial Officer Chief Information Officer Chief Technology Officer Senior Vice President, Research and Development Vice President and General Counsel Director Director Director Director Director Director

Member of the Disclosure and Corporate Development Committee.

Marc Benioff co-founded salesforce.com in February 1999 and has served as Chairman of the Board of Directors since inception. He has served as Chief Executive Officer since November 2001. From 1986 to 1999, Mr. Benioff was employed at Oracle Corporation where he held a number of positions in sales, marketing and product development, most recently as a Senior Vice President. Mr. Benioff is Co-Chairman of The President of the United States‘ Information Technology Advisory Committee (PITAC). Mr. Benioff also serves as Chairman of the Board of Directors of the salesforce.com/foundation. Mr. Benioff received a Bachelor of Science in Business Administration (B.S.B.A.) from the University of Southern California. Jim Steele has served as our President, Worldwide Operations since joining salesforce.com in October 2002. From February 2001 to September 2002, Mr. Steele served as Executive Vice President, Worldwide Sales and Operations for Ariba, Inc., a software company. From February 1978 to January 2001, Mr. Steele served in a variety of globally focused executive roles at IBM Corporation. Mr. Steele received a B.S. from Bucknell University. Steve Cakebread has served as our Chief Financial Officer since April 2002. From April 1997 to April 2002, Mr. Cakebread served as Senior Vice President and Chief Financial Officer for Autodesk, Inc., a software company. From 1992 to 1997, Mr. Cakebread served as Vice President of Finance for Silicon Graphics, Inc., a computer workstation company. Mr. Cakebread also serves as a director of SCO Group, Inc. Mr. Cakebread received a B.S. from the University of California at Berkeley and an M.B.A. from Indiana University. Jim Cavalieri has served as our Chief Information Officer since November 2001. From July 1999 to November 2001, Mr. Cavalieri served as our Vice President, Systems Engineering. From January 1995 to July 1999, Mr. Cavalieri was employed at Oracle Corporation where he held several technical and management positions, most recently as Senior Technical Program Manager. From June 1991 to December 1994, Mr. Cavalieri worked as a consultant and systems engineer for EDS. Mr. Cavalieri received a B.S. from Cornell University. 55

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David Moellenhoff co-founded salesforce.com in February 1999 and served in senior technical positions since inception, most recently as our Chief Technology Officer. Mr. Moellenhoff also serves on the Board of Directors of the salesforce.com/foundation. From October 1996 to February 1999, Mr. Moellenhoff was President of Left Coast Software, a Java consulting firm he co-founded. Mr. Moellenhoff received two B.S. degrees and an M.B.A. from Washington University in St. Louis. . Parker Harris co-founded salesforce.com in February 1999 and served in senior technical positions since inception, most recently as our Senior Vice President, Research and Development. From October 1996 to February 1999, Mr. Harris was a Vice President at Left Coast Software, a Java consulting firm he co-founded. Mr. Harris received a B.A. from Middlebury College. David Schellhase has served as our Vice President and General Counsel since July 2002. From December 2000 to June 2002, Mr. Schellhase was an independent legal consultant and authored a treatise entitled Corporate Law Department Handbook . From February 2000 to November 2000, Mr. Schellhase was Vice President and General Counsel of Linuxcare, Inc., an IT services and consulting company. From August 1997 to January 2000, Mr. Schellhase was Vice President and General Counsel of The Vantive Corporation, a software company. Mr. Schellhase received a B.A. from Columbia University and a J.D. from Cornell University. Alan Hassenfeld has served as a Director since December 2003. From 1989 until May 2003, Mr. Hassenfeld was Chairman and Chief Executive Officer of Hasbro, Inc., a provider of children‘s and family entertainment products, and has been Chairman of Hasbro since May 2003. Mr. Hassenfeld is a trustee of the Hasbro Charitable Trust and Hasbro Children‘s Foundation. Mr. Hassenfeld received a B.A. from the University of Pennsylvania. Craig Ramsey has served as a Director since April 2003. From July 2003, Mr. Ramsey has been CEO of Pay By Touch, a biometrics payments company. From March 1996 to April 2000, Mr. Ramsey served as Senior Vice President, Worldwide Sales, of Siebel Systems, Inc., a provider of eBusiness applications. From March 1994 to March 1996, Mr. Ramsey served as Senior Vice President, Worldwide Sales, Marketing and Support for nCube, a maker of massively parallel computers. From 1968 to 1994, Mr. Ramsey held various positions with Oracle Corporation, Amdahl and IBM. Mr. Ramsey currently serves on the Board of Directors of Pay By Touch and Arcsight. He received a B.A. in Economics from Denison University. Sanford R. Robertson has served as a Director since October 2003. He is a principal of Francisco Partners, a technology buyout fund. Prior to founding Francisco Partners in January 2000, Mr. Robertson was the founder and chairman of Robertson, Stephens & Company, a technology investment bank. Mr. Robertson has been an active technology investor and advisor to several technology companies. Mr. Robertson was also the founder of Robertson, Colman, Siebel & Weisel, later renamed Montgomery Securities, another prominent technology investment bank. Mr. Robertson is a director of Pain Therapeutics, Inc. and the Schwab Fund for Charitable Giving. Mr. Robertson received a B.B.A. and M.B.A. from the University of Michigan. Stratton Sclavos has served as a Director since February 2000. Since July 1995, Mr. Sclavos has served as President, Chief Executive Officer and Chairman of VeriSign, Inc., a provider of trusted infrastructure services to websites, enterprises, electronic service providers and individuals. In December 2001, Mr. Sclavos was named Chairman of the Board of Directors of Verisign. From July 1993 to June 1995, Mr. Sclavos served as Vice President, Worldwide Marketing and Sales of Taligent, Inc., a software development company that was a joint venture among Apple Computer, IBM and Hewlett-Packard. From May 1992 to September 1993, Mr. Sclavos was Vice President of Worldwide Sales and Business Development of GO Corporation, a pen-based computer company. Prior to that time, he served in various sales and marketing capacities for MIPS Computer Systems, Inc. and Megatest Corporation. Mr. Sclavos serves as a director of VeriSign, Inc., Intuit, Inc., Juniper Networks, Inc. and Keynote Systems, Inc. Mr. Sclavos received a B.S. from the University of California at Davis. Larry Tomlinson has served as a Director since May 2003. From 1965 to 2003, Mr. Tomlinson was employed at Hewlett-Packard, an information technology company, holding various management and executive positions. From 1993 to June 2003, Mr. Tomlinson was Hewlett-Packard Treasurer and also a Senior Vice 56

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President. Mr. Tomlinson serves as a director of Coherent, Inc. Mr. Tomlinson received a B.S. from Rutgers University and an M.B.A. from Santa Clara University. Magdalena Yesil has served as a Director since March 1999. Ms. Yesil has been a venture capitalist at Presidio Management/US Venture Partners since February 1998. From August 1996 to December 1997, Ms. Yesil founded MarketPay, a software company, and served as its CEO and President. From 1994 to August 1996, Ms. Yesil co-founded Cybercash, a secure electronic payment company, and served as Vice President of Marketing and Technology. She currently serves on the boards of 3Ware, Aqueduct, Claria Corporation, Dotomi, Everypath and Klocwork. Ms. Yesil received a B.S. and an M.S. from Stanford University. Board Composition Our board of directors currently consists of seven members. Effective upon the closing of this offering, our board of directors will be divided into three classes of directors who will serve in staggered three-year terms, as follows:    The Class I directors will be Messrs. Benioff and Hassenfeld, and their terms will expire at the annual meeting of stockholders to be held in 2005; The Class II directors will be Ms. Yesil and Mr. Robertson, and their terms will expire at the annual meeting of stockholders to be held in 2006; and The Class III directors will be Messrs. Tomlinson, Sclavos and Ramsey, and their terms will expire at the annual meeting of stockholders to be held in 2007.

Effective upon the closing of this offering, our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes with three-year terms so that, as nearly as possible, each class will consist of one-third of the directors. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. The division of our board of directors into these three classes may delay or prevent a change of our management or a change in control. Board Committees As of the closing of this offering, our board of directors will have, among others, the following committees: an audit committee; a compensation committee; and a disclosure and corporate development committee. The composition and responsibilities of each committee are described below. Audit Committee Our audit committee oversees our corporate accounting and financial reporting process. It evaluates the independent auditors‘ qualifications, independence and performance; determines the engagement of the independent auditors; approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on the salesforce.com engagement team as required by law; reviews our financial statements; reviews our critical accounting policies and estimates; oversees our internal audit function; and discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements. The current members of our audit committee are Messrs. Tomlinson, who is the committee chair, Hassenfeld and Robertson. Mr. Tomlinson is our audit committee financial expert (as is currently defined under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002). We believe that the composition of our audit committee meets the requirements for independence under the current requirements of the Sarbanes-Oxley Act of 2002 and SEC rules 57

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and regulations, and the functioning of our audit committee complies with the applicable requirements of the Sarbanes-Oxley Act of 2002 and SEC rules and regulations. Compensation Committee Our compensation committee reviews and recommends policy relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives, and setting compensation of these officers based on such evaluations. The compensation committee also will administer the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. The current members of our compensation committee members are Ms. Yesil, who is the committee chair, and Mr. Ramsey. We believe that the composition of our compensation committee meets the requirements for independence under and the functioning of our compensation committee complies with, the applicable requirements of the Sarbanes-Oxley Act of 2002 and SEC rules and regulations. Disclosure and Corporate Development The disclosure and corporate development committee is responsible for overseeing our tax and treasury strategies, policies and practices; overseeing management‘s establishment and enforcement of our financial policies and business practices, as well as our compliance with laws and regulations; reviewing acquisitions and joint ventures; overseeing our compliance with the Sarbanes-Oxley Act of 2002; and overseeing our corporate governance guidelines. The current members of the disclosure and corporate development committee are Messrs. Robertson, who is the committee chair, and Tomlinson. Director Compensation The members of our board of directors who are not our employees are reimbursed for travel, lodging and other reasonable expenses incurred in attending board and committee meetings. Members do not receive cash compensation for attending board and committee meetings. The members of our board of directors received the following stock option grants as compensation for their attendance at our board and committee meetings. These options vest over four years, with 25 percent vesting after one year and the balance vesting monthly over the remaining period.
Number of Shares Subject to Options

Director

Date of Grant

Exercise Price

Alan Hassenfeld Craig Ramsey Sanford R. Robertson Stratton Sclavos Larry Tomlinson Magdalena Yesil

200,000 300,000 300,000 250,000 300,000 500,000

12/16/03 3/5/03 10/7/03 2/11/00 5/2/03 6/24/99

$

8.00 2.50 4.00 0.55 2.50 0.02

In addition, under our 2004 Outside Directors Stock Plan which will be effective upon completion of the offering, our non-employee directors will receive quarterly stock awards of 3,750 shares of common stock for service during the preceding quarter. See ―Employee Benefit Plans‖ for a description of our 2004 Outside Directors Stock Plan. 58

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Compensation Committee Interlocks and Insider Participation None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board of directors or compensation committee. Executive Compensation The following table provides information for fiscal 2003 regarding the compensation awarded or paid to, or earned by, our chief executive officer and each of our four other most highly compensated executive officers. We refer to these individuals elsewhere in this prospectus as ―named executive officers.‖ We do not compensate our named executive officers with perquisites or other personal benefits. Summary Compensation Table
Long-Term Compensation Awards Securities Underlying Options Bonus All Other Compensation

Annual Compensation Name and Principal Position Salary

Marc Benioff, Chairman of the Board and Chief Executive Officer (1) Steve Cakebread, Chief Financial Officer (2) Jim Steele, President, Worldwide Operations (3) Jim Cavalieri, Chief Information Officer David Schellhase, Vice President and General Counsel (4) (1) (2) (3) (4)

$

1 177,244 170,577 168,333 106,153

$ — — — — —

— 1,000,000 1,350,000 200,000 250,000

$

— — — — —

Mr. Benioff receives minor compensation for his position: nominal salary; no bonus; and no options. Mr. Cakebread joined us in April 2002. The amounts above reflect his compensation from April 2002 to January 31, 2003. Mr. Steele joined us in October 2002. The amounts above reflect his compensation, which includes $75,000 in sales commissions, from October 2002 to January 31, 2003. Mr. Schellhase joined us in July 2002. The amounts above reflect his compensation from July 2002 to January 31, 2003.

Option Grants in Fiscal 2003 The table below contains information concerning the grant of options to purchase shares of our common stock to each of our named executive officers during fiscal 2003.
Individual Grants Number of Securities Underlying Options Granted % of Total Options Granted to Employees in Fiscal Year Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term 5% 10%

Name

Exercise Price Per Share

Expiration Date

Marc Benioff Steve Cakebread Jim Steele Jim Cavalieri David Schellhase

— 1,000,000 1,350,000 200,000 250,000

— 11 % 18 2 3 59 $

— 1.10 1.10 1.10 1.10

— 6/12/12 10/7/12 8/16/12 8/16/12

— $ $

—

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Potential realizable values are calculated by:    multiplying the number of shares of our common stock subject to a given option by the assumed initial public offering price of $ per share; assuming that the aggregate stock value derived from that calculation compounds at the annual 5 percent or 10 percent rates shown in the table for the entire ten-year term of the option; and subtracting from that result the total option exercise price.

The 5 percent and 10 percent assumed annual rates of stock price appreciation are required by the rules of the SEC and do not represent our estimate or projection of future stock price growth. Aggregated Option Exercises in Fiscal 2003 and Year-End Option Values The following table provides information concerning options exercised during fiscal 2003, and unexercised options held as of January 31, 2003, by each of our named executive officers:
Shares Acquired on Exercise Value Realized(1) Number of Securities Underlying Unexercised Option at Fiscal Year-End Exercisable Unexercisable Value of Unexercised In-the-Money Options at Fiscal Year-End(1) Exercisable Unexercisable

Name

Marc Benioff Steve Cakebread Jim Steele Jim Cavalieri David Schellhase (1)

— 250,000 337,500 — —

— $ — —

— 750,000 1,012,500 425,000 250,000

— — — — —

— $ $

—

Based on an assumed initial public offering price of $ upon the exercise of, or subject to, the option.

per share, minus the exercise price, multiplied by the number of shares issued

Our 1999 Stock Option Plan, 2004 Equity Incentive Plan and 2004 Outside Directors Stock Plan allow for the early exercise of options granted. All options exercised early are subject to repurchase by us at the original exercise price or, for some options, at the lower of the original purchase price or fair market value at the time of repurchase. Our repurchase right lapses over time. Amounts presented under the captions ―Value Realized‖ and ―Value of Unexercised In-the-Money Options at Fiscal Year-End‖ are based on an assumed initial public offering price of $ per share minus the exercise price, multiplied by the number of shares subject to the option, without taking into account any taxes that may be payable in connection with the transaction. Employment Agreements and Change in Control Agreements Executive Officer Employment Agreements Each of our named executive officers has signed offer letters which provide that the officer is an at-will employee. The offer letters provide for salary, in some instances an annual bonus that is based upon our financial performance and the successful completion of specified performance objectives, stock options, and participation in our employee benefit plans. In addition, the board of directors approved in December 2003 a change in control provision that would affect the compensation of certain of our executive officers. Specifically, if we experience a change in control, and the employment of Messrs. Benioff, Cakebread or Steele is terminated without cause, or if such officer terminates his employment for certain reasons including changes in job responsibilities, geographic movement or a change in reporting status during the 12-month period following the change in control, then the vesting of the 60

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unvested stock options held by such officer automatically accelerates by six months from the date of the change in control. Information for fiscal 2003 regarding the compensation earned by our named executive officers is described in ―Executive Compensation‖ above. Employee Benefit Plans 1999 Stock Option Plan In April 1999, our board of directors adopted and our stockholders approved the 1999 Stock Option Plan, the 1999 Plan. A total of 36,000,000 shares of common stock have been reserved for issuance under this plan. As of October 31, 2003, there were outstanding under the 1999 Plan options to purchase 14,876,392 shares of common stock at a weighted average exercise price per share of $1.63. As of October 31, 2003, a total of 2,400,334 shares of common stock remained available for future option grants. Under the 1999 Plan, our employees, directors and consultants, and those of any parent or subsidiary of ours, are eligible to receive nonstatutory stock options. Employees are eligible also to receive ―incentive stock options,‖ within the meaning of Section 422 of the Internal Revenue Code. This plan is administered by our board of directors. Subject to the provisions of the 1999 Plan, the board determines in its discretion the persons to whom and the times at which options are granted, the types and sizes of such options, and all of their terms and conditions. All options must be evidenced by a written agreement between us and the participant. The board may amend, cancel, renew or reprice any option, grant a new option in substitution for any option, waive any restrictions or conditions applicable to any option, and accelerate, continue, extend or defer the vesting of any option. The board has the authority to construe and interpret the terms of the 1999 Plan and options granted under it. The exercise price of nonstatutory stock options granted under the 1999 Plan must be at least 85 percent of the fair market value of a share of our common stock on the date of grant. The exercise price of incentive stock options cannot be less than 100 percent of the fair market value of a share of our common stock on the date of grant. In the case of any options granted to a person who owns stock possessing more than 10 percent of the total combined voting power of all classes of our stock or of any parent or subsidiary corporation, the exercise price cannot be less than 110 percent of such fair market value. The term of an option cannot exceed 10 years, or 5 years for incentive stock options granted to 10 percent stockholders. Unless a longer period is provided by the board, an option generally remains exercisable for 30 days following the participant‘s termination of service, except that if service terminates as a result of the participant‘s death or disability, the option generally remains exercisable for twelve months, but in any event not beyond the expiration of its term. Shares subject to options granted under the 1999 Plan generally vest, conditioned upon the participant‘s continued service, over a period of four years, with 25 percent vesting after one year and the balance vesting in equal monthly installments over the remaining 36 months. If we experience a change in control, the acquiring or successor corporation may assume or substitute substantially equivalent options for the outstanding options granted under the 1999 Plan. If the acquiring or successor corporation elects not to assume or substitute for outstanding options granted under the 1999 Plan, shares subject to the options will become fully exercisable and vested ten days prior to the date of the change in control. On completion of a change in control all outstanding options will terminate to the extent not exercised or assumed by the acquiring or successor corporation. 2004 Equity Incentive Plan Our 2004 Equity Incentive Plan, the Equity Plan, was approved by our board of directors in December 2003 and will be effective upon its approval by our stockholders, currently anticipated in January 2004. 61

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Purpose. The Equity Plan is intended to make available incentives that will assist us to attract, retain and motivate service providers whose contributions are essential to our success. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares and performance units. Shares Subject to Equity Plan. A total of 4,000,000 shares of our common stock are initially authorized and reserved for issuance under the Equity Plan. This authorization will automatically increase on February 1, 2005 and each subsequent anniversary through 2013 as follows: (1) in 2005 and 2006 by the lesser of 5 percent of our then outstanding shares of common stock or 5,000,000 shares, (2) in 2007 and 2008 by the lesser of 4 percent of our then outstanding shares of common stock or 4,000,000 shares, and (3) in each year from 2009 through 2013 by the lesser of 3.5 percent of our then outstanding shares of common stock or 3,500,000 shares. The board of directors may elect to reduce, but not increase without also obtaining stockholder approval, the number of additional shares authorized in any year. Appropriate adjustments will be made in the number of authorized shares and in outstanding awards to prevent dilution or enlargement of participants‘ rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the Equity Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number of shares issued upon the exercise of stock appreciation rights or options exercised by tender of previously owned shares will be deducted from the shares available under the Equity Plan. Administration . The administrator of our Equity Plan will generally be the compensation committee of our board of directors, although the board may delegate to one or more of our officers authority, subject to limitations specified by the plan and the board, to grant stock options to service providers who are neither officers nor directors of us. Subject to the provisions of the plan, the administrator determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. All awards must be evidenced by a written agreement between us and the participant. The administrator may amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The administrator has the authority to construe and interpret the terms of the Equity Plan and awards granted under it. Eligibility . Awards may be granted under the Equity Plan to our employees, including officers, directors, or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. While we grant incentive stock options only to employees, we may grant nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares and performance units to any eligible participant. Stock Options. The administrator may grant nonstatutory stock options, ―incentive stock options,‖ within the meaning of Section 422 of the Internal Revenue Code, or any combination of these. The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant. Any incentive stock option granted to a person who owns stock possessing more than 10 percent of the total combined voting power of all classes of our stock or of any parent or subsidiary corporation must have an exercise price equal to at least 110 percent of the fair market value of a share of our common stock on the date of grant and a term not exceeding five years. The term of all other options may not exceed ten years. Options vest and become exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the administrator. Unless a longer period is provided by the administrator, an option generally will remain exercisable for three months following the participant‘s termination of service, except that if service terminates as a result of the participant‘s death or disability, the option generally will remain exercisable for twelve months, but in any event not beyond the expiration of its term. Stock Appreciation Rights . A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of our common stock between the date of grant of the award and the date of its exercise. We may pay the appreciation either in cash or in shares of our common stock. We may make this 62

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payment in a lump sum, or we may defer payment in accordance with the terms of the participant‘s award agreement. The administrator may grant stock appreciation rights under the Equity Plan in tandem with a related stock option or as a freestanding award. A tandem stock appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. Freestanding stock appreciation rights vest and become exercisable at the times and on the terms established by the administrator. The maximum term of any stock appreciation right granted under the Equity Plan is ten years. Restricted Stock Awards . The administrator may grant restricted stock awards under the Equity Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase our common stock, or in the form of a restricted stock bonus, for which the participant furnishes consideration in the form of services to us. The administrator determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the administrator specifies, and the shares acquired may not be transferred by the participant until vested. Unless otherwise determined by the administrator, a participant will forfeit any unvested shares upon voluntary or involuntary termination of service with us for any reason, including death or disability. Participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award. Restricted Stock Units . Restricted stock units granted under the Equity Plan represent a right to receive shares of our common stock at a future date determined in accordance with the participant‘s award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant‘s services to us. The administrator may grant restricted stock unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. The Equity Plan also authorizes the administrator to establish a deferred compensation award program under which selected participants may elect to receive fully vested stock units in lieu of compensation otherwise payable in cash or in lieu of cash or shares of stock otherwise issuable upon the exercise of stock options, stock appreciation rights, performance shares or performance units. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards. However, the administrator may grant restricted stock units that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends we pay. Performance Shares and Performance Units . The administrator may grant performance shares and performance units under the Equity Plan, which are awards that will result in a payment to a participant only if specified performance goals are achieved during a specified performance period. Performance share awards are denominated in shares of our common stock, while performance unit awards are denominated in dollars. In granting a performance share or unit award, the administrator establishes the applicable performance goals based on one or more measures of business performance enumerated in the Equity Plan, such as revenue, gross margin, net income, cash flow, return on capital or market share. To the extent earned, performance share and unit awards may be settled in cash, shares of our common stock, including restricted stock, or any combination of these. Payments may be made in lump sum or on a deferred basis. If payments are to be made on a deferred basis, the administrator may provide for the payment of dividend equivalents or interest during the deferral period. Unless otherwise determined by the administrator, if a participant‘s service terminates due to death or disability prior to completion of the applicable performance period, the final award value is determined at the end of the period on the basis of the performance goals attained during the entire period, but payment is prorated for the portion of the period during which the participant remained in service. Except as otherwise provided by the Equity Plan, if a participant‘s service terminates for any other reason, the participant‘s performance shares or units are forfeited. Change in Control . In the event of a change in control, the acquiring or successor entity may assume all stock options and stock appreciation rights outstanding under the Equity Plan or substitute substantially 63

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equivalent options and stock appreciation rights. If the outstanding stock options and stock appreciation rights are not assumed by the acquiring or successor entity, then all unexercised portions of such outstanding awards will terminate. Alternatively, the administrator may provide for the cancellation of outstanding stock options or stock appreciation rights in exchange for a payment in cash, stock or other property having a value equal to the difference between the exercise price of the award and the consideration payable in the change in control transaction with respect to the number of vested shares subject to the award. The administrator may accelerate the vesting and settlement of any award upon a change in control. Amendment and Termination. The Equity Plan will continue in effect until the tenth anniversary of its approval by the stockholders, unless earlier terminated by the administrator. The administrator may amend, suspend or terminate the Equity Plan at any time, provided that without stockholder approval, the plan cannot be amended to increase the number of shares authorized, change the class of persons eligible to receive incentive stock options or effect any other change that would require stockholder approval under any applicable law or listing rule. Amendment, suspension or termination of the Equity Plan may not adversely affect any outstanding award without the consent of the participant, unless such amendment, suspension or termination is necessary to comply with applicable law. 2004 Outside Directors Stock Plan Our 2004 Outside Directors Stock Plan, the Directors Plan, was approved by our board of directors in December 2003 will be effective on upon its approval by our stockholders, currently anticipated in January 2004. Purpose. The Directors Plan is intended to advance our interests and the interests of our stockholders by providing an incentive to attract, retain and reward independent members of our board of directors. We may provide these incentives through the grant of stock options, restricted stock and restricted stock units. Shares Subject to Directors Plan. A total of 1,000,000 shares of our common stock are authorized and reserved for issuance under the Directors Plan. Appropriate adjustments will be made in the number of authorized shares and in outstanding awards to prevent dilution or enlargement of participants‘ rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are canceled or forfeited will again become available for issuance under this plan. The shares available will not be reduced by shares withheld to satisfy tax withholding obligations. Only the net number of shares issued upon the exercise of options by tender of previously owned shares will be deducted from the shares available under the Directors Plan. Administration . The administrator of our Directors Plan will be either our board of directors or a committee of the board appointed by our board to administer the plan. Subject to the provisions of the plan and except for the automatic grant of quarterly stock awards as described below, the administrator determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. All awards must be evidenced by a written agreement between us and the participant. The administrator may amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The administrator has the authority to construe and interpret the terms of the Directors Plan and awards granted under it. Eligibility. An award may be granted under the Directors Plan only to a person who is serving, at the time of grant, as a member of our board of directors and who is neither our employee nor a consultant to us or any of our parents or subsidiaries. We refer to such persons as Outside Directors. Automatic Grant of Stock Awards. The Directors Plan provides for the automatic grant of a stock award to each eligible Outside Director on the first day of each of our fiscal quarters, commencing with the first quarter that begins after the effective date of the registration of our common stock in connection with this offering and 64

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continuing during the ten-year term of the plan. These awards are granted as compensation for our Outside Directors‘ service during the preceding fiscal quarter, and only those Outside Directors who have served for the entire preceding fiscal quarter are eligible. Each eligible Outside Director will receive a basic quarterly award of 3,750 shares of our common stock. This basic award will be increased by 1,250 shares for each committee of the board on which the participant served for the entire preceding fiscal quarter and by an additional 1,250 shares for each such committee for which the participant served as chairperson for the entire preceding fiscal quarter. The shares of our common stock subject to these automatic quarterly awards will be fully vested upon grant. Stock Options. The administrator may grant nonstatutory stock options to any Outside Director, the exercise price of which will equal the fair market value of a share of our common stock on the date of grant. Such options will vest and become exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the administrator. Unless a longer period is provided by the administrator, an option generally will remain exercisable for three months following the participant‘s termination of service, except that if service terminates as a result of the participant‘s death or disability, the option generally will remain exercisable for twelve months, but in any event not beyond the expiration of its term. Restricted Stock Awards. The administrator may grant restricted stock bonus awards under the Directors Plan to any Outside Director in consideration for the participant‘s services to us. Such awards will be substantially similar to the restricted stock bonus awards described above in connection with the Equity Plan. Restricted Stock Units . The administrator may grant restricted stock unit awards under the Directors Plan to any Outside Director in consideration for the participant‘s services to us. Such awards will be substantially similar to the restricted stock unit awards described above in connection with the Equity Plan. Change in Control. In the event of a change in control, the acquiring or successor entity may assume all stock options outstanding under the Directors Plan or substitute substantially equivalent options. Any such options that are assumed or replaced with equivalent options will continue to be exercisable for six months, but not beyond the expiration of the option‘s term, following the participant‘s termination of service if such service terminates for any reason, except death or disability, within 12 months following the change in control. If the stock options are not assumed by the acquiring or successor entity, then all unexercised portions of such options will terminate. Alternatively, the administrator may provide for the cancellation of outstanding stock options in exchange for a payment in cash, stock or other property having a value equal to the difference between the exercise price of the option and the consideration payable in the change in control transaction with respect to the number of vested shares subject to the option. The administrator may accelerate the vesting and settlement of any award upon a change in control. Amendment and Termination. The Directors Plan will continue in effect until terminated by the administrator. At the present time no awards will be granted under the Directors Plan after the tenth anniversary of the date of its approval by our stockholders. The administrator may amend, suspend or terminate the Directors Plan at any time, provided that without stockholder approval, the Directors Plan cannot be amended to increase the number of shares authorized or effect any other change that would require stockholder approval under any applicable law or listing rule. Amendment, suspension or termination of the Directors Plan may not adversely affect any outstanding award without the consent of the participant, unless such amendment, suspension or termination is necessary to comply with applicable law. 2004 Employee Stock Purchase Plan Our 2004 Employee Stock Purchase Plan, the Purchase Plan, was adopted by our board of directors in December 2003. Subject to its approval by our stockholders, currently anticipated in January 2004, the Purchase Plan will become effective upon the closing of this offering. 65

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Purpose. The purpose of the Purchase Plan is to advance our interests and the interests of our stockholders by providing an incentive to attract, retain and reward eligible employees. It is intended to qualify as an ―employee stock purchase plan‖ under Section 423 of the Internal Revenue Code. Shares Subject to Purchase Plan . A total of 1,000,000 shares of our common stock are initially authorized and reserved for sale under the Purchase Plan. In addition, the Purchase Plan provides for an automatic annual increase in the number of shares available for issuance under the plan on February 1 of each year beginning in 2005 and continuing through 2013 equal to the smallest of (1) 1 percent of our then outstanding shares of common stock, (2) one million shares or (3) a lesser number of shares as our board may determine. Appropriate adjustments will be made in the number of authorized shares and in outstanding purchase rights to prevent dilution or enlargement of participants‘ rights in the event of a stock split or other change in our capital structure. Shares subject to purchase rights which expire or are canceled will again become available for issuance under the Purchase Plan. Administration . Our board of directors or a committee of the board will serve as administrator of the Purchase Plan. The administrator has the authority to construe and interpret the terms of the Purchase Plan and the purchase rights granted under it, to determine eligibility to participate, and to establish policies and procedures for administration of the plan. Eligibility . Our employees and employees of any parent or subsidiary corporation designated by the administrator are eligible to participate in the Purchase Plan if they are customarily employed by us for more than 20 hours per week and more than five months in any calendar year. However, an employee may not be granted a right to purchase stock under the Purchase Plan if: (1) the employee immediately after grant would own stock possessing 5 percent or more of the total combined voting power or value of all classes of our capital stock or of any parent or subsidiary corporation, or (2) the employee‘s rights to purchase stock under all of our employee stock purchase plans would accrue at a rate that exceeds $25,000 in value for each calendar year of participation in such plans. Offering Periods . The Purchase Plan is implemented through a series of sequential offering periods, generally six months in duration beginning on the first trading day on or after March 1 and September 1 of each year, except that the first offering period will commence on the effective date of the Purchase Plan and will end on August 31, 2004. The administrator is authorized to establish additional or alternative sequential or overlapping offering periods and offering periods having a different duration or different starting or ending dates, provided that no offering period may have a duration exceeding 27 months. Participation. Eligible employees who enroll in the Purchase Plan may elect to have up to 15 percent of their eligible compensation withheld and accumulated for the purchase of shares at the end of each offering period in which they participate. However, all eligible employees will be automatically enrolled in the Purchase Plan‘s initial offering period and may only purchase shares by delivering an exercise notice and payment of the applicable purchase price prior to the initial purchase date, provided that participants may elect to begin payroll deductions under the Purchase Plan after the effective date of a Form S-8 registration statement registering the shares reserved for issuance under the Purchase Plan. Participants may voluntarily withdraw from the Purchase Plan at any time during an offering period and receive a refund, without interest, of all amount withheld from compensation not previously applied to purchase shares. Participation ends automatically upon termination of employment. Purchase of Shares . Amounts accumulated for each participant are used to purchase shares of our common stock at the end of each offering period at a price generally equal to 85 percent of the lower of the fair market value of our common stock at the beginning of an offering period or at the end of the offering period. Prior to commencement of an offering period, the administrator is authorized to reduce, but not increase, this purchase price discount for that offering period, or, under circumstances described in the Purchase Plan, during that offering period. The maximum number of shares a participant may purchase in any six-month offering 66

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period is the lesser of 750 shares or a number of shares determined by dividing $12,500 by the fair market value of a share of our common stock at the beginning of the offering period. Prior to the beginning of any offering period, the administrator may alter the maximum number of shares that may be purchased by any participant during the offering period or specify a maximum aggregate number of shares that may be purchased by all participants in the offering period. If insufficient shares remain available under the plan to permit all participants to purchase the number of shares to which they would otherwise be entitled, the administrator will make a pro rata allocation of the available shares. Any amounts withheld from participants‘ compensation in excess of the amounts used to purchase shares will be refunded, without interest. Change in Control . In the event of a change in control, an acquiring or successor corporation may assume our rights and obligations under the Purchase Plan. If the acquiring or successor corporation does not assume such rights and obligations, then the purchase date of the offering periods then in progress will be accelerated to a date prior to the change in control. Amendment and Termination. The Purchase Plan will continue in effect until terminated by the administrator. The administrator may amend, suspend or terminate the Purchase Plan at any time, provided that unless stockholder approval is obtained within 12 months of such amendment, the plan cannot be amended to increase the number of shares authorized or change the definition of the corporations that may be designated by the administrator for participation in the plan. Amendment, suspension or termination of the Purchase Plan may not adversely affect any purchase rights previously granted without the consent of the participant, unless such amendment, suspension or termination is necessary to qualify the plan under Section 423 of the Internal Revenue Code or to comply with applicable law, or is effected after a determination by the administrator that continuation of the plan or an offering period would result in unfavorable accounting consequences to us as a result of a change, after the plan‘s effective date, in the generally accepted accounting principles applicable to the Purchase Plan. 401(k) Plan In June 2000, our board of directors adopted the salesforce.com, inc. 401(k) Plan, which is intended to be a tax-qualified defined contribution plan under Sections 401(a) and 401(k) of the Internal Revenue Code. Under the terms of the plan as amended and restated effective January 1, 2003, eligible employees may elect to contribute up to 50 percent of their eligible compensation as salary deferral contributions to the plan, subject to certain statutorily prescribed limits ($12,000 in calendar year 2003). In addition, effective January 1, 2002, eligible employees may elect to contribute an additional amount of their eligible compensation as a catch-up contribution to the 401(k) plan, provided that such eligible employees are anticipated to reach age 50 before the end of the applicable year and subject to certain statutorily prescribed limits, $2,000 in calendar year 2003. The 401(k) plan also permits, but does not require, that we make discretionary matching contributions. To date, we have not made any such discretionary matching contributions to the plan. As a tax-qualified plan, we can generally deduct contributions to the 401(k) plan when made, and such contributions are not taxable to participants until distributed from the plan. Pursuant to the terms of the 401(k) plan, participants may direct the trustees to invest their accounts in selected investment options. Limitation of Liability and Indemnification Our amended and restated certificate of incorporation will contain provisions limiting the liability of directors. It will provide that a director will not be personally liable to us or to our stockholders for monetary damages for any breach of fiduciary duty as a director, but will continue to be subject to liability for the following:   any breach of the director‘s duty of loyalty to us or to our stockholders; acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; 67

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 

unlawful payment of dividends or unlawful stock repurchases or redemptions; and any transaction from which the director derived an improper personal benefit.

Our bylaws provide that:    we are required to indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions where indemnification is not permitted by applicable law; we are required to advance expenses, as incurred, to our directors and officers in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and the rights conferred in the bylaws are not exclusive.

If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our amended and restated certificate of incorporation will not eliminate a director‘s duty of care and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief remain available under Delaware law. Our amended and restated certificate of incorporation will not affect a director‘s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws. In addition, we have entered into agreements to indemnify our directors and executive officers to the fullest extent permitted under Delaware law, including the non-exclusivity provisions of Delaware law, and our bylaws, subject to limited exceptions. These agreements, among other things, provide for indemnification of our directors and executive officers for fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person‘s service as a director or officer, including any action by us, arising out of that person‘s services as our director or officer or that person‘s services provided to any other company or enterprise at our request. We believe that these bylaw provisions and agreements are necessary to attract and retain qualified persons as directors and officers. We also intend to maintain liability insurance for our officers and directors. The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder‘s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 68

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Since our inception on February 3, 1999, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $60,000 and in which any current director, executive officer, holder of more than 5 percent of our common stock or entities affiliated with them had or will have an interest, other than as described under ―Management‖ and in the transactions described below. For transactions described in this section that occurred prior to July 1999, we have adjusted the share and per share purchase price information to reflect a five-for-one stock split of our common and preferred stock effected in July 1999. Stock Sales to Insiders The following table summarizes sales by us of our common stock since inception to our executive officers, directors and holders of more than 5 percent of our total voting securities.
Shares of Common Stock Total Purchase Price Date of Purchase

Executive Officers and Directors: Marc Benioff Jim Steele Steve Cakebread Jim Cavalieri Parker Harris David Moellenhoff Magdalena Yesil Five Percent Stockholders: Halsey Minor

10,000,000 500,000 337,500 50,000 200,000 275,000 50,000 1,250,000 1,250,000 500,000 500,000

$

20,000 10,000 371,250 55,000 220,000 8,250 1,500 2,500 2,500 10,000 10,000

4/27/99 7/15/99 12/23/02 8/20/02 12/5/02 7/27/99 5/7/00 7/22/99 7/22/99 7/20/99 7/27/99

In April 1999, we issued a $62,875 convertible note payable to Mr. Benioff. During fiscal 2000, $20,000 of the note was converted into 10,000,000 shares of our common stock, $10,000 of the note was used to exercise an option grant for 500,000 shares of our common stock, and $32,875 plus accrued interest was repaid. 69

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The following table summarizes sales by us of our preferred stock since inception to our executive officers, directors and holders of more than 5 percent of our total voting securities.
Shares of Series A Preferred Stock Shares of Series B Preferred Stock Shares of Series C Preferred Stock Shares of Series D Preferred Stock Total Purchase Price Date of Purchase

Executive Officers and Directors: Marc Benioff

Parker Harris David Moellenhoff Stratton Sclavos Magdalena Yesil Five Percent Stockholders: Attractor Funds Halsey Minor

22,000,000 — — — — 1,250,000 — 1,250,000 — — — — — — — —

— 1,375,000 — — — — 83,335 — 83,335 — 1,666,665 — — 5,000,000 — —

— — 571,429 — — — — — — — —

— — — 1,029,306 62,990 — — — — 25,707 — — 3,341,902 — — 3,341,902

$

440,000 412,500 1,000,000 4,004,000 245,031 25,000 25,000 25,000 25,000 100,000 500,000

4/27/99 6/28/99 11/22/99 3/30/00 11/28/00 4/27/99 6/28/99 4/27/99 6/28/99 3/30/00 6/28/99

1,428,572 — — 2,857,142 —

2,500,001 13,000,000 1,500,000 5,000,000 13,000,000

11/22/99 3/30/00 6/28/99 1/22/99 3/30/00

We sold 25,850,000 shares of our Series A preferred stock in April 1999 at $0.02 per share, for total proceeds of $517,000. We sold 12,588,345 shares of our Series B preferred stock in June 1999 at $0.30 per share, for total proceeds of $3,776,504. We sold 7,526,640 shares of our Series C preferred stock in November 1999 at $1.75 per share, for total proceeds of $13,171,620. We sold 12,059,360 shares of our Series D preferred stock from March 2000 to June 2001 at $3.89 per share, for total proceeds of $46,910,910. In conjunction with the sale of our Series D preferred stock, we issued warrants to purchase 580,639 shares of Series D preferred stock at an exercise price of $3.89 per share to Attractor Funds. Director and Officer Indemnification Our amended and restated certificate of incorporation will contain provisions limiting the liability of our directors and our bylaws contain provisions requiring us to indemnify our officers and directors. In addition, we have entered into agreements to indemnify our directors and executive officers to the fullest extent permitted under Delaware law. See ―Management—Limitation of Liability and Indemnification.‖ Other Transactions with Stockholders Subleasing office space We sublease a portion of our San Francisco office facility to a company in which Mr. Benioff, our Chief Executive Officer, is a majority stockholder. In October 2001, the sublease tenant paid us $110,000 for early termination of the sublease agreement with respect to a portion of the leased space. Transactions with the salesforce.com/foundation In January 1999, the salesforce.com/foundation, commonly referred to as the Foundation, a non-profit public charity, was chartered with the intent of building philanthropic programs that were particularly focused on 70

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youth and technology. Our chairman, Mr. Benioff, is the chairman of the Foundation. He and Mr. Moellenhoff, our Chief Technology Officer, hold two of the Foundation‘s seven board seats. In June 2002, we issued warrants to purchase 500,000 shares of our common stock to the Foundation at an exercise price per share of $1.10. As of October 31, 2003, the Foundation had not exercised these warrants. Additionally, through the donation of shares of our common stock by our officers and employees, the Foundation owned 286,000 shares of common stock as of October 31, 2003. Since the Foundation‘s inception, we have provided, at no charge, certain resources to Foundation employees such as office space. The value of these items totaled $60,000 in each of fiscal 2001, 2002 and 2003, and $45,000 for the nine months ended October 31, 2003. In addition, as part of our commitment to the Foundation, we have donated subscriptions for our service to a variety of registered section 501(c)(3) nonprofit organizations. Japanese Joint Venture Our Japanese joint venture, Kabushiki Kaisha salesforce.com, was established pursuant to a joint venture agreement that we entered into with SunBridge, Inc., a Japanese corporation, in December 2000. The agreement provides that the joint venture will terminate if the joint venture becomes a public company or is sold to a third party, or upon the mutual agreement of the parties. In addition, if we commit a breach of, or if we fail to perform, our material obligations under the joint venture agreement which we do not cure in a timely manner, SunBridge can require that we purchase all of its shares in the joint venture. The purchase price for SunBridge‘s shares would be the then fair market value plus a specified premium. In the event that SunBridge commits a breach of, or if it fails to perform, its material obligations under the joint venture agreement which it does not cure in a timely manner, or if SunBridge enters into bankruptcy proceedings, we can require that SunBridge sell to us all of its shares in the joint venture. The purchase price for SunBridge‘s shares would be their fair market value less a specified discount. Additionally, if we and SunBridge are unable to agree on certain operational matters, SunBridge can require that we purchase all of its shares of the joint venture at a price equal to the then fair market value, and we can require that SunBridge sell to us all of its shares of the joint venture at a price equal to the then fair market value. Fair market value is to be determined by mutual agreement of the parties, or if the parties are unable to agree, by an independent appraiser. We have also entered into a consulting agreement with the joint venture under which we have agreed to provide management and administrative services to the Japanese joint venture. We charge the joint venture for providing these services at rates that we consider to be fair value. Employee Loans We have provided loans totaling approximately $1.5 million to employees, none of whom is an executive officer, in connection with the early exercise of stock options. We have received full recourse promissory notes from each individual in connection with these loans. The promissory notes have an annual interest rate of 6 percent and are due at various dates through September 2005. 71

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PRINCIPAL STOCKHOLDERS The following table sets forth, as of December 17, 2003, information regarding beneficial ownership of our capital stock by the following:     each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5 percent of any class of our voting securities; each of our directors; each of the named executive officers; and all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC, and does not necessarily indicate beneficial ownership for any other purpose. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person are deemed to be outstanding if the options are exercisable within 60 days of the date of this table. The shares subject to options are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. All percentages in this table are based on a total of 89,139,519 shares of our convertible preferred and common stock outstanding on December 17, 2003 and shares of common stock to be outstanding following completion of this offering and conversion of all outstanding shares of our convertible preferred stock into common stock upon the closing of the offering. Except as indicated in the footnotes below, we believe, based on information furnished to us and subject to community property laws where applicable, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address for each of the stockholders in the table below is salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105.
Beneficially Owned Shares Before Offering Percent After Offering

Name and Address of Beneficial Owner

Executive Officers and Directors: Marc Benioff Parker Harris Magdalena Yesil David Moellenhoff (1) Jim Steele (2) Craig Ramsey (3) Steve Cakebread (4) Jim Cavalieri (5) Sanford R. Robertson (6) Larry Tomlinson (7) Stratton Sclavos (8) David Schellhase (9) Alan Hassenfeld (10) All directors and executive officers as a group (13 persons) Five Percent Stockholders: Halsey Minor (11) Attractor Funds (12) * (1) Less than one percent (1%).

28,179,071 2,370,507 2,066,665 1,642,005 1,350,000 1,300,000 1,000,000 750,000 300,000 300,000 275,707 250,000 200,000 39,983,955 9,099,044 5,351,113

31.6 % 2.7 2.3 1.8 1.5 1.5 1.1 * * * * * * 44.9 % 10.2 % 6.0

%

% %

Includes 62,500 shares held by the David V. Moellenhoff, Trustee, The David V. Moellenhoff Grantor Retained Annuity Trust, dated December 15, 2003, 62,500 shares held by the Pamela A. Moellenhoff, 72

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Trustee, The Pamela A. Moellenhoff Grantor Retained Annuity Trust, dated December 15, 2003 and 1,517,005 shares held by David V. Moellenhoff and Pamela A. Moellenhoff, Trustees, The Moellenhoff Family Trust, dated February 12, 2002. (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Includes 1,012,500 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, of which 112,500 will be vested and 900,000 will be unvested. Includes 300,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003. None of the 300,000 shares will have vested within 60 days of December 17, 2003. Includes 750,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003, of which 145,831 will be vested and 604,169 will be unvested. Includes 425,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003, of which 295,835 will be vested and 129,165 will be unvested. Includes 300,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003. None of the 300,000 shares will have vested within 60 days of December 17, 2003. Includes 300,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003. None of the 300,000 shares will have vested within 60 days of December 17, 2003. Includes 250,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003, all of which will be vested. Includes 250,000 shares issuable upon the exercise of options that are exercisable within 60 days of December 17, 2003, of which 88,540 will be vested and 161,460 will be unvested. Includes 200,000 shares issuable upon the exercise of options granted to Mr. Hassenfeld in December 2003. None of the 200,000 shares will have vested within 60 days of December 17, 2003. All 9,099,044 shares are held by The Minor Revocable Trust. Includes 580,639 shares issuable upon the exercise of warrants that are exercisable. The address of Attractor Funds is 1440 Chapin Avenue, Suite 201, Burlingame, California 94010. 73

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DESCRIPTION OF CAPITAL STOCK Upon completion of this offering and the filing of our amended and restated certificate of incorporation immediately following the closing of this offering, our authorized capital stock will consist of 400,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of undesignated preferred stock, $0.001 par value. The following description of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by, our amended and restated certificate of incorporation and bylaws, which are exhibits to the registration statement of which this prospectus forms a part. Common Stock As of October 31, 2003, 89,063,519 shares of our common stock were outstanding and held of record by 304 stockholders. This amount assumes the conversion upon the closing of this offering of all outstanding shares of our convertible preferred stock, totaling 58,024,345 shares, into common stock. In addition, as of October 31, 2003, 14,876,392 shares of our common stock were subject to outstanding options and 1,299,496 shares of our common stock were subject to outstanding warrants. Upon completion of this offering, shares of our common stock will be outstanding, assuming no exercise of outstanding stock options or warrants or the underwriters‘ over-allotment option. Each share of our common stock entitles its holder to one vote on all matters to be voted upon by our stockholders. Subject to preferences that may apply to any of our outstanding convertible preferred stock, holders of our common stock will receive ratably any dividends our board of directors declares out of funds legally available for that purpose. If we liquidate, dissolve or wind up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and any liquidation preference of any of our outstanding convertible preferred stock. Our common stock has no preemptive rights, conversion rights, or other subscription rights or redemption or sinking fund provisions. The shares of our common stock to be issued upon completion of this offering will be fully paid and non-assessable. Preferred Stock After the filing of our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series. Our 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 our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock, or delaying or preventing a change in control. The ability to issue preferred stock could delay or impede a change in control. After the completion of this offering, no shares of preferred stock will be outstanding, and we currently have no plan to issue any shares of preferred stock. Warrants As of October 31, 2003, warrants to purchase a total of 1,299,496 shares of our common stock were outstanding with exercise prices ranging from $1.10 to $3.89 per share and a weighted average exercise price of $2.43 per share. Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations and reclassifications and consolidations. Registration Rights The holders of 58,689,984 shares of our common stock issuable upon the automatic conversion of all outstanding shares of our convertible preferred stock, including 665,639 shares of common stock issuable upon 74

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the exercise of warrants to purchase our convertible preferred stock, are entitled to rights to cause their shares to be registered under the Securities Act. These registration rights are contained in our second amended and restated rights agreement and in certain outstanding warrants, which incorporate the terms of the rights agreement. These registration rights include demand registration rights, piggyback registration rights exercisable in connection with any registration proposed by us, and Form S-3 registration rights, as described below. The registration rights under the rights agreement will expire seven years following the completion of this offering, or for any particular stockholder with registration rights, at such time following this offering when all securities held by that stockholder subject to registration rights may be sold pursuant to Rule 144 under the Securities Act during any three month period. Demand Registration Rights At any time six months after the closing of this offering, and before the expiration of these registration rights, if requested by the holders of at least a majority of our then outstanding shares of common stock having registration rights under the rights agreement, we will be required to register all or a portion of their shares, as long as the portion constitutes at least 20 percent of all then outstanding shares having registration rights. We are only required to effect two registrations in response to this demand registration right. Also, during the same period of time, if requested by the holders of at least a majority of our then outstanding shares of common stock issued upon conversion of our Series D preferred stock that have registration rights under the rights agreement, we will be required to register all or a portion of their shares, as long as the portion constitutes at least 15 percent of all then outstanding shares having registration rights. We are only required to effect one registration in response to this demand registration right. Each demand registration right exercised must cover a sale of securities with a total aggregate public offering price, net of commissions, of more than $10.0 million. We may postpone the filing of any registration statement for up to 90 days once in any 12-month period if we determine that the filing would be seriously detrimental to us and our stockholders. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights, provided that the number may not be reduced unless all other securities are excluded from the registration statement. We must pay all expenses, except for underwriters‘ discounts and commissions, incurred in connection with these demand registration rights, except that we are not required to pay for expenses incurred if the holders who exercise these rights later withdraw their request for registration. Piggyback Registration Rights If we register any securities for public sale, our stockholders with registration rights under the rights agreement have the right to include their shares in the registration, subject to specified exceptions. The underwriters of any underwritten offering have the right to limit the number of shares registered by these stockholders, subject to certain limitations. We must pay all expenses, except for underwriters‘ discounts and commissions, incurred in connection with these piggyback registration rights, except that we are not required to pay for expenses incurred in respect of holders who exercise these rights and later withdraw their request to be included in the registration. Form S-3 Registration Rights If we are eligible to file a registration statement on Form S-3, holders of shares of our common stock having Form S-3 registration rights under the rights agreement can request that we register their shares, provided that the total price of the shares of common stock offered to the public is at least $1.0 million and subject to other exceptions. We are not required to file a registration statement on Form S-3 if we have already effected two registrations on Form S-3 at the request of the holders of shares having these registration rights in the 12-month period prior to the holder‘s request. We may postpone the filing of a registration statement for up to 90 days once in any 12-month period if we determine that the filing would be seriously detrimental to us and our stockholders. Each holder exercising Form S-3 registration rights must pay a pro rata portion of all expenses, except for underwriters‘ discounts and commissions, based on the number of shares being offered by such holder. 75

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Anti-Takeover Provisions Some provisions of Delaware law, our amended and restated certificate of incorporation and our bylaws may have the effect of delaying, deferring or discouraging another party from acquiring control of us. Delaware Law We are subject to Section 203 of the Delaware General Corporation Law, which regulates, subject to some exceptions, acquisitions of publicly-held Delaware corporations. In general, Section 203 prohibits us from engaging in a ―business combination‖ with an ―interested stockholder‖ for a period of three years following the date the person becomes an interested stockholder, unless:   our board of directors approved the business combination or the transaction in which the person became an interested stockholder prior to the date the person attained this status; upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owned at least 85 percent of our voting stock outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers and issued under employee stock plans under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or on or subsequent to the date the person became an interested stockholder, our board of directors approved the business combination and the stockholders other than the interested stockholder authorized the transaction at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3 percent of the outstanding stock not owned by the interested stockholder.



Section 203 defines a ―business combination‖ to include:      any merger or consolidation involving us and the interested stockholder; any sale, transfer, pledge or other disposition involving the interested stockholder of 10 percent or more of our assets; in general, any transaction that results in the issuance or transfer by us of any of our stock to the interested stockholder; any transaction involving us that has the effect of increasing the proportionate share of our stock owned by the interested stockholders; and the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through us.

In general, Section 203 defines an ―interested stockholder‖ as any person who, together with the person‘s affiliates and associates, owns, or within three years prior to the time of determination of interested stockholder status did own, 15 percent or more of a corporation‘s voting stock. Amended and Restated Certificate of Incorporation and Bylaw Provisions Following the completion of this offering, our amended and restated certificate of incorporation and bylaws will provide that:   no action can be taken by stockholders except at an annual or special meeting of the stockholders called in accordance with our bylaws, and stockholders may not act by written consent; the approval of holders of two-thirds of the shares entitled to vote at an election of directors will be required to adopt, amend or repeal our bylaws or amend or repeal the provisions of our certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action; 76

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  

our board of directors will be expressly authorized to make, alter or repeal our bylaws; stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors; our board of directors will be divided into three classes of service with staggered three-year terms. This means that only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective terms; our board of directors will be authorized to issue preferred stock without stockholder approval; directors may only be removed for cause by the holders of two-thirds of the shares entitled to vote at an election of directors; and we will indemnify officers and directors against losses that may incur investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.

  

Transfer Agent and Registrar has been appointed as the transfer agent and registrar for our common stock. Exchange Listing We expect to apply to list our common stock on either the New York Stock Exchange or the Nasdaq National Market. 77

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SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, no public market existed for our common stock. Market sales of shares of our common stock after this offering and from time to time, and the availability of shares for future sale, may reduce the market price of our common stock. Sales of substantial amounts of our common stock, or the perception that these sales could occur, could adversely affect prevailing market prices for our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities. Based on shares outstanding on October 31, 2003, upon completion of this offering, shares of common stock will be outstanding, assuming no outstanding options or warrants are exercised. Of these outstanding shares, all of the shares sold in this offering, will be freely tradable without restrictions or further registration under the Securities Act (assuming no exercise of the underwriters‘ over allotment option), unless the shares are purchased by our affiliates as that term is defined under Rule 144 under the Securities Act.
Number of Shares Eligible for Sale in U.S. Public Market/Percent of Outstanding Stock

Days after Effective Date

Comment

Upon effectiveness At 180 days after effectiveness and various times thereafter

/ 89,063,519/

% %

Shares sold in this offering Shares eligible for sale under Rules 144 and 701 upon expiration of lockup agreements

Additionally, of the options to purchase 14,876,392 shares and warrants to purchase 1,299,496 shares of our common stock outstanding as of October 31, 2003, options and warrants exercisable for approximately shares of common stock will be vested and eligible for sale 180 days after the effective date of this offering. Rule 144 In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of this offering, a person who has beneficially owned restricted securities for at least one year, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of restricted shares within any three-month period that does not exceed the greater of (1) 1 percent of the number of shares of our common stock then outstanding, which will equal shares immediately after the offering, and (2) the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Sales of restricted shares under Rule 144 are also subject to requirements regarding the manner of sale, notice, and the availability of current public information about us. Rule 144 also provides that affiliates that sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement. Rule 144(k) Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, may sell those shares without complying with the manner-of-sale, public information, volume limitation or notice provisions of Rule 144. Rule 701 Under Rule 701, shares of our common stock acquired upon the exercise of currently outstanding options or pursuant to other rights granted under our stock plans may be resold, to the extent not subject to lock-up 78

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agreements, (1) by persons other than affiliates, beginning 90 days after the effective date of this offering, subject only to the manner-of-sale provisions of Rule 144, and (2) by affiliates, subject to the manner-of-sale, current public information, and filing requirements of Rule 144, in each case, without compliance with the one-year holding period requirement of Rule 144. As of October 31, 2003, options to purchase a total of 14,876,392 shares of common stock were outstanding, all of which are eligible for early exercise. Of the total number of shares of our common stock issuable under these options, all are subject to contractual lock-up agreements with us or the underwriters. Form S-8 Registration Statements We intend to file one or more registration statements on Form S-8 under the Securities Act following this offering to register the shares of our common stock that are issuable pursuant to our 1999 Stock Option Plan, 2004 Equity Incentive Plan, 2004 Outside Directors Stock Plan, and 2004 Employee Stock Purchase Plan. These registration statements are expected to become effective upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to any applicable lock-up agreements and to Rule 144 limitations applicable to affiliates. Lock-up Agreements Our officers, directors, and holders of all of our outstanding stock have agreed not to, among other things, sell or otherwise transfer the economic benefit of, directly or indirectly, any shares of our common stock, or any security convertible into or exchangeable or exercisable for our common stock, without the prior written consent of Morgan Stanley & Co. Incorporated for a period of 180 days from the date of the registration statement of which this prospectus is part. The lock-up agreements permit transfers of shares of our common stock purchased on the open market and, subject to certain restrictions, transfers of shares as a gift, to trusts or immediate family members, or to certain entities or persons affiliated with the stockholder. Morgan Stanley & Co. Incorporated may, in its sole discretion, at any time, and without notice, release for sale in the public market all or any portion of the shares subject to the lock-up agreements. Substantially all of the shares that are not subject to the underwriters‘ lock-up agreements are subject to similar contractual lock-up restrictions with us. 79

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UNDERWRITERS Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc., UBS Securities LLC, Wachovia Capital Markets, LLC and William Blair & Company, L.L.C. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:
Name Number of Shares

Morgan Stanley & Co. Incorporated Deutsche Bank Securities Inc. UBS Securities LLC Wachovia Capital Markets, LLC William Blair & Company, L.L.C. Total The underwriters and the representatives are collectively referred to as the ―underwriters‖ and the ―representatives,‖ respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters‘ over-allotment option described below. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. No underwriter may allow, and no dealer may reallow, any concession to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter‘s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. If the underwriters‘ option is exercised in full, the total price to the public would be $ , the total underwriters‘ discounts and commissions would be $ and total proceeds to us would be $ . The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them. 80

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We and all of our directors and officers and holders of substantially all of our outstanding stock have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus:  offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock; or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock;



whether any transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise. The restrictions described in the immediately preceding paragraph do not apply to:    the sale of shares to the underwriters; the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; the issuance by us of shares or options to purchase shares of our common stock, or the repurchase by us of unvested shares upon termination of service of an employee, director, consultant or other service provider, pursuant to our stock option plans or our employee stock purchase plan described above in the ―Management—Executive Compensation—Employee Benefit Plans‖ section, provided that the recipient of the shares is under an obligation not to sell the shares during the 180-day period; transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares; the establishment of a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, provided that no transfers occur under such plan during the 180-day period; transfers of shares as a gift or for no consideration; distributions of shares to partners, members or stockholders of the stockholder; or transfers to certain entities or persons affiliated with the stockholder;

    

provided that in the case of each of the last three transactions, each donee, distributee, transferee and recipient agrees to be subject to the restrictions described in the immediately preceding paragraph, no filing under Section 16 of the Exchange Act is required in connection with these transactions. In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open 81

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market after pricing that could adversely affect investors who purchase in this offering. In addition, to stabilize the price of the common stock, the underwriters may bid for, and purchase, common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in this offering, if the syndicate repurchases previously distributed common stock to cover syndicate short positions or to stabilize the price of the common stock. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. We expect to apply to list our common stock on either the New York Stock Exchange or the Nasdaq National Market. We have engaged Deutsche Bank Securities Inc. to provide a valuation and related services to us regarding our Japanese joint venture, for which we will pay Deutsche Bank a customary fee. We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. Pricing of the Offering Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price will be our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours. The estimated initial public offering price range set forth on the cover page of the preliminary prospectus is subject to change as a result of market conditions and other factors. 82

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LEGAL MATTERS The validity of the issuance of the common stock offered by this prospectus and certain other legal matters are being passed upon for us by our counsel, Gray Cary Ware & Freidenrich LLP, East Palo Alto, California. Certain legal matters relating to the offering will be passed upon for the underwriters by Fenwick & West LLP, Mountain View, California. EXPERTS Our consolidated financial statements at January 31, 2002 and 2003 and for each of the three years in the period ended January 31, 2003 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. CHANGE IN INDEPENDENT ACCOUNTANTS The consolidated financial statements of salesforce.com as of February 29, 2000 and February 28, 2001 and 2002 and for the years ended February 28, 2001 and 2002 and for the period from inception (February 3, 1999) to February 29, 2000 were previously audited by PricewaterhouseCoopers LLP, certified public accountants. We engaged Ernst & Young LLP to audit salesforce.com‘s consolidated financial statements for the period from inception (February 3, 1999) to January 31, 2000 and the years ended January 2001, 2002 and 2003. There were no disagreements at any time between us and PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures. Our board of directors approved the appointment of Ernst & Young LLP as our independent accountants in September 2002. WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act that registers the shares of our common stock to be sold in this offering. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our capital stock. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement. For further information about us and our common stock, you should refer to the registration statement and the exhibits and schedules filed with the registration statement. With respect to the statements contained in this prospectus regarding the contents of any agreement or any other document, in each instance, the statement is qualified in all respects by the complete text of the agreement or document, a copy of which has been filed as an exhibit to the registration statement. In addition, upon completion of this offering, we will file reports, proxy statements, and other information with the SEC under the Securities Exchange Act of 1934. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. We intend to provide our stockholders with annual reports containing combined financial statements that have been examined and reported on, with an opinion expressed by an independent accounting firm, and to file with the SEC quarterly reports containing unaudited combined financial data for the first three quarters of each year. 83

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page

Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheet s Consolidated Statements of Operations Consolidated Statements of Convertible Preferred Stock and Stockholders‘ Deficit Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements F-1

F-2 F-3 F-4 F-5 F-7 F-8

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Report of Ernst & Young LLP, Independent Auditors The Board of Directors salesforce.com, inc. We have audited the accompanying consolidated balance sheets of salesforce.com, inc. (the ―Company‖) as of January 31, 2002 and 2003, and the related consolidated statements of operations, convertible preferred stock and stockholders‘ deficit, and cash flows for each of the three years in the period ended January 31, 2003. These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at January 31, 2002 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 31, 2003, in conformity with accounting principles generally accepted in the United States. /s/ Palo Alto, California November 13, 2003 F-2 E RNST & Y OUNG LLP

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salesforce.com, inc. Consolidated Balance Sheets (in thousands, except share and per share data)
As of October 31, 2003 2003 (unaudited) Pro Forma at October 31, 2003

As of January 31, 2002

Assets Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable Prepaid expenses and other current assets Deferred income taxes Total current assets Restricted cash Fixed assets, net Other assets Total assets Liabilities, convertible preferred stock, and stockholders’ (deficit) equity Current liabilities: Accounts payable Accrued expenses and other current liabilities Income taxes payable Deferred revenue Current portion of capital lease obligations Total current liabilities Capital lease obligations, net of current portion Long-term lease abandonment liability Minority interest Total liabilities Commitments and contingencies (Note 7) Convertible preferred stock, $0.001 par value; 63,738,843 shares authorized, 58,024,345 shares issued and outstanding at January 31, 2002 and 2003 and October 31, 2003, and zero pro forma (aggregate liquidation preference of $64,376,033 at January 31, 2003 and October 31, 2003) (Note 5) Stockholders‘ (deficit) equity: Common stock, $0.001 par value; 200,000,000 shares authorized, 29,254,822, 30,480,962 and 31,039,174 issued and outstanding at January 31, 2002 and 2003 and October 31, 2003 and 89,063,519 pro forma, respectively Additional paid-in capital Deferred stock-based compensation Notes receivables from stockholders Accumulated other comprehensive income (loss) Accumulated deficit

$

11,709 — 5,709 767 — 18,185 3,500 6,966 433

$

8,709 7,300 9,581 4,515 — 30,105 3,733 4,988 595

$

6,536 23,950 16,607 9,435 2,248 58,776 3,912 4,429 755

$

29,084

$

39,421

$

67,872

$

805 3,430 — 7,128 955 12,318 956 6,335 315 19,924

$

606 8,487 — 19,171 531 28,795 78 5,128 410 34,411

$

2,128 12,761 2,626 34,408 163 52,086 — 804 693 53,583

61,137

61,137

61,137

$

—

29 21,087 (4,930 ) (1,594 ) (208 ) (66,361 )

29 30,700 (9,588 ) (1,574 ) 6 (75,700 )

31 34,834 (9,093 ) (1,639 ) 30 (71,011 )

89 95,913 (9,093 ) (1,639 ) 30 (71,011 )

Total stockholders‘ (deficit) equity Total liabilities, convertible preferred stock and stockholders‘ deficit $

(51,977 ) 29,084 $

(56,127 ) 39,421 $

(46,848 ) 67,872

$

14,289

See accompanying notes. F-3

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salesforce.com, inc. Consolidated Statements of Operations (in thousands, except per share data)
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Revenues: Subscription and support Professional services and other Total revenues Cost of revenues (1): Subscription and support Professional services and other Total cost of revenues Gross profit Operating expenses (1): Research and development Marketing and sales General and administrative Lease abandonment (recovery) Total operating expenses (Loss) income from operations Interest income Interest expense Other income (expense) (Loss) income before provision for income taxes and minority interest Provision for income taxes (Loss) income before minority interest Minority interest in consolidated joint venture Net (loss) income Net (loss) income per share: Basic Diluted Pro forma (unaudited) Weighted-average number of shares used in per share amounts: Basic Diluted Pro forma (unaudited) (1) Amounts include stock-based expenses, as follows: Cost of revenues Research and development Marketing and sales General and administrative

$

5,022 413 5,435 1,730 1,692 3,422 2,013 3,366 25,392 6,855 — 35,613 (33,600 ) 1,715 (42 ) 63 (31,864 ) — (31,864 ) 193

$

21,513 896 22,409 3,718 2,329 6,047 16,362 5,308 25,234 8,317 7,657 46,516 (30,154 ) 755 (272 ) 8 (29,663 ) — (29,663 ) 425

$

47,656 3,335 50,991 7,199 3,164 10,363 40,628 4,648 33,145 12,958 — 50,751 (10,123 ) 572 (178 ) 98 (9,631 ) — (9,631 ) 292

$ 33,022 2,403 35,425 5,320 1,786 7,106 28,319 3,353 23,069 9,432 — 35,854 (7,535 ) 459 (140 ) (130 ) (7,346 ) — (7,346 ) 175 $ (7,171 ) $ (0.28 ) (0.28 )

$ 58,994 6,976 65,970 5,559 6,292 11,851 54,119 4,805 37,288 11,637 (4,342 ) 49,388 4,731 360 (122 ) 207 5,176 385 4,791 (102 ) $ $ 4,689 0.16 0.05 0.05

$ $

(31,671 ) (2.38 ) (2.38 )

$ $

(29,238 ) (1.39 ) (1.39 )

$ $

(9,339 ) (0.35 ) (0.35 ) (0.11 )

13,314 13,314

21,039 21,039

26,375 26,375 84,399 $ 428 402 1,696 2,241 $

25,901 25,901

29,267 98,975 98,975 $ 489 353 1,564 757

$

345 431 1,350 1,326

$

369 436 1,422 2,224

274 287 1,512 1,294

Total stock-based expenses

$

3,452

$

4,451

$

4,767

$

3,367

$

3,163

See accompanying notes. F-4

Table of Contents

salesforce.com, inc. Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit (in thousands, except share and per share data)
Additional Paid-in Capital Deferred Stock-Based Compensation Notes Receivables from Stockholders Accumulated Other Comprehensive Loss Total Comprehensive Loss Total Stockholders’ Deficit

Convertible Preferred Stock

Common Stock Amoun t

Accumulated Deficit

Shares Balances at January 31, 2000 Deferred compensation related to the issuance of stock options Amortization of deferred stock-based compensation Exercise of stock options Accrued interest on stockholder notes receivable Repurchase of unvested shares Accelerated vesting of employee stock options Issuance of common stock for services Issuance of Series C preferred stock for cash at $1.75 per share Issuance of Series D preferred stock for cash at $3.89 per share and warrants to purchase shares of Series D preferred stock, net of issuance costs of $85 Issuance of warrants to purchase Series C and Series D preferred stock to nonemployees Fair value of stock options and warrants issued to nonemployees for services Translation adjustment Net loss Comprehensive loss, year ended January 31, 2001 Balances at January 31, 2001 Deferred compensation related to the issuance of Company and subsidiary stock options Amortization of Company and subsidiary deferred stock-based compensation Exercise of stock options

Amount

Shares

45,788,414 $ 17,156

27,944,917

$

28

$

9,717

$

(8,171 )

$

—

$

—

$

(5,452 )

$

(5,452 )

$

(3,878 )

—

—

—

—

2,131

(2,131 )

—

—

—

—

—

— —

— —

— 3,222,108

— 3

— 2,754

2,620 —

— (1,469 )

— —

— —

— —

2,620 1,288

— —

— —

— (2,435,229 )

— (2 )

— (148 )

— —

(37 ) —

— —

— —

— —

(37 ) (150 )

— —

— —

— 300

— —

107 1

— —

— —

— —

— —

— —

107 1

176,571

309

—

—

—

—

—

—

—

—

—

11,310,958

42,387

—

—

1,527

—

—

—

—

—

1,527

—

—

—

—

218

—

—

—

—

—

218

— — —

— — —

— — —

— — —

695 — —

— — —

— — —

— (49 ) —

— — (31,671 )

— (49 ) (31,671 )

695 (49 ) (31,671 )

—

—

—

—

—

—

—

—

—

(31,720 )

—

57,275,943 $ 59,852

28,732,096

$

29

$

17,002

$

(7,682 )

$

(1,506 )

$

(49 )

$

(37,123 )

$

(37,172 )

$

(29,329 )

—

—

—

—

(132 )

144

—

—

—

—

12

— —

— —

— 495,974

— —

— 254

2,608 —

— —

— —

— —

— —

2,608 254

Accrued interest on stockholder notes receivable Repurchase of unvested shares Fair value of stock options issued to nonemployees for services Accelerated vesting of employee stock options Issuance of Series D preferred stock and common stock, net of issuance costs of $15 Beneficial conversion feature on Series D preferred stock Deemed dividend relating to beneficial conversion feature on Series D preferred stock Issuance of common stock to employee for services Sale of subsidiary common stock Translation adjustment Net loss Comprehensive loss, year ended January 31, 2002 Balances at January 31, 2002

— —

— —

— (2,008,348 )

— (2 )

— (225 )

— —

(88 ) —

— —

— —

— —

(88 ) (227 )

—

—

—

—

292

—

—

—

—

—

292

—

—

—

—

1,298

—

—

—

—

—

1,298

748,402

1,285

2,000,000

2

1,630

—

—

—

—

—

1,632

—

(70 )

—

—

70

—

—

—

—

—

70

—

70

—

—

(70 )

—

—

—

—

—

(70 )

— — — —

— — — —

35,100 — — —

— — — —

130 838 — —

— — — —

— — — —

— — (159 ) —

— — — (29,238 )

— — (159 ) (29,238 )

130 838 (159 ) (29,238 )

—

—

—

—

—

—

—

—

—

(29,397 )

—

58,024,345 $ 61,137

29,254,822

$

29

$

21,087

$

(4,930 )

$

(1,594 )

$

(208 )

$

(66,361 )

$

(66,569 )

$

(51,977 )

F-5

Table of Contents

salesforce.com, inc. Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit—(Continued) (in thousands, except share and per share data)
Additional Paid-in Capital Deferred Stock-Based Compensation Notes Receivables from Stockholders Accumulated Other Comprehensive Loss Total Comprehensive Loss

Convertible Preferred Stock

Common Stock Amoun t

Accumulated Deficit

Total Stockhold Defici

Shares Balances at January 31, 2002 Deferred compensation related to the issuance of Company and subsidiary stock options Amortization of Company and subsidiary deferred stock-based compensation Exercise of stock options Stock options early exercised subject to repurchase Repurchase of unvested shares Fair value of stock options issued to nonemployees for services Accelerated vesting of employee stock options Cancellation of stockholder notes receivable for unvested common stock options Accrued interest on stockholder notes receivable Issuance of common stock and warrants to purchase common stock for services Sale of subsidiary common stock Translation adjustment Net loss Comprehensive loss, year ended January 31, 2003 Balances at January 31, 2003 Deferred compensation related to the issuance of Company and subsidiary stock options (unaudited) Amortization of Company and subsidiary deferred stock-based compensation

Amount

Shares

58,024,345 $ 61,137

29,254,822

$

29

$

21,087

$

(4,930 )

$

(1,594 )

$

(208 )

$

(66,361 )

$

(66,569 )

$

(

—

—

—

—

7,589

(7,793 )

—

—

—

—

— —

— —

— 547,560

— 1

— 416

3,135 —

— —

— —

— —

— —

— —

— —

1,132,562 (646,982 )

— (1 )

— (341 )

— —

— —

— —

— —

— —

—

—

—

—

310

—

—

—

—

—

—

—

—

—

178

—

—

—

—

—

—

—

(87,500 )

—

—

—

109

—

—

—

—

—

—

—

—

—

(89 )

—

—

—

— — — —

— — — —

280,500 — — —

— — — —

1,106 355 — —

— — — —

— — — —

— — 214 —

— — — (9,339 )

—

214 (9,339 )

—

—

—

—

—

—

—

—

—

(9,125 )

58,024,345 $ 61,137

30,480,962

$

29

$

30,700

$

(9,588 )

$

(1,574 )

$

6

$

(75,700 )

$

(75,694 )

$

(

—

—

—

—

2,265

(2,370 )

—

—

—

—

—

—

—

—

—

2,865

—

—

—

—

(unaudited) Exercise of stock options (unaudited) Repurchase of unvested shares (unaudited) Fair value of stock options issued to nonemployees for services (unaudited) Accelerated vesting of employee stock options (unaudited) Accrued interest on stockholder notes receivable (unaudited) Sale of subsidiary common stock (unaudited) Translation adjustment (unaudited) Net income (unaudited) Comprehensive income, nine months ended October 31, 2003 (unaudited) (Balances at October 31, 2003 (unaudited)

—

—

581,636

2

1,524

—

—

—

—

—

—

—

(23,424 )

—

(16 )

—

—

—

—

—

—

—

—

—

133

—

—

—

—

—

—

—

—

—

129

—

—

—

—

—

—

—

—

—

—

—

(65 )

—

—

—

—

—

—

—

99

—

—

—

—

— —

— —

— —

— —

— —

— —

— —

24 —

— 4,689

24 4,689

—

—

—

—

—

—

—

—

—

4,713

58,024,345 $ 61,137

31,039,174

$

31

$

34,834

$

(9,093 )

$

(1,639 )

$

30

$

(71,011 )

$

(70,981 )

$

(

See accompanying notes. F-6

Table of Contents

salesforce.com, inc. Consolidated Statements of Cash Flows (in thousands)
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) Operating activities : Net (loss) income Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Minority interest in consolidated joint venture Depreciation and amortization Loss on retirement of fixed assets Amortization of prepaid commissions Lease abandonment (recovery) Accrued interest on stockholder notes receivable Expense related to stock-based awards Changes in assets and liabilities: Accounts receivable Prepaid expenses and other current assets Other assets Accounts payable Accrued expenses and other current liabilities Income taxes Deferred revenue Lease abandonment liability Other long-term liabilities Net cash (used in) provided by operating activities Investing activities : Restricted cash Purchases of marketable securities Sales and maturities of marketable securities Capital expenditures Net cash used in investing activities Financing activities : Proceeds from the issuance of convertible Series A, B, C, and D preferred stock, net of issuance costs Proceeds from the issuance of common stock, net of issuance costs Proceeds from exercise of stock options Principal payments on capital lease obligations Repurchase of unvested shares Proceeds from subsidiary stock offerings Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow disclosure : Cash paid during the year for: Interest Income taxes Noncash financing and investing activities : Equipment acquired under capital lease Transfer of capital lease to operating lease Beneficial conversion feature on Series D preferred stock Cancellation of stockholder notes receivable for unvested common stock options $ $ (31,671 ) (193 ) 861 — — — (37 ) 3,452 (1,718 ) (637 ) (202 ) 25 1,690 — 1,780 — (36 ) (26,686 ) $ (29,238 ) (425 ) 2,403 — — 7,657 (88 ) 4,451 (3,991 ) 317 84 70 246 — 5,348 — — (13,166 ) $ (9,339 ) (292 ) 2,664 589 2,125 — (89 ) 4,767 (3,872 ) (5,887 ) 16 (199 ) 3,864 — 12,043 (1,177 ) — 5,213 $ (7,171 ) (175 ) 1,942 455 1,102 — (70 ) 3,367 (859 ) (9,186 ) 165 275 3,527 — 7,119 (865 ) — (374 ) $ 4,689 102 1,956 68 5,281 (4,342 ) (65 ) 3,163 (7,026 ) (10,237 ) (14 ) 1,522 5,791 378 15,237 (788 ) — 15,715 2003

(3,500 ) — — (5,869 ) (9,369 )

— — — (713 ) (713 )

(233 ) (27,977 ) 20,677 (2,367 ) (9,900 )

(70 ) (19,410 ) 14,180 (1,748 ) (7,048 )

(179 ) (31,550 ) 14,900 (1,611 ) (18,440 )

44,223 — 1,288 (105 ) (150 ) 439 45,695 9,640 (49 ) 9,591 12,609 22,200 $

1,285 1,632 254 (656 ) (227 ) 1,259 3,547 (10,332 ) (159 ) (10,491 ) 22,200 11,709 $

— — 1,580 (412 ) (342 ) 551 1,377 (3,310 ) 310 (3,000 ) 11,709 8,709 $

— — 146 (237 ) (221 ) 551 239 (7,183 ) 208 (6,975 ) 11,709 4,734 $

— — 815 (446 ) (16 ) 167 520 (2,205 ) 32 (2,173 ) 8,709 6,536

$

42 — 2,060 1,469 — —

$

272 — 642 — 70 —

$

178 — — 914 — 109

$

140 — — 914 — 109

$

121 7 — — — —

See accompanying notes.

F-7

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements Fiscal Years Ended January 31, 2001, 2002 and 2003 (Information as of October 31, 2003 and for the nine months ended October 31, 2002 and 2003 is unaudited) 1. Summary of Business and Significant Accounting Policies Description of Business and Basis of Presentation Salesforce.com, inc. (the ―Company‖) was incorporated in Delaware in February 1999. Principal offices are located in San Francisco, California. The Company is the leading provider of application services that allow organizations to easily share customer information on demand. It provides a comprehensive customer relationship management (―CRM‖) service to businesses of all sizes and industries worldwide. The Company began to offer its on-demand application service on a subscription basis in February 2000. The Company conducts its business worldwide, with subsidiaries in Europe and Japan. Unaudited Interim Financial Information The accompanying unaudited interim consolidated balance sheet as of October 31, 2003, the consolidated statements of operations and cash flows for the nine months ended October 31, 2002 and 2003 and the consolidated statement of convertible preferred stock and stockholders‘ deficit for the nine months ended October 31, 2003 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In the opinion of the Company‘s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments necessary for the fair presentation of the Company‘s statement of financial position, results of operations and its cash flows for the nine months ended October 31, 2002 and 2003. The results for the nine months ended October 31, 2003 are not necessarily indicative of the results to be expected for the year ending January 31, 2004. Unaudited Pro Forma Stockholders’ Equity If the offering contemplated by this prospectus is consummated, all of the convertible preferred stock outstanding will automatically convert into 58,024,345 shares of common stock based on the shares of convertible preferred stock outstanding at October 31, 2003. Unaudited pro forma stockholders‘ equity as adjusted for the assumed conversion of the convertible preferred stock, is set forth on the consolidated balance sheet. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in the Company‘s consolidated financial statements and notes thereto. Significant estimates and assumptions made by management include the determination of the fair value of stock awards issued and the adequacy of the lease abandonment accrual. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, SFDC International Ltd. and SFDC EMEA Ltd. All significant intercompany balances and transactions have been eliminated in consolidation. F-8

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Additionally, the Company holds a majority interest in Kabushiki Kaisha salesforce.com (―Salesforce Japan‖), a Japanese joint venture (see Note 2). The Company records gains and losses resulting from the change of interest in Salesforce Japan directly to stockholders‘ deficit as additional paid-in capital. Segments The Company operates in one segment. Foreign Currency Translation The functional currency of the Company‘s foreign subsidiaries is the local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component of stockholders‘ deficit. Foreign currency transaction gains and losses are included in net (loss) income for the period and have not been material during the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Concentrations of Credit Risk and Significant Customers and Suppliers The Company‘s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term marketable securities, restricted cash, and trade accounts receivable. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable. Additionally, customers‘ financial condition and creditworthiness are regularly evaluated. The Company‘s accounts receivable and net revenues are derived from a large number of direct customers. No single customer accounted for more than 5 percent of accounts receivable at January 31, 2002 and 2003 and October 31, 2003. No single customer accounted for 5 percent or more of total revenue during the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2002 and 2003. As of January 31, 2002 and 2003 and October 31, 2003, assets located outside the Americas were 9 percent, 10 percent and 12 percent of total assets, respectively. Revenues for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, from foreign customers were 2 percent, 9 percent, 14 percent and 17 percent, respectively, of total revenues. Revenues by geographical region are as follows (in thousands):
Nine Months Ended October 31, 2003 2003 (unaudited)

Fiscal Year Ended January 31, 2001 2002

Americas Europe Asia Pacific

$ 5,310 123 2 $ 5,435

$ 20,305 1,680 424 $ 22,409

$ 43,855 5,345 1,791 $ 50,991

$

54,601 7,897 3,472 65,970

$

The loss from operations outside the Americas totaled $1,185,000, $3,345,000, $3,971,000 and $643,000 for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, respectively. F-9

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) The Company serves all of its customers and users from a single third-party co-location facility located in Sunnyvale, California. The Company does not control the operation of this facility, and it is vulnerable to damage or interruption. The Company maintains redundant systems in its San Francisco headquarters that can be used to provide service in the event the third-party co-location facility becomes unavailable, although in such circumstances, the Company‘s service may be interrupted during the transition. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents, which consist of cash on deposit with banks and money market funds, are stated at cost, which approximates fair value. Restricted Cash The Company‘s restricted cash balance of $3,500,000, $3,733,000 and $3,912,000 at January 31, 2002 and 2003 and October 31, 2003, respectively, consisted primarily of a certificate of deposit in the amount of $3,500,000, plus interest, that served as collateral to a letter of credit that was issued to the Company‘s principal landlord as a security deposit. The letter of credit is further discussed in Note 7. The certificate of deposit bears annual interest at 1 percent and the letter of credit renews annually through December 31, 2010 or expires upon the successful completion of an initial public offering. The remaining restricted cash balance at January 31, 2003 and October 31, 2003, of $233,000 and $412,000, respectively, consisted of collateral for the Company‘s credit card processor and sublease of office space. Marketable Securities The Company‘s investments in marketable securities consist of short-term municipal bonds. Management determines appropriate classification of investments in marketable securities at the time of purchase in accordance with Statement of Financial Accounting Standards (―SFAS‖) No. 115, Accounting for Certain Investments in Debt and Equity Securities and reevaluates such determination at each balance sheet date. Securities available for sale are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders‘ equity. Fair value is determined based on quoted market rates. Realized gains and losses and declines in value judged to be other-than-temporary on securities available for sale are included as a component of interest income. The cost of securities sold is based on the specific-identification method. Interest on securities classified as available for sale is included as a component of interest income. Fair Value of Financial Instruments The carrying amounts of the Company‘s financial instruments, which include cash and cash equivalents, short term marketable securities, restricted cash, accounts receivable, accounts payable, and other accrued expenses, approximate their fair values due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of capital lease obligations approximates fair value. Fixed Assets Fixed assets are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of those assets as follows: Computers, equipment, and software Furniture and fixtures Leasehold improvements F-10 3 to 5 years 5 to 7 years Shorter of the estimated useful life of 5 years or the lease term

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) When assets are retired, the cost and accumulated depreciation and amortization are removed from their respective accounts and any loss on such retirement is reflected in operating expenses. When assets are otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts and any gain or loss on such sale or disposal is reflected in other income (expense). During fiscal 2003 and the nine months ended October 31, 2003, the Company retired certain fixed assets, which had a total net book value of $589,000 and $68,000, respectively. These amounts were expensed and are reflected in operating expenses in the accompanying Consolidated Statements of Operations. Impairment of Long-Lived Assets The Company evaluates the recoverability of its long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (―SFAS 144‖). Long-lived assets are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value. In addition to the recoverability assessment, the Company routinely reviews the remaining estimated lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the period when such determinations are made, as well as in subsequent periods. Software and Website Development Costs The Company follows the guidance of Emerging Issues Task Force (―EITF‖) Issue No. 00-2, Accounting for Web Site Development Costs (―EITF 00-2‖), and EITF Issue No. 00-3, Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware (―EITF 00-3‖). EITF 00-2 sets forth the accounting for website development costs based on the website development activity. EITF 00-3 sets forth the accounting for software in a hosting arrangement. As such, the Company follows the guidance set forth in Statement of Position 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (―SOP 98-1‖), in accounting for the development of its on-demand application service. SOP 98-1 requires companies to capitalize qualifying computer software costs, which are incurred during the application development stage and amortize them over the software‘s estimated useful life of three years. The Company capitalized $112,000, $204,000, $364,000 and $341,000 during the years ended January 31, 2001, 2002, 2003, and the nine months ended October 31, 2003, respectively. Amortization expense totaled $29,000, $69,000, $186,000 and $195,000 during the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, respectively. Comprehensive Income (Loss) Comprehensive income (loss) consists of other comprehensive income and net loss. Other comprehensive income includes certain changes in equity that are excluded from net income (loss). Specifically, cumulative foreign currency translation adjustments are included in accumulated other comprehensive income. Comprehensive income (loss) has been reflected in the consolidated statements of convertible preferred stock and stockholders‘ deficit. Accumulated other comprehensive income (loss) totaled $(159,000), $214,000 and $24,000 for the years ended January 31, 2002 and 2003 and the nine months ended October 31, 2003, respectively, resulting from foreign currency translations. F-11

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Accounting for Stock-Based Compensation The Company accounts for compensation expense for its stock-based employee compensation plan using the intrinsic value method prescribed in Accounting Principles Board Opinion (―APB‖) No. 25, Accounting for Stock Issued to Employees (―APB 25‖), and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation (―SFAS 123‖), and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure (―SFAS 148‖). Under APB 25, compensation expense of fixed stock options is based on the difference, if any, on the date of the grant between the deemed fair value of the Company‘s stock and the exercise price of the option. Compensation expense is recognized on a straight-line basis over the option-vesting period of four years. The Company accounts for stock issued to nonemployees in accordance with the provisions of SFAS 123 and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services (―EITF 96-18‖). Pro forma information regarding the results of operations is determined as if the Company had accounted for its employee stock options using the fair-value method. The fair value of each option grant is estimated on the date of grant using the Black-Scholes method with the following assumptions:
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Volatility Weighted-average estimated life Weighted-average risk-free interest rate Dividend yield

100% 4 years 6.23% —

100% 4 years 3.81% —

100% 4 years 1.67% —

100% 4 years 1.67% —

100% 4 years 2.63% —

Had compensation cost for the Company‘s stock-based compensation plans been determined using the fair-value method at the grant date for awards under those plans calculated using the Black-Scholes pricing model, the Company‘s net loss would have been increased to the pro forma amounts indicated below (in thousands, except per share data):
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Net (loss) income, as reported Add: Total stock-based employee compensation expense included in the determination of net loss Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards Net loss, pro forma Net (loss) income, per share Basic: As reported Pro forma Diluted: As reported Pro forma

$

(31,671 ) 2,620

$

(29,238 ) 2,608

$

(9,339 ) 3,135

$ (7,171 ) 2,072

$

4,689 2,865

(3,462 ) $ (32,513 ) $

(4,025 ) (30,655 ) $

(4,805 ) (11,009 )

(3,076 ) $ (8,175 ) $

(5,487 ) 2,067

$

(2.38 ) (2.44 ) (2.38 ) (2.44 ) F-12

$

(1.39 ) (1.46 ) (1.39 ) (1.46 )

$

(0.35 ) (0.42 ) (0.35 ) (0.42 )

$

(0.28 ) (0.32 ) (0.28 ) (0.32 )

$

0.16 0.07 0.05 0.02

$

$

$

$

$

Table of Contents

salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) For the pro forma calculation, the per share weighted-average fair value of options granted are as follows:
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Weighted-average fair value: Options granted below fair value Options granted above fair value Options equal to fair value Weighted-average exercise price: Options granted below fair value Options granted above fair value Net (Loss) Income Per Share

$ 1.58 1.37 — $ 0.93 2.00

$ 1.21 1.31 — $ 0.51 2.00

$ 1.65 — — $ 1.10 —

$ 1.65 — — $ 1.10 —

$ 2.95 — 1.88 $ 2.64 —

Basic net (loss) income per share is computed by dividing net (loss) income by weighted-average number of common shares outstanding for the fiscal period. Diluted net (loss) income per share is computed giving effect to all potential dilutive common stock, including options, warrants and convertible preferred stock. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net (loss) income per share is as follows (in thousands):
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Numerator: Net (loss) income Denominator: Weighted-average shares outstanding for basic (loss) earnings per share, net of weighted-average shares of common stock subject to repurchase Effect of dilutive securities: Employee stock options and warrants Convertible preferred stock Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share

$

(31,671 )

$ (29,238 )

$ (9,339 )

$ (7,171 )

$

4,689

13,314 — — 13,314

21,039 — — 21,039

26,375 — — 26,375

25,901 — — 25,901

29,267 11,684 58,024 98,975

Outstanding unvested common stock purchased by employees is subject to repurchase by the Company and therefore is not included in the calculation of the weighted-average shares outstanding for basic (loss) earnings per share. The following were excluded from the computation of diluted earnings per share as they had an anti-dilutive impact (in thousands):
Fiscal Year Ended January 31, 2001 2002 2003 Nine Months Ended October 31, 2002 (unaudited) 2003

Convertible preferred stock Options Warrants F-13

57,276 3,308 1,214

58,024 4,075 1,214

58,024 10,526 1,299

58,024 10,802 1,299

— — —

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Income Taxes The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Revenue Recognition The Company derives its revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing its on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services and other revenues, consisting primarily of training fees. Because the Company provides its application as a service, the Company follows the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements . On August 1, 2003, the Company adopted Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables . The Company recognizes revenue when all of the following conditions are met:     There is persuasive evidence of an arrangement; The service has been provided to the customer; The collection of the fees is probable; and The amount of fees to be paid by the customer is fixed or determinable.

Subscription and support revenues are recognized on a monthly basis over the lives of the contracts. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Professional services and other revenues, when sold with subscription and support offerings, are accounted for separately since these services have value to the customer on a stand-alone basis and there is objective and reliable evidence of fair value of the undelivered elements. The Company‘s arrangements do not contain general rights of return. Additionally, when professional services are sold with other elements, the consideration from the revenue arrangement is allocated among the separate elements based upon the relative fair value. Professional services and other revenues are recorded as follows: Consulting revenues are recognized upon completion of the contracts that are of short duration (generally less than 60 days) and as the services are rendered for contracts of longer duration. Training revenues, resulting from system administrator, user, and partner workshops, are recognized after the services are performed. On occasion, the Company has purchased from its suppliers goods or services for the Company‘s use in its operations at or around the same time these same businesses entered into subscription and/or consulting agreements. The Company generally defines ―at or around the same time‖ as within six months. Revenues recognized from customers who were also suppliers were not significant during the years ended January 31, 2001, 2002 and 2003, and the nine months ended October 31, 2003. Both the procurement and revenue agreements are separately negotiated, settled ultimately in cash, and recorded at what the Company considers to be fair value. When any of these factors is not present, the Company does not recognize the revenue from the underlying sale agreements; rather, the revenue is netted with expenses. F-14

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Deferred Revenue Deferred revenue consists of billings or payments received in advance of revenue recognition from the Company‘s subscription service described above and is recognized as revenue recognition criteria are met. Sales Commissions For periods prior to February 1, 2002, commissions were expensed upon payment. On February 1, 2002, the Company began capitalizing commissions paid to sales people and recognizing commission expense over the period that the related subscription revenue is recognized. This change was the result of a change in the Company‘s ability and practice to recover commissions from sales people in the event a customer failed to pay or reduced or terminated the level of service. Commission payments are nonrefundable unless amounts due from a customer are determined to be uncollectible or if the customer subsequently changes or terminates the level of service, in which case commissions paid are recoverable by the Company. During fiscal 2003, the Company capitalized $5,308,000 and amortized to marketing and sales expense $2,125,000 of prepaid commissions. During the nine month period ended October 31, 2003, the Company capitalized $8,594,000 and amortized to marketing and sales expense $5,281,000 of prepaid commissions. Prepaid commissions are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets and totaled $3,183,000 and $6,496,000 at January 31, 2003 and October 31, 2003, respectively. Warranties and Indemnification The Company‘s on-demand application service is typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and substantially in accordance with the Company‘s online help documentation under normal use and circumstances. The Company‘s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party‘s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements. The Company has entered into service level agreements with a small number of its customers warranting certain levels of uptime reliability and permitting those customers to receive credits or terminate their agreements in the event that the Company fails to meet those levels. To date, the Company has not provided credits, or cancelled any subscription agreements related to these service level agreements. The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person‘s service as a director or officer, including any action by the Company, arising out of that person‘s services as the Company‘s director or officer or that person‘s services provided to any other company or enterprise at the Company‘s request. Advertising Expenses Advertising is expensed as incurred. Advertising expense was $11,936,000, $6,402,000, $3,997,000 and $3,323,000 for the years ended January 31, 2001, 2002, and 2003, and the nine months ended October 31, 2003, respectively. Reclassifications Certain reclassifications have been made to conform with the current fiscal period presentation. F-15

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) 2. Joint Venture

On December 7, 2000, the Company entered into a joint venture agreement with SunBridge, Inc., a Japanese corporation, to establish Salesforce Japan. In accordance with the agreement, the Company contributed $1,339,000 for 300,000 shares of common stock, which resulted in a 75 percent interest in the joint venture. Provided that the Company owns at least 30 percent of the outstanding voting shares of the joint venture, the Company has the right to appoint three of the six board members of the joint venture, and together with SunBridge, may appoint a fourth director. On September 15, 2001, the joint venture sold 4,000 shares of common stock to an executive of the joint venture at a per share price that was below fair value. As a result, the joint venture recorded compensation expense relating to the difference between the price paid per share and the fair value per share, which equaled $76,000. As a result of this transaction, the Company‘s ownership percentage decreased from 75 percent to 74.3 percent. On December 4, 2001, the joint venture sold an additional 44,400 shares of common stock to new investors at a per share price of $28.21 for total proceeds of $1,252,369. As a result, the Company‘s ownership percentage declined from 74.3 percent to 66.9 percent. The Company‘s change in interest in the joint venture resulted in a gain of $838,000, which has been recorded directly to additional paid-in capital. This gain was calculated based on the Company‘s proportionate share of the proceeds from the sale. On September 29, 2002 and October 28, 2002, the joint venture sold an additional 9,000 and 8,000 shares of common stock, respectively, to new investors at a per share price of $32.41 for total proceeds of $551,000. As a result, the Company‘s ownership percentage declined from 66.9 percent to 64.5 percent. The Company‘s change in interest in the joint venture resulted in a gain of $355,000, which has been recorded directly to additional paid-in capital. This gain was calculated based on the Company‘s proportionate share of the proceeds from the sale. On September 11, 2003, the joint venture sold an additional 4,750 shares of common stock to new investors at a per share price of $35.16 for total proceeds of $167,000. As a result, the Company‘s ownership percentage declined from 64.5 percent to 63.8 percent. The Company‘s change in interest in the joint venture resulted in a gain of $99,000, which has been recorded directly to additional paid-in capital. This gain was calculated based on the Company‘s proportionate share of the proceeds from the sale. The Board of Directors of the joint venture has authorized options to purchase 40,000 shares to be issued to employees under its Stock Option Plan in accordance with the rules and regulations of the Commercial Code of Japan. The Japanese Stock Option Plan includes an antidilution provision such that the option holders are allowed additional options if the Company issues stock options with exercise prices below market prices. This provision results in variable accounting for the plan, as the number of options awarded is not fixed and no measurement date currently exists. In fiscal 2002 and 2003 and the nine months ended October 31, 2003, the joint venture granted options to purchase 34,100, 2,600 and 3,000 shares, respectively, to its employees to purchase shares of common stock in Salesforce Japan. The stock options were issued with an exercise price of ¥500 per share (approximately $4.00 per share), ¥3,500 per share (approximately $30.00 per share) and ¥3,500 per share (approximately $31.00 per share) and vest over a two-year period. As a result of these stock option grants, the joint venture recorded $778,000, $162,000 and $13,000 of deferred stock-based compensation during the years ended January 31, 2002 and 2003 and nine months ended October 31, 2003, respectively. The joint venture amortized $190,000, $544,000 and $262,000 of deferred stock-based compensation expense during the years ended January 31, 2002 and 2003 and nine months ended October 31, 2003, respectively. The joint venture reversed zero, $34,000 and zero of deferred stock-based compensation related to terminated employees during the years ended January 31, 2002 and 2003 and the nine months ended October 31, 2003, respectively. F-16

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Given the Company‘s majority ownership interest in the joint venture, the accounts of the joint venture have been consolidated with the accounts of the Company, and a minority interest has been recorded for the third party‘s interest in the net assets and operations of the joint venture to the extent of the minority partners‘ individual investments. All intercompany transactions have been eliminated, with the exception of minority interest. Under the terms of the joint venture agreement, the joint venture will terminate if the joint venture becomes a public company or is sold to a third party, or upon the mutual agreement of the parties. In addition, if the Company commits a breach of, or if the Company fails to perform, its material obligations under the joint venture agreement, which are not cured in a timely manner, SunBridge can require the Company to purchase all of its shares in the joint venture. The purchase price for SunBridge‘s shares would be the then fair market value plus a specified premium. In the event that SunBridge commits a breach of, or if it fails to perform, its material obligations under the joint venture agreement, which it does not cure in a timely manner, or if SunBridge enters into bankruptcy proceedings, the Company can require SunBridge to sell to it all of their shares in the joint venture. The purchase price for SunBridge‘s shares would be the then fair market value less a specified discount. Additionally, if the Company and SunBridge are unable to agree on certain operational matters, either party can require the other to purchase all of its shares of the joint venture at a price equal to the then fair value market value. Fair market value is to be determined by mutual agreement of the parties, or if the parties are unable to agree, by an independent appraiser. 3. Balance Sheet Accounts Marketable Securities At January 31, 2003 and October 31, 2003, the Company had $7,300,000 and $23,950,000 of short-term marketable securities, respectively, consisting entirely of municipal bonds. These securities have been classified as available for sale in accordance with SFAS No. 115. The cost of these securities approximates the fair value. Fixed Assets Fixed assets consisted of the following (in thousands):
January 31, 2002 2003 (unaudited) October 31, 2003

Computers, equipment, and software Furniture and fixtures Leasehold improvements Construction-in-progress

$

7,812 1,314 1,099 5 10,230

$

7,010 1,353 1,113 363 9,839 (4,851 )

$

7,932 1,329 1,283 342 10,886 (6,457 )

Less accumulated depreciation and amortization $

(3,264 ) 6,966 $

4,988

$

4,429

Depreciation and amortization expense totaled $832,000, $2,334,000, $2,478,000 and $1,761,000 for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, respectively. Fixed assets at January 31, 2002 and 2003 and October 31, 2003, included $2,703,000, $1,788,000 and $1,788,000, respectively, acquired under capital lease agreements. Accumulated amortization relating to equipment under capital leases totaled $974,000, $1,214,000 and $1,639,000, respectively, at January 31, 2002 F-17

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) and 2003 and October 31, 2003. Amortization of assets under capital leases is included in depreciation and amortization expense. Other Assets Other assets consisted of the following (in thousands):
January 31, 2002 2003 (unaudited) October 31, 2003

Capitalized internal-use software development costs, net of accumulated amortization of $98, $284 and $479, respectively Long-term deposits

$ 218 215 $ 433

$ 396 199 $ 595

$ $

542 213 755

Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands):
January 31, 2002 2003 (unaudited) October 31, 2003

Accrued compensation Accrued other liabilities Current portion of lease abandonment liability Liability for early exercise of unvested employee stock options Accrued taxes payable Accrued professional costs Accrued rent

$

591 778 1,177 — 160 300 424

$ 2,072 2,037 1,207 1,163 848 652 508 $ 8,487

$

5,502 3,479 401 452 1,349 923 655 12,761

$ 3,430 4. Income Taxes

$

The domestic and foreign components of loss before minority interest and provisions for income taxes were as follows (in thousands):
Fiscal Year Ended January 31, 2001 2002 2003

Domestic Foreign

$ $

(29,288 ) (2,576 ) (31,864 )

$ $

(25,029 ) (4,634 ) (29,663 )

$ (3,690 ) (5,941 ) $ (9,631 )

There were no provisions for income taxes for the years ended January 31, 2001, 2002 and 2003, due to both current and accumulated losses incurred in those years in all domestic and foreign taxing jurisdictions. The provision for income taxes recorded for the nine months ended October 31, 2003 was attributable to federal minimum taxes, California income taxes due to the suspension of the use of loss carryforwards, and income taxes due in certain other states in which the Company had not previously accumulated tax loss carryforwards. F-18

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) A reconciliation of income taxes at the statutory federal income tax rate to net income taxes included in the accompanying statements of operations is as follows (in thousands):
Fiscal Year Ended January 31, 2001 2002 2003

U.S. federal taxes (benefit) at statutory rate Deferred compensation Foreign losses providing no benefit Unutilized net operating losses Other

$

(11,152 ) 580 901 9,643 28 —

$

(10,382 ) 965 1,622 7,782 13 —

$ (3,370 ) 697 2,055 586 32 $ —

$

$

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company‘s deferred tax assets were as follows (in thousands):
January 31, 2002 2003

Deferred tax assets: Net operating loss carryforwards Lease abandonment Deferred compensation Tax credits Capitalized start-up costs Other Total deferred tax assets Less valuation allowance Net deferred tax assets

$

17,001 3,120 989 539 901 644 23,194 (23,194 )

$

18,106 2,444 1,242 824 450 1,592 24,658 (24,658 )

$

—

$

—

Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $11,385,000, $9,224,000 and $1,464,000 for the years ended January 31, 2001, 2002 and 2003, respectively. At January 31, 2003, the Company had net operating loss carryforwards for federal income tax purposes of approximately $43,977,000, which expire in 2020 through 2023 and federal research and development tax credits of approximately $541,000, which expire in 2020 through 2023. The Company also has state net operating loss carryforwards of approximately $47,202,000 which expire beginning in 2007 and state research and development tax credits of approximately $435,000 which have no expiration date. 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. F-19

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) 5. Convertible Preferred Stock At January 31, 2003 and at October 31, 2003, convertible preferred stock consisted of the following:
Aggregate Liquidation Preference Issued and Outstanding

Shares

Authorized

Series A Series B Series C Series D Series E

25,850,000 12,588,345 7,650,498 12,650,000 5,000,000 63,738,843

25,850,000 12,588,345 7,526,640 12,059,360 — 58,024,345

$

517,000 3,776,503 13,171,620 46,910,910 — 64,376,033

$

The rights, preferences, and privileges of the convertible preferred stock are as follows: Dividends The holders of Series A, Series B, Series C, and Series D preferred stock are entitled to receive noncumulative dividends out of any assets legally available prior and in preference to any declaration or payment of any dividend on the common stock at the rate of $0.0012, $0.018, $0.093, and $0.233 per share per annum, respectively, when and if declared by the Board of Directors. After payment of the dividend preference, outstanding shares of preferred stock shall participate with shares of common stock as to any additional declaration or payment of any dividend. As of October 31, 2003, no dividends had been declared or paid. Conversion Each share of preferred stock is convertible, at the option of its holder, into the number of fully paid and nonassessable shares of common stock which results from dividing the applicable original issue price per share by the applicable conversion price per share at the time of conversion. The original issue prices per share of Series A, Series B, Series C and Series D preferred stock, respectively, are $0.02, $0.30, $1.75, and $3.89. As of October 31, 2003, the conversion prices per share of Series A, Series B, Series C and Series D preferred stock, respectively, were $0.02, $0.30, $1.75, and $3.89, and the rate at which each share converted into common stock is one for one. Each share of Series A, Series B and Series C preferred stock will automatically convert into common stock, at the conversion rate then in effect, immediately on the earlier of (1) the date specified by vote or written consent of the holders of a majority of the then outstanding shares of Series A, Series B, and Series C preferred stock, or (2) the closing of the sale of the Company‘s common stock in a firm commitment underwritten public offering with aggregate gross proceeds of at least $20,000,000 at a price per share of at least $3.00. Each share of Series D preferred stock will automatically convert into common stock, at the conversion rate then in effect, immediately on the earlier of (1) the date specified by vote or written consent of the holders of a majority of the then outstanding shares of Series D preferred stock, or (2) the closing of the sale of the Company‘s common stock in a firm commitment underwritten public offering with aggregate gross proceeds of at least $20,000,000 at a price per share of at least $5.00, provided that the aggregate value of all shares of the Company‘s common stock outstanding before the offering, together with all shares of common stock issuable upon the conversion or exercise of other securities of the Company outstanding before the offering, valued at the price per share established in the offering, is at least $535,500,000. F-20

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Liquidation Preferences In the event of any liquidation, dissolution, or winding up of the Company either voluntary or involuntary, the holders of Series A, Series B, Series C, and Series D preferred stock will be entitled to receive, prior and in preference to any distribution of any assets of the Company to the holders of common stock, an amount per share equal to the sum of the original purchase price of $0.02, $0.30, $1.75 and $3.89 per share, respectively, plus any declared but unpaid dividends. If, upon the occurrence of such event, the assets and funds available for distribution among the holders of preferred stock are insufficient to permit the payment of these preferential amounts in full, the entire assets and funds legally available for distribution will be distributed ratably among the holders of the preferred stock in proportion of the aggregate liquidation preference for the shares of such stock owned by each holder. After completion of distribution to the preferred stockholders, the remaining assets of the Company will be distributed to the holders of preferred stock and common stock together in proportion to the number of shares of common stock held by each, assuming conversion into common stock of all shares of preferred stock, provided that the holders of Series A, Series B, Series C and Series D preferred stock will not be entitled to receive any further distribution after each has received total distributions of $0.06, $0.90, $5.25, and $11.67 per share, respectively. A merger or consolidation of the Company into another entity in which the stockholders of the Company own less than 50 percent of the voting stock of the surviving company or the sale, transfer, or lease of substantially all assets of the Company will be deemed a liquidation, dissolution, or winding up of the Company. These liquidation characteristics require classification of the convertible preferred stock outside of the equity section of the accompanying balance sheet. Voting Rights Each share of Series A, Series B, Series C, and Series D preferred stock is entitled to one vote for each share of common stock into which such share of preferred stock is convertible on the record date for any vote, or effective date of any written consent, as applicable. Antidilution Provisions Each share of Series A, Series B, Series C and Series D preferred stock has standard anti-dilution protection. In addition, in the event that more than 10,282,776 shares of Series D preferred stock are sold by the Company, the Company is obligated to issue to certain investors warrants to purchase additional shares of Series D preferred stock. Each warrant will be exercisable at any time until the fifth anniversary of the date of issuance at a per share exercise price of $3.89 (see discussion below under Warrants). Warrants In fiscal year 2001, the Company issued two warrants to purchase 40,000 and 35,000 shares, respectively, of Series C preferred stock at an exercise price of $1.75 per share to the landlord of the Company‘s corporate headquarters. The warrants were fully vested at the date of grant with no performance obligations by the landlord and expire in April 2007. The warrants were valued using the Black-Scholes pricing model. Assumptions used were as follows: fair value of the underlying stock of $1.75; risk-free interest rate of 6.27 percent; contractual life of seven years; no dividends during the term; and volatility of 100 percent. The fair value of the warrants totaled $112,000 and was recorded as prepaid rent. This amount will be amortized to rent expense over the lease term of 10 years. The related rent expense recorded for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, totaled $8,000, $11,000, $11,000, and $8,000, respectively. In fiscal year 2001, the Company issued a warrant to purchase 10,000 shares of Series D preferred stock at an exercise price of $3.89 per share to this landlord. The warrant was issued in consideration of the Company‘s F-21

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) lease for its corporate headquarters. The warrant was fully vested at the date of grant without any performance obligations by the landlord and expires seven years from the date of grant. The warrant was valued using the Black-Scholes pricing model. Assumptions used were as follows: fair value of the underlying stock of $3.89; risk-free interest rate of 6.33 percent; contractual life of seven years; no dividends during the term; and volatility of 100 percent. The fair value of the warrant totaled $33,000 and was recorded as prepaid rent. This amount will also be amortized to rent expense over the lease term of 10 years. The related rent expense recorded for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, totaled $2,000, $3,000, $3,000 and $2,000, respectively. In fiscal year 2001, the Company issued a warrant to purchase 48,857 shares of Series C preferred stock at an exercise price of $1.75 per share to a leasing company in consideration for capital leases. The warrant was fully vested at the date of grant without any performance obligations by the leasing company and expires seven years from the date of grant or three years from the effective date of an initial public offering by the Company, whichever is earlier. The warrant was valued using the Black-Scholes pricing model. Assumptions used were as follows: fair value of the underlying stock of $1.75; risk-free interest rate of 6.27 percent; contractual life of seven years; no dividends during the term; and volatility of 100 percent. The fair value of the warrant totaled $73,000 and was recorded as a discount to the related capital lease obligation. This amount will be amortized to interest expense over the lease term, which is three years. The related interest expense recorded for the years ended January 2001, 2002, and 2003 and the nine months ended October 31, 2003, totaled $19,000, $24,000, $24,000 and $6,000, respectively. In fiscal year 2001, the Company sold 3,341,902 shares of Series D preferred stock to an investor for aggregate proceeds of $12,999,999. Based on the antidilution provisions described above, warrants to purchase Series D preferred stock were contingently issuable at the time of the sale. Based on the information available at the time of sale, it was considered probable that warrants would be issued to the investor. The proceeds from the sale of the Series D preferred stock were allocated to the Series D preferred stock and the contingent warrants based on their estimated relative fair values. The estimated number of shares subject to the warrants to be issued was 580,639 at an exercise price of $3.89 per share. These warrants are exercisable immediately and expire five years from the date of grant. The fair value of the warrants was estimated using the Black-Scholes pricing model. Assumptions used were as follows: fair value of the underlying stock of $3.89; risk-free interest rate of 4.86 percent; contractual life of five years; no dividends during the term; and volatility of 100 percent. The apportioned value of the warrants of $1,527,000 has been allocated to additional paid-in capital. In January 2001, warrants to purchase 334,158 shares were issued to the investor. In accordance with the antidilution provisions described above, the sale of Series D preferred stock in June 2001, as described below, triggered the issuance of additional warrants to purchase shares of Series D preferred stock to this investor. As a result, the Company issued in July 2001 warrants to purchase an aggregate of 246,481 shares of Series D preferred stock at an exercise price of $3.89 per share to the investor. Given that the fair value of these contingent warrants was recorded in fiscal year 2001, no further amounts were recorded with respect to this transaction. Issuance of Series D Preferred Stock and Common Stock In June 2001, the Company sold 748,402 shares of Series D preferred stock and 2,000,000 shares of common stock to an investor for aggregate gross proceeds of $2,931,266. The proceeds were allocated to the Series D preferred stock and the common stock issued based on their relative fair values. The relative fair value was calculated based on the fair market value of the Series D preferred stock and common stock at the commitment date to purchase the Series D preferred stock and common stock. A beneficial conversion feature of $70,000 was calculated based on the difference between the accounting conversion price of the Series D preferred stock and the fair value of common stock at the commitment date. Since the Series D preferred stock was immediately convertible upon issuance, the Company recognized a deemed dividend for the discount of the Series D preferred stock created by the beneficial conversion feature amounting to $70,000. F-22

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) 6. Stockholders’ Equity Stock Options Issued to Employees In April 1999, the Board of Directors adopted and stockholders approved the 1999 Stock Option Plan (the ―Plan‖), which provides for the issuance of incentive and nonstatutory options to employees and nonemployees of the Company. Through October 31, 2003, the Company reserved 36,000,000 shares of common stock for issuance under the Plan. As of October 31, 2003, remaining shares of common stock available for grant under the Plan were 2,400,334. Options issued under the Plan are generally for periods not to exceed 10 years and must be issued at prices not less than 85 percent of the estimated fair value of the shares of common stock on the date of grant as determined by the Board of Directors. The Plan provides for grants of immediately exercisable options; however, the Company has the right to repurchase any unvested common stock upon the termination of employment at the original exercise price. In accordance with EITF Issue 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44 , stock options granted or modified after March 21, 2002, that are subsequently exercised for cash prior to vesting are treated differently from prior grants and related exercises. The consideration received for an exercise of an option granted after the effective date of the new guidance is considered to be a deposit of the exercise price, and the related dollar amount is recorded as a liability. The shares and liability are only reclassified into equity as the award vests. The Company has appropriately applied the new guidance and recorded a liability on the consolidated balance sheets relating to 1,132,562 of options exercised that are unvested as of January 31, 2003, totaling $1,163,000. The liability at October 31, 2003 was $452,000 relating to the exercise of options for 367,000 shares, of which 172,000 related to the exercise of options during the nine months ended October 31, 2003. Options become vested and exercisable at such times and under such conditions as determined by the Board of Directors. Options, or shares issued upon exercise of options, generally vest over four years, with 25 percent vesting after one year and the balance vesting monthly over the remaining period. Stock option activity is as follows:
Options Outstanding WeightedAverage Exercise Price

Shares Available for Grant

Outstanding Stock Options

Balance as of January 31, 2000 Granted Exercised Cancelled Repurchased Balance as of January 31, 2001 Granted Exercised Cancelled Repurchased Balance as of January 31, 2002 Increase in options authorized Granted Exercised Cancelled Repurchased Balance as of January 31, 2003 Increase in options authorized (unaudited) Granted (unaudited) Exercised (unaudited) Cancelled (unaudited) Repurchased (unaudited)

4,953,000 (5,455,000 ) — 1,026,500 2,435,229 2,959,729 (2,537,025 ) — 1,274,966 2,008,348 3,706,018 5,000,000 (8,878,000 ) — 746,559 734,482 1,309,059 6,000,000 (5,872,500 ) — 940,351 23,424

2,102,083 5,455,000 (3,222,108 ) (1,026,500 ) — 3,308,475 2,537,025 (495,974 ) (1,274,966 ) — 4,074,560 — 8,878,000 (1,680,122 ) (746,559 ) — 10,525,879 — 5,872,500 (581,636 ) (940,351 ) —

$

0.04 1.12 0.86 0.46 — 0.90 0.97 0.51 1.50 — 0.81 — 1.10 0.94 1.18 — 1.01 2.64 1.37 1.27 —

Balance as of October 31, 2003 (unaudited) F-23

2,400,334

14,876,392

$

1.63

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) All options were exercisable at October 31, 2003, and options for 3,355,449 shares granted under the Plan were fully vested as of October 31, 2003. Any unvested shares may be repurchased by the Company at the option exercise price in the event of the employee‘s termination. The right to repurchase unvested shares lapses at the rate of the vesting schedule. In addition, the Company has a 30-day right of first refusal if an optionee intends to sell shares acquired pursuant to options. Shares subject to repurchase by the Company were exercised at prices ranging from $0.06 to $2.50 per share. As of October 31, 2003, 624,000 shares remained subject to repurchase. For the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, the Company recorded $4,415,000, $1,602,000, $8,913,000 and $3,317,000, respectively, of deferred stock-based compensation expense for the excess of the deemed fair market value over the exercise price at the date of grant related to stock options granted to employees. The Company reversed deferred stock-based compensation related to cancellation of options for terminated employees in the amount of $2,284,000, $2,524,000, $1,248,000 and $960,000 for the years ended January 31, 2001, 2002, and 2003 and for the nine months ended October 31, 2003, respectively. The Company amortized $2,620,000, $2,436,000, $2,591,000 and $2,603,000 to expense in 2001, 2002, and 2003 and the nine months ended October 31, 2003, respectively. The compensation expense is being recognized on a straight-line basis over the option-vesting period of four years. During the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, the Company accelerated the vesting of certain stock options relating to terminated employees. As a result, the Company recorded compensation expense totaling $107,000, $1,298,000, $178,000 and $129,000, respectively. The following table summarizes information about stock options outstanding: As of January 31, 2003:
Options Outstanding WeightedAverage Remaining Contractual Life (Years)

Range of Exercise Prices

Number Outstanding

WeightedAverage Exercise Price

$0.02 to $0.06 $0.40 to $0.95 $1.10 to $2.00

842,000 1,313,637 8,370,242 10,525,879

6.56 8.12 9.33

$0.04 0.53 1.18

As of October 31, 2003 (unaudited):
Options Outstanding WeightedAverage Remaining Contractual Life (Years)

Range of Exercise Prices

Number Outstanding

WeightedAverage Exercise Price

$0.02 to $0.95 $1.10 $1.25 to $4.00

2,128,037 6,214,713 6,533,642 14,876,392 F-24

6.74 8.34 8.61

$0.34 1.10 2.56

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Notes Receivable from Stockholders During fiscal 2001, certain employees exercised their stock options with notes. None of these employees is an executive officer. The notes are full recourse and collateralized by the stock of the individuals. The notes bear an interest rate of 6 percent. The notes receivable have been classified as a reduction of stockholders‘ deficit and are due at various dates through September 2005. During fiscal 2003, the Company terminated one of these employees and repurchased the unvested shares through cancellation of $109,000 of the related note receivable. The remaining principal and interest of $1,574,000 and $1,639,000 at January 31, 2003 and October 31, 2003, respectively, on the notes remains outstanding and is due on September 7, 2005. Stock Awards Issued to Non-employees During the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003 the Company granted stock awards of 70,000, 10,000, zero and 100,000 shares, respectively, to non-employees with vesting terms ranging from 18 to 48 months. Compensation expense is re-measured as the shares vest and was recorded over the vesting periods. Such expenses amounted to $318,000, $292,000, $310,000 and $133,000 for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003, respectively. Such expense was estimated using the Black-Scholes pricing model with the following weighted-average assumptions: Risk-free interest rate Contractual lives Expected dividend yield Expected volatility Warrants for Common Stock In fiscal year 2001, the Company issued four warrants to purchase 125,000 shares each of common stock at an exercise price of $5.00 to the salesforce.com/foundation (the ―Foundation‖), which is a nonprofit related party. The chief executive officer of the Company is also the chairman of the Board of Trustees of the Foundation. The warrants were originally scheduled to expire in February 2002, August 2002, August 2003, and August 2004, respectively. The warrants were issued as a charitable contribution to the Foundation. The warrants were fully vested on the date of grant without any performance obligations by the Foundation. The warrants were valued using the Black-Scholes model. Assumptions used were as follows: fair value of the underlying stock at $2.05 per share; risk-free interest rate of 6 percent; contractual life of 1.43, 1.93, 2.93, and 3.93 years, respectively; no dividends during the term; and volatility of 100 percent. The fair value of the warrants totaled $377,500 and was recorded in general and administrative expense in fiscal 2001. In August 2002, the Board of Directors authorized the cancellation of these warrants and issuance of four new warrants, each to purchase 125,000 shares of common stock at $1.10 per share. The warrants are exercisable for one-year terms beginning on the earlier of the initial public offering of the Company or August 1 2003, August 1, 2004, August 1, 2005, and August 1, 2006, respectively. The warrants were issued as a charitable contribution to the Foundation. The warrants were fully vested on the date of grant without any performance obligations by the Foundation. The warrants were valued on the date of modification of the award by calculating the difference between the fair value of the new warrants and the old warrants immediately before the modification. The estimated fair values of the old and new warrants were calculated using the Black-Scholes pricing model with the following assumptions: fair value of the underlying stock of $2.07 per share; risk-free interest rate of 2 percent; contractual lives ranging from .08 to 5 years; no dividends during the term; and volatility of 100 percent. The fair value of the warrants totaled $656,000 and was recorded as general and administrative expense. As of January 31, 2003 and October 31, 2003, all of the warrants to purchase an aggregate of 500,000 shares of common stock remain outstanding. F-25 6.00% 18–48 months 0% 100%

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) In fiscal year 2003, the Company issued two warrants to purchase 50,000 and 35,000 shares, respectively, of common stock at an exercise price of $1.10 to an executive recruiting firm. The warrants were fully vested on the date of grant and are exercisable at any time for a term of five years. The warrants were valued using the Black-Scholes pricing model with the following assumptions: fair value of the underlying stock of $1.96 and $2.50 per share, respectively; risk-free interest rate of 5 percent; contractual life of five years; no dividends during the term; and volatility of 100 percent. The fair value of the warrants totaled $153,000 and was recorded as general and administrative expense. Common Stock In November 2001, the Company entered into an agreement with an advertising agency in which the agency agreed to provide the Company with promotional advertising services in exchange for 250,000 shares of the Company‘s common stock. The shares were fully vested and were not subject to any repurchase rights. The term of the contract was one year. The Company established fair value of the transaction using the fair value of the common stock. The advertising services were provided over the term of the contract, and the expense was recognized over the service period of one year. The expense related to this agreement was $82,000, $248,000 and zero for the years ended January 31, 2002 and 2003 and the nine months ended October 31, 2003, respectively. The Company has reserved shares of common stock for future issuance at January 31, 2003 and at October 31, 2003, as follows: The Plan as of January 31, 2003: Options outstanding Stock available for future grants Common stock warrants Convertible preferred stock Convertible preferred stock warrants 10,525,879 1,309,059 585,000 58,024,345 714,496 71,158,779 The Plan as of October 31, 2003 (unaudited): Options outstanding Stock available for future grants Common stock warrants Convertible preferred stock Convertible preferred stock warrants 14,876,392 2,400,334 585,000 58,024,345 714,496 76,600,567 7. Commitments and Contingencies Letter of Credit In fiscal year 2001, the Company established a $3,500,000 letter of credit in favor of its principal landlord. This letter of credit is collateralized by a certificate of deposit maintained at the granting financial institution. As of October 31, 2003, the letter of credit was outstanding; however, no amounts had been drawn against it. The letter of credit renews annually through December 31, 2010 or expires upon the successful completion of an initial public offering. In addition, the Company had two letters of credit outstanding as of October 31, 2003, both of which were collateralized by certificates of deposit maintained at the granting financial institution. Both letters of credit have renewal provisions and expire at various dates through June 2006. F-26

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) Leases The Company leases office space and equipment under noncancelable operating and capital leases with various expiration dates through 2011. The Company has entered into various capital lease arrangements to obtain equipment for its operations. These agreements are typically for three years, with interest rates ranging from 7 percent to 8 percent per year. The leases are secured by the underlying equipment. The Company is a lessee to certain leased equipment acquired under a capital lease. In June 2002, the Company amended an existing capital lease agreement. The amended lease met the requirements for classification as an operating lease. As a result of this amendment, the Company reduced its capital lease liability by approximately $914,000 in fiscal year 2003. Future minimum lease payments under noncancelable operating and capital leases areas are as follows:
Operating Leases, Net of Sublease Income

Capital Leases

Fiscal Year Ended January 31: 2004 2005 2006 2007 2008 Thereafter Total minimum lease payments Less: amount representing interest Less: unamortized debt discount (Note 5) Present value of capital lease obligations Less: current portion Capital lease obligations, net of current portion

$

560,000 80,000 — — — — 640,000 (25,000 ) (6,000 ) 609,000 (531,000 )

$

5,477,000 5,403,000 5,064,000 4,833,000 4,807,000 14,683,000 40,267,000

$

$

78,000

The terms of the lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on the straight-line basis over the lease period and has accrued for rent expense incurred but not paid. In fiscal year 2001, the Company issued a warrant to purchase 48,857 shares of Series C preferred stock to a leasing company in consideration for a capital lease. The fair value of the warrant of $73,000 was recorded as a discount to the capital lease obligation and is being amortized to interest expense over the lease term (see Note 5). The effective interest rate on the capital lease when considering the value of the warrants issued is approximately 10.9 percent. Rent expense for the years ended January 31, 2001, 2002, and 2003 and the nine months ended October 31, 2003 was $1,783,000, $3,962,000, $3,708,000 and $3,179,000, respectively. Sublease income for the years ended January 31, 2001, 2002, and 2003 and October 31, 2003, was $0, $218,000, and $219,000 and $164,000, respectively. Aggregate future minimum sublease rentals to be received under noncancelable subleases as of January 31, 2003 and October 31, 2003 were $329,000 and $164,000, respectively. F-27

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) In December 2001, the Company abandoned excess office space in San Francisco. The Company accrued for lease and related costs of $7,657,000 pertaining to the estimated future obligations of noncancelable lease payments for these excess facilities. The Company made cash payments of $145,000 and $1,177,000 during the years ended January 31, 2002 and 2003. The remaining liability at January 31, 2003, was $6,335,000, of which $5,128,000 was long-term and expected to be paid through April 2011. The current portion of the remaining liability of $1,207,000 at January 31, 2003 was classified in accrued expenses and other current liabilities. In August 2003, the Company executed a Third Amendment to Office Lease with its landlord. This agreement modified the original lease such that the total leased space under the amended agreement excluded the portion of the leased space that was abandoned by the Company in December 2001. As a result of this amendment, the Company recorded a reduction in its lease liability of $4,342,000 during the third quarter of fiscal 2004. The remaining lease abandonment accrual is based on estimates of vacancy periods and sublease income. The actual vacancy periods may differ from these estimates, and sublease income, if any, may not materialize. Accordingly, these estimates may be adjusted in future periods. The remaining liability at October 31, 2003 was $1,205,000, of which $401,000 was the current portion. 8. 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 October 31, 2003. 9. Related-Party Transactions

The Company subleases a portion of its San Francisco office facility to another party. One of the stockholders of the Company is also a majority shareholder of the sublease tenant. In October 2001, the sublease tenant paid the Company $110,000 for early termination of the sublease agreement with respect to a portion of the leased space. In January 1999, the Foundation 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 and one of the Company‘s executive officers hold two of the Foundation‘s seven 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 totaled $60,000 for the each of the years ended January 31, 2001, 2002, and 2003 and $45,000 during the nine months ended October 31, 2003. In addition to the resource sharing, the Company has issued warrants to purchase 500,000 shares of common stock and has donated subscriptions to the Company‘s service to registered section 501(c)(3) nonprofit organizations. F-28

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salesforce.com, inc. Notes to Consolidated Financial Statements—(Continued) 10. Unaudited Pro Forma Net (Loss) Income Per Share

Pro forma net (loss) income per share has been computed to give effect to convertible preferred stock that will automatically convert into common stock upon the closing of the Company‘s initial public offering for the fiscal year ended January 31, 2003 and the nine months ended October 31, 2003. A reconciliation of the numerator and denominator used in the calculation of pro forma net (loss) income per share is as follows (in thousands):
Fiscal Year Ended January 31, 2003 Nine Months Ended October 31, 2003

Numerator: Net (loss) income Denominator: Weighted-average shares outstanding, net of weighted-average shares of common stock subject to repurchase Adjustments to reflect the assumed conversion of the convertible preferred stock from date of issuance Effect of dilutive securities—employee stock options and warrants Weighted-average shares used in computing diluted pro forma net (loss) income per share

$

(9,339 )

$

4,689

26,375 58,024 — 84,399

29,267 58,024 11,684 98,975

The Company excluded options exercisable for 10,526,000 shares of common stock and warrants exercisable for 1,299,000 shares of common stock from its computation of pro forma net (loss) income per share for the year ended January 31, 2003 as these securities had an anti-dilutive impact. 11. Subsequent Events (unaudited)

In December 2003, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of the Company‘s common stock. Additionally, the Board of Directors approved the 2004 Equity Incentive Plan, the 2004 Employee Stock Purchase Plan and the 2004 Outside Directors Stock Plan, all of which are subject to stockholder approval and will be effective upon the closing of the initial public offering. The 2004 Employee Stock Purchase Plan will be available to all eligible employees, who will be able to individually purchase a maximum of 1,500 shares annually at a price equal to 85 percent of the lower of the fair market value at the start date of the offering or fair market value on the semi-annual purchase dates. The Company will initially reserve for issuance 1,000,000 shares of common stock. The 2004 Equity Incentive Plan will be the successor equity incentive program to the 1999 Stock Option Plan and will increase the shares reserved for issuance by 4,000,000 shares. For the 2004 Outside Directors Stock Plan, the Company will reserve for issuance 1,000,000 shares of common stock. The 2004 Employee Stock Purchase Plan and 2004 Equity Incentive Plan have provisions for annual automatic increases to the shares reserved for issuance based on a specific percentage of the total number of shares outstanding at each year-end. F-29

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of the common stock being registered. All the amounts shown are estimates except the registration fee and the NASD filing fee.
Total

SEC registration fee NASD filing fee Blue sky qualification fees and expenses Printing and engraving expenses Legal fees and expenses Accounting fees and expenses Transfer agent and registrar fees Miscellaneous Total Item 14. Indemnification of Officers and Directors

$

9,304 12,000

$

As permitted by Section 145 of the Delaware General Corporation Law, the bylaws of the registrant provide that (i) the registrant is required to indemnify its directors and executive officers to the fullest extent not prohibited by the Delaware General Corporation Law, (ii) the registrant may, in its discretion, indemnify its other officers, employees and agents as set forth in the Delaware General Corporation Law, (iii) the registrant is required to advance all expenses incurred by its directors and executive officers in connection with certain legal proceedings, (iv) the rights conferred in the bylaws are not exclusive, and (v) the registrant is authorized to enter into indemnification agreements with its directors, officers, employees and agents. The registrant has entered into agreements with its directors and executive officers that require the registrant to indemnify such persons against expenses, judgments, fines, settlements, and other amounts that any such person becomes legally obligated to pay (including with respect to a derivative action) in connection with any proceeding, whether actual or threatened, to which such person may be made a party by reason of the fact that such person is or was a director or officer of the registrant or any of its affiliates, provided such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the registrant. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder. At present, no litigation or proceeding is pending that involves a director or officer of the registrant regarding which indemnification is sought, nor is the registrant aware of any threatened litigation that may result in claims for indemnification. The underwriting agreement filed as exhibit 1.1 to this registration statement provides for indemnification under certain circumstances by the underwriters of the registrant, its directors, and certain of its officers for liabilities arising under the Securities Act of 1933, as amended (the ―Securities Act‖), or otherwise. The registrant maintains a directors‘ and officers‘ insurance and registrant reimbursement policy. The policy insures directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses the registrant for those losses for which the registrant has lawfully indemnified the directors and officers. The policy contains various exclusions, none of which apply to this offering. II-1

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The Second Amended and Restated Investor Rights Agreement between the registrant and certain investors provides for cross-indemnification in connection with registration of the registrant‘s common stock on behalf of such investors. Item 15. Recent Sales of Unregistered Securities

Since December 17, 2000, the registrant has sold and issued the following unregistered securities: 1. From March 2000 to June 2001, the registrant sold 12,059,360 shares of Series D preferred stock at $3.89 per share to 33 investors, consisting of 13 individual investors and 20 venture capital and investment funds, for total proceeds of $46,910,910, all of which was paid in cash. As part of the Series D preferred stock offering, in June 2001 the registrant sold 2,000,000 shares of common stock at $0.01 per share to The Individual Funds and in January 2001 and June 2001, the registrant issued warrants to purchase 580,639 shares of Series D preferred stock at an exercise price of $3.89 per share to Attractor Funds. 2. In December 2000, the registrant issued a warrant to purchase 40,000 shares of Series C preferred stock at an exercise price of $1.75 per share and a warrant to purchase 10,000 shares of Series D preferred stock at an exercise price of $3.89 per share to TMG/Landmark, L.P., the landlord of the registrant‘s headquarters office in San Francisco, California. 3. In June 2002, the registrant issued warrants to purchase 500,000 shares of common stock at an exercise price of $1.10 per share to the salesforce.com/foundation, a non-profit public charity and related party of the registrant. 4. In April 2002, the registrant issued 30,000 shares of common stock to Outcast Communications and 250,000 shares of common stock to CXO Media, Inc., in consideration for advertising services provided by such firms. 5. In July 2002 and October 2002, the registrant issued warrants to purchase a total of 85,000 shares of common stock at an exercise price of $1.10 per share to Heidrick & Struggles, Inc., a retained search firm. 6. Since inception and through October 31, 2003, the registrant had issued 23,936,757 shares of common stock to its employees, directors, consultants and other service providers upon exercise of options granted by the registrant under its 1999 Stock Option Plan, with exercise prices ranging from $0.02 to $4.00 per share. The sales and issuances of securities above, other than the sales and issuances described in item 6, were determined to be exempt from registration under Section 4(2) of the Securities Act or Regulation D thereunder as transactions by an issuer not involving a public offering. The sales and issuances of securities listed above in item 6 were deemed to be exempt from registration under the Securities Act by virtue of Rule 701 promulgated under Section 3(b) of the Securities Act as transactions pursuant to compensation benefits plans and contracts relating to compensation. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. II-2

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Item 16. (a)
Exhibit Number

Exhibits and Financial Statement Schedules Exhibits.
Description of Document

1.1 (a) 3.1 3.2 (a) 3.3 3.4 (a) 4.1 4.2 (a) 5.1 (a) 10.1 (a)(b) 10.2 (b) 10.3 (a)(b) 10.4 (a)(b) 10.5 (a)(b) 10.6 10.7 10.8 (c) 10.9 10.10 10.11 10.12 10.13 10.14 16.1 21.1 23.1 (a) 23.2 24.1

Form of Underwriting Agreement. Eighth Amended and Restated Certificate of Incorporation of salesforce.com, inc. Form of Restated Certificate of Incorporation of salesforce.com, inc. to be filed upon the closing of the offering to which this Registration Statement relates. Bylaws of salesforce.com, inc. Form of Amended and Restated Bylaws of salesforce.com, inc., to be effective upon the closing of the offering to which this Registration Statement relates. Second Amended and Restated Rights Agreement dated as of November 28, 2000 and amendments thereto. Specimen Common Stock Certificate. Opinion of Gray Cary Ware & Freidenrich LLP. Form of Indemnification Agreement between salesforce.com, inc and its officers and directors. 1999 Stock Option Plan. 2004 Equity Incentive Plan. 2004 Employee Stock Purchase Plan. 2004 Outside Directors Stock Plan. Office Lease dated as of June 23, 2000 between salesforce.com, inc. and TMG/One Market, L.P., and amendments thereto. Sublease Agreement dated as of August 5, 2003 between salesforce.com, inc. and Vignette Corporation. Web Hosting and Internet Access Service Agreement dated January 8, 2003 between salesforce.com, inc. and Qwest Communications Corporation, and an amendment thereto. Warrant to purchase shares of Series C Preferred Stock. Warrant to purchase shares of Series D Preferred Stock. Resource Sharing Agreement dated as of March 3, 2003 between salesforce.com, inc. and salesforce.com/foundation. Joint Venture Agreement dated as of December 7, 2000 among salesforce.com, inc., SunBridge, Inc. and Kabushiki Kaisha salesforce.com. License Agreement dated as of January 19, 2001 by and between salesforce.com, inc. and Kabushiki Kaisha salesforce.com. Consulting Services Agreement dated as of January 19, 2001 by and between salesforce.com, inc. and Kabushiki Kaisha salesforce.com. Letter from PricewaterhouseCoopers. List of Subsidiaries. Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). Consent of Ernst & Young, Independent Auditors. Power of Attorney (see page II-5 of this Registration Statement). II-3

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(a) (b) (c)

To be filed by amendment. Denotes a management contract or compensatory plan or arrangement. Confidential treatment has been requested for a portion of this exhibit. (b) Financial Statement Schedules

Schedules not listed above have been omitted because they are not required, they are not applicable or the information is already included in the financial statements or notes thereto. Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item 14 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant undertakes that: (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective, and (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4

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SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on the 18th day of December 2003. salesforce.com, inc. By: /s/ M ARC B ENIOFF

Marc Benioff Chairman and Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Marc Benioff, Steve Cakebread and David Schellhase, and each of them acting individually, as his or her attorney-in-fact and agents, each with full power of substitution, for him or her in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done with respect to the offering of securities contemplated by this Registration Statement, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date

/s/

M ARC B ENIOFF
Marc Benioff

Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) Chief Financial Officer (Principal Financial & Accounting Officer)

December 18, 2003

/s/ S TEVE C AKEBREAD
Steve Cakebread

December 18, 2003

/s/

A LAN H ASSENFELD
Alan Hassenfeld

Director

December 18, 2003

/s/

C RAIG R AMSEY
Craig Ramsey

Director

December 18, 2003

/s/ S ANFORD R. R OBERTSON
Sanford R. Robertson

Director

December 18, 2003

/s/ S TRATTON S CLAVOS
Stratton Sclavos

Director

December 18, 2003

/s/

L ARRY T OMLINSON

Director

December 18, 2003

Larry Tomlinson

/s/

M AGDALENA Y ESIL
Magdalena Yesil

Director

December 18, 2003

II-5

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EXHIBIT INDEX
Exhibit Number Description of Document

1.1 (a) 3.1 3.2 (a) 3.3 3.4 (a) 4.1 4.2 (a) 5.1 (a) 10.1 (a)(b) 10.2 (b) 10.3 (a)(b) 10.4 (a)(b) 10.5 (a)(b) 10.6 10.7 10.8 (c) 10.9 10.10 10.11 10.12 10.13 10.14 16.1 21.1 23.1 (a) 23.2 24.1 (a) (b) (c)

Form of Underwriting Agreement. Eighth Amended and Restated Certificate of Incorporation of salesforce.com, inc. Form of Restated Certificate of Incorporation of salesforce.com, inc. to be filed upon the closing of the offering to which this Registration Statement relates. Bylaws of salesforce.com, inc. Form of Amended and Restated Bylaws of salesforce.com, inc., to be effective upon the closing of the offering to which this Registration Statement relates. Second Amended and Restated Rights Agreement dated as of November 28, 2000 and amendments thereto. Specimen Common Stock Certificate. Opinion of Gray Cary Ware & Freidenrich LLP. Form of Indemnification Agreement between salesforce.com, inc and its officers and directors. 1999 Stock Option Plan. 2004 Equity Incentive Plan. 2004 Employee Stock Purchase Plan. 2004 Outside Directors Stock Plan. Office Lease dated as of June 23, 2000 between salesforce.com, inc. and TMG/One Market, L.P., and amendments thereto. Sublease Agreement dated as of August 5, 2003 between salesforce.com, inc. and Vignette Corporation. Web Hosting and Internet Access Service Agreement dated January 8, 2003 between salesforce.com, inc. and Qwest Communications Corporation, and an amendment thereto. Warrant to purchase shares of Series C Preferred Stock. Warrant to purchase shares of Series D Preferred Stock. Resource Sharing Agreement dated as of March 3, 2003 between salesforce.com, inc. and salesforce.com/foundation. Joint Venture Agreement dated as of December 7, 2000 among salesforce.com, inc., SunBridge, Inc. and Kabushiki Kaisha salesforce.com. License Agreement dated as of January 19, 2001 by and between salesforce.com, inc. and Kabushiki Kaisha salesforce.com. Consulting Services Agreement dated as of January 19, 2001 by and between salesforce.com, inc. and Kabushiki Kaisha salesforce.com. Letter from PricewaterhouseCoopers. List of Subsidiaries. Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). Consent of Ernst & Young, Independent Auditors. Power of Attorney (see page II-5 of this Registration Statement).

To be filed by amendment. Denotes a management contract or compensatory plan or arrangement. Confidential treatment has been requested for a portion of this exhibit.

EXHIBIT 3.1 EIGHTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SALESFORCE.COM, INC. SalesForce.com, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is SalesForce.com, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was February 3, 1999. 2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Eighth Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of this corporation. 3. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read in full as follows: ARTICLE I NAME The name of the corporation (hereinafter called the Corporation) is SalesForce.com, Inc. ARTICLE II REGISTERED OFFICE The address of the registered office of the Corporation in the State of Delaware is Incorporating Services, Ltd., 15 East North Street, City of Dover, County of Kent, and the name of the registered agent of the Corporation in the State of Delaware at such address is the Incorporating Services, Ltd. ARTICLE III PURPOSES The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV CAPITAL STOCK 1. Authorized Stock . The Corporation is authorized to issue two classes of shares to be designated respectively Preferred Stock, par value $0.001 per share, and Common Stock, par value $0.001 per share. The total number of shares of Preferred Stock authorized is 63,738,843. The total number of shares of Common Stock authorized is 200,000,000. The shares of Preferred Stock authorized by this Certificate of Incorporation may be issued from time to time in one or more series. 2. Preferred Stock . The Preferred Stock may be divided into such number of series as the Board of Directors may determine. The first series of Preferred Stock shall be comprised of 25,850,000 shares designated as Series A Preferred Stock. The second series of Preferred Stock shall be comprised of 12,588,345 shares designated as Series B Preferred Stock. The third series of Preferred Stock shall be comprised of 7,650,498 shares designated as Series C Preferred Stock. The fourth series of Preferred Stock shall be comprised of 12,650,000 shares designated as Series D Preferred Stock. The fifth series of Preferred Stock shall be comprised of 5,000,000 shares designated as Series E Preferred Stock. The relative rights, preferences, restrictions and other matters relating to such Preferred Stock are as follows: (a) Dividends . The holders of outstanding Preferred Stock shall be entitled to receive in any fiscal year, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, noncumulative dividends in cash at the rate equal to $0.0012 per share of Series A Preferred Stock, $0.018 per share of Series B Preferred Stock, $0.093 per share of Series C Preferred Stock, $0.233 per share of Series D Preferred Stock, and $0.233 per share of Series E Preferred Stock, as adjusted for any consolidations, combinations, stock distributions, stock dividends, stock splits or similar events (collectively a Recapitalization Event ), per annum. Dividends may be declared and paid upon Common Stock in any fiscal year of the Corporation only if dividends in the total amount during that fiscal year of (i) $0.0012 per share (as adjusted for any Recapitalization Event) shall have been paid or declared and set apart upon all shares of Series A Preferred Stock, (ii) $0.018 per share (as adjusted for any Recapitalization Event) shall have been paid or declared and set apart upon all shares of Series B Preferred Stock, (iii) $0.105 per share (as adjusted for any Recapitalization Event) shall have been paid or declared and set apart upon all shares of Series C Preferred Stock (iv) $0.233 per share (as adjusted for any Recapitalization Event) shall have been paid or declared and set apart upon all shares of Series D Preferred Stock, and (v) $0.233 per share (as adjusted for any Recapitalization Event) shall have been paid or declared and set apart upon all shares of Series E Preferred Stock, and no dividends shall be paid on any share of Common Stock unless a dividend (including the amount of any dividends paid pursuant to the above provisions of this Section (2)(a)) is paid with respect to all outstanding shares of Preferred Stock in an amount for each such share of Preferred Stock equal to or greater than the aggregate amount of such dividends for all shares of Common Stock into which each such share of Preferred Stock could then be converted. The right to dividends on Preferred Stock shall not be cumulative and no right shall accrue to 2

holders of Preferred Stock by reason of the fact that distributions on said shares are not declared in any prior year, nor shall any undeclared or unpaid distribution bear or accrue interest. (b) Preference on Liquidation . (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets and funds of the Corporation available for distribution to stockholders shall be distributed as follows: (i) First, the holders of shares of Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made in respect of the Corporation‘s Common Stock, an amount equal to (i) $0.02 per share of Series A Preferred Stock, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends (the Original Series A Issue Price), plus all declared or accrued and unpaid dividends thereon to the date fixed for such distribution, (ii) $0.30 per share of Series B Preferred Stock, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends (the Original Series B Issue Price), plus all declared or accrued and unpaid dividends thereon to the date fixed for such distribution, (iii) $1.75 per share of Series C Preferred Stock, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends (the Original Series C Issue Price), plus all declared or accrued and unpaid dividends thereon to the date fixed for such distribution, (iv) $3.89 per share of Series D Preferred Stock, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends (the Original Series D Issue Price), plus all declared or accrued and unpaid dividends thereon to the date fixed for such distribution, and (v) $3.89 per share of Series E Preferred Stock, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends (the Original Series E Issue Price), plus all declared or accrued and unpaid dividends thereon to the date fixed for such distribution. If upon liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of the Preferred Stock the full amounts to which they respectively shall be entitled, the holders of the Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. (ii) After setting apart or paying in full the preferential amounts due the holders of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders, if any, shall be distributed ratably to the holders of Preferred and Common Stock on a per share basis, assuming the conversion of the Preferred Stock into Common Stock; provided, that the holders of (a) Series A Preferred Stock shall not receive any assets after each has received at least $0.06 per share pursuant to distributions in accordance with paragraph (i) above and this paragraph, (b) Series B Preferred Stock shall not receive any assets after each has received at least $0.90 per share pursuant to distributions in accordance with paragraph (i) above and this paragraph, (c) Series C Preferred Stock shall not receive any assets after each has 3

received at least $5.25 per share pursuant to distributions in accordance with paragraph (i) above and this paragraph, (d) Series D Preferred Stock shall not receive any assets after each has received at least $11.67 per share pursuant to distributions in accordance with paragraph (i) above and this paragraph, and (e) Series E Preferred Stock shall not receive any assets after each has received at least $11.67 per share pursuant to distributions in accordance with paragraph (i) above and this paragraph. The merger or consolidation of the Corporation into or with another corporation in which the stockholders of this Corporation shall own less than 50% of the voting securities of the surviving corporation or the sale, transfer or other disposition (but not including a transfer or disposition by pledge or mortgage to a bona fide lender) of all or substantially all of the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation as those terms are used in this Section 2(b). (2) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the Corporation shall, within ten (10) days after the date the Board of Directors approves such action, or twenty (20) days prior to any stockholders meeting called to approve such action, or twenty (20) days after the commencement of any involuntary proceeding, whichever is earlier, give each holder of shares of Preferred Stock written notice of the proposed action. Such written notice shall describe the material terms and conditions of such proposed action, including a description of the stock, cash and property to be received by the holders of shares of Preferred Stock upon consummation of the proposed action and the date of delivery thereof. If any material change in the facts set forth in the initial notice shall occur, the Corporation shall promptly give written notice to each holder of shares of Preferred Stock of such material change. (3) The Corporation shall not consummate any voluntary or involuntary liquidation, dissolution or winding up of the Corporation before the expiration of thirty (30) days after the mailing of the initial written notice or ten (10) days after the mailing of any subsequent written notice, whichever is later; provided that any such thirty (30) day or ten (10) day period may be shortened upon the written consent of the holders of a majority of the outstanding shares of Preferred Stock. (4) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation which will involve the distribution of assets other than cash, the Corporation shall promptly engage competent independent appraisers to determine the value of the assets to be distributed to the holders of shares of Preferred Stock and the holders of shares of Common Stock (it being understood that with respect to the valuation of securities, the Corporation shall engage such appraiser as shall be approved by the holders of a majority of shares of the Corporation‘s outstanding Preferred Stock). The Corporation shall, upon receipt of such appraiser‘s valuation, give prompt written notice to each holder of shares of Preferred Stock of the appraiser‘s valuation. (c) Voting . Except as otherwise required by law or as set forth herein, the shares of Preferred Stock shall be voted equally with the shares of the Corporation‘s Common Stock as one class at any annual or special meeting of stockholders of the 4

Corporation, or may act by written consent in the same manner as the Corporation‘s Common Stock, upon the following basis: each holder of shares of Preferred Stock shall be entitled to such number of votes for the Preferred Stock held by the holder on the record date fixed for such meeting, or on the effective date of such written consent, as shall be equal to the whole number of shares of the Corporation‘s Common Stock into which all of his or her shares of Preferred Stock are convertible, exclusive of any dividends, immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent. (d) Conversion Rights . The holders of Preferred Stock shall have conversion rights as follows: (1) Optional Conversion . Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $0.02 by the Series A Conversion Price (as defined below), $0.30 by the Series B Conversion Price (as defined below), $1.75 by the Series C Conversion Price (as defined below), $3.89 by the Series D Conversion Price (as defined below), or $3.89 by the Series E Conversion Price (as defined below), as applicable, in effect at the time of conversion. The ―Series A Conversion Price‖ shall initially be $0.02, the ―Series B Conversion Price‖ shall initially be $0.30, the ―Series C Conversion Price‖ shall initially be $1.75, the ―Series D Conversion Price‖ shall initially be $3.89, and the ―Series E Conversion Price‖ shall initially be $3.89, subject to adjustment as hereinafter provided. (2) Automatic Conversion . Each share of Series A, B and C Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price, immediately upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the then outstanding Series A, B and C Preferred Stock, voting together as a class, or (ii) the closing of the sale of the Corporation‘s Common Stock for the account of the Corporation in a firm commitment underwritten public offering pursuant to an effective registration statement on Form S1 (or a successor form) under the Securities Act of 1933, as amended, at a public offering price (prior to underwriters‘ discounts and commissions) equal to or exceeding $3.00 per share, as adjusted for any stock split, combination, consolidation or stock distributions or stock dividends, and at an aggregate offering price (prior to underwriters‘ discounts and commissions) equal to or exceeding $20,000,000. Each share of Series D Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price, immediately upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the then outstanding Series D Preferred Stock or (ii) the closing of the sale of the Corporation‘s Common Stock for the account of the Corporation in a firm commitment underwritten public offering pursuant to an effective registration statement on Form S1 (or a successor form) under the Securities Act of 1933, as amended, at a public offering price (prior to underwriters‘ discounts and commissions) equal to or exceeding $5.00 per share, or at an aggregate offering price (prior to underwriters‘ 5

discounts and commissions) equal to or exceeding $20,000,000, provided that, prior to the commencement of such public offering, the product obtained by multiplying the per share public offering price by the sum of (A) the number of shares of Common Stock outstanding, (B) the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any securities of the Corporation, and (C) the aggregate number of shares of Common Stock authorized for issuance pursuant to all stock option plans of the Company, in each case as adjusted for any Recapitalization Event, is equal to or in excess of $535,500,000. Each share of Series E Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price, immediately upon the earlier of (i) the date specified by vote or written consent or agreement of holders of at least a majority of the then outstanding Series E Preferred Stock or (ii) the closing of the sale of the Corporation‘s Common Stock for the account of the Corporation in a firm commitment underwritten public offering pursuant to an effective registration statement on Form S1 (or a successor form) under the Securities Act of 1933, as amended, at a public offering price (prior to underwriters‘ discounts and commissions) equal to or exceeding $5.00 per share, or at an aggregate offering price (prior to underwriters‘ discounts and commissions) equal to or exceeding $20,000,000, provided that, prior to the commencement of such public offering, the product obtained by multiplying the per share public offering price by the sum of (A) the number of shares of Common Stock outstanding, (B) the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any securities of the Corporation, and (C) the aggregate number of shares of Common Stock authorized for issuance pursuant to all stock option plans of the Company, in each case as adjusted for any Recapitalization Event, is equal to or in excess of $600,000,000. In the event of an automatic conversion upon a public offering, the person(s) entitled to receive the Common Stock issuable upon such conversion of Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such public offering at which time the Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless certificates evidencing such shares of Preferred Stock being converted are either delivered to the Corporation or its transfer agent, as hereinafter provided, or the holder notifies the Corporation or any transfer agent, as hereinafter provided, that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. (3) The holder of any shares of Preferred Stock may exercise the conversion rights by delivering to the Corporation during regular business hours, at the office of any transfer agent of the Corporation for the Preferred Stock, or at the principal office of the Corporation or at such other place as may be designated by the Corporation, the certificate or certificates for the shares to be converted, duly endorsed for transfer to the Corporation (if required by it), accompanied or preceded by written notice stating that the holder elects to convert such shares into shares of Common Stock. Conversion shall be deemed to have been effected on the date when such delivery is made (the Conversion Date). As promptly as practicable thereafter the Corporation shall issue and deliver to or 6

upon the written order of such holder, at such office or other place designated by the Corporation, a certificate or certificates for the number of full shares of Common Stock, to which such holder is entitled. The holder shall be deemed to have become a stockholder of record of Conversion Stock on the applicable Conversion Date unless the transfer books of the Corporation are closed on the date, in which event it shall be deemed to have become a stockholder of record on the next succeeding date on which the transfer books are open, but the Conversion Price shall be that in effect on the Conversion Date. Upon conversion of only a portion of the number of shares of Preferred Stock represented by a certificate surrendered for conversion, the Corporation shall issue and deliver to or upon the written order of the holder of the certificate so surrendered for conversion, at the expense of the Corporation, a new certificate covering the number of shares of Preferred Stock representing the unconverted portion of the certificate so surrendered. (4) The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (5) The Corporation shall at all times reserve and keep available, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all Preferred Stock from time to time outstanding. The Corporation shall from time to time (subject to obtaining necessary board and stockholder approval), in accordance with the laws of the State of Delaware, increase the authorized amount of its Common Stock if at any time the authorized number of shares of its Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of Preferred Stock at the time outstanding. (6) If any shares of Common Stock to be reserved for the purpose of conversion of shares of Preferred Stock require registration or listing with, or approval of, any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise, before such shares may be validly issued or delivered upon conversion, the Corporation will in good faith and as expeditiously as possible endeavor to secure such registration, listing or approval, as the case may be. (7) All shares of Common Stock which may be issued upon conversion of the shares of Preferred Stock will upon issuance by the Corporation be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof. 7

(8) In case: (i) the Corporation shall take a record of the holders of its capital stock for the purpose of entitling them to receive a dividend, or any other distribution, payable otherwise than in cash or to subscribe for or purchase any shares of stock of any class or to receive any other rights; or (ii) of any capital reorganization of the Corporation, reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of common stock), consolidation or merger of the Corporation with or into another Corporation or conveyance of all or substantially all of the assets of the Corporation to another Corporation; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, and in any such case, the Corporation shall cause to be mailed to the transfer agent for the Preferred Stock, and to the holders of record of the outstanding Preferred Stock at the address of record of such stockholder as set forth on the Corporation‘s books, at least thirty (30) days prior to the date hereinafter specified, a notice stating the material terms of the proposed transaction and the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which holders of capital stock of record shall be entitled to exchange their shares of capital stock for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (e) Adjustment of Conversion Price . The Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price, and Series E Conversion Price from time to time in effect shall be subject to adjustment from time to time as follows: (1) In case the Corporation shall at any time subdivide the outstanding shares of Common Stock, or shall issue a stock dividend on its outstanding Common Stock, the Conversion Price in effect immediately prior to such subdivision or the issuance of such dividend shall be proportionately decreased, and in case the Corporation shall at any time combine the outstanding shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend or combination, as the case may be. 8

(2) Upon the issuance by the Corporation of Equity Securities (as defined below) at a consideration per share less than the Conversion Price of such series of Preferred Stock in effect immediately prior to the time of such issue or sale other than an issuance of stock or securities pursuant to Section 2(e)(1) above or the issuance of shares of Common Stock upon conversion of any shares of Preferred Stock, then forthwith upon such issue or sale, such Conversion Price shall be reduced to a price (calculated to the nearest hundredth of a cent) determined by dividing: (i) an amount equal to the sum of (x) the number of shares of Common Stock deemed outstanding immediately prior to such issue or sale multiplied by the Conversion Price in effect immediately prior to such adjustment, (y) the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any securities of the Corporation deemed outstanding immediately prior to such issue or sale multiplied by the Conversion Price in effect immediately prior to such adjustment, and (z) an amount equal to the aggregate consideration actually received by the Corporation upon such issue or sale; by (ii) the sum of the number of shares of Common Stock deemed outstanding immediately after such issue or sale and the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any securities of the Corporation deemed outstanding immediately after such issue or sale. For purposes of this Section 2(e)(2), the following provisions shall be applicable: (A) The term Equity Securities as used in this Section (e)(2) shall mean: (1) with respect to adjustment of the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price, any shares of Common Stock, or any obligation, any share of stock or other security of the Corporation convertible into or exchangeable for Common Stock except for (i) shares of Common Stock (or securities convertible into such shares) issued to officers, directors, employees and consultants of the Corporation pursuant to any option plan or compensation package of the Corporation, (ii) securities issued in connection with real estate or equipment leases, credit agreements with commercial lenders or in connection with a strategic partnering, (iii) securities issued pursuant to the acquisition of all or part of another company by the Corporation by merger or other reorganization, or by the purchase of all or part of the assets of another company, pursuant to a plan, agreement or arrangement approved by the Board of Directors, (iv) shares of common and/or Preferred reissued by the Corporation following repurchase of such shares pursuant to any restricted stock purchase agreement, (v) securities issued with the unanimous approval of the Board of Directors, (vi) shares of Common Stock issued upon conversion of the Preferred Stock, and (2) with respect to adjustment of the Series D Conversion Price or Series E Conversion Price, any shares of Common Stock, or any obligation, any share of stock or other security of the Corporation convertible into or exchangeable for Common Stock except for (i) shares of Common Stock (or securities convertible into such shares) issued to officers, directors, employees and consultants of the Corporation pursuant to any option plan or compensation package of the Corporation, but not exceeding 25,000,000 shares of Common Stock (net of any repurchases of such shares or cancellations of expiration of options), as adjusted for any Recapitalization Event, (ii) securities issued in connection with real estate or equipment leases, credit agreements with commercial lenders or in connection with a strategic partnering, pursuant to a plan, agreement or arrangement unanimously approved by the Board of Directors, (iii) securities issued pursuant to the acquisition of all or part of another company by the 9

Corporation by merger or other reorganization, or by the purchase of all or part of the assets of another company, pursuant to a plan, agreement or arrangement approved by the Board of Directors, (iv) shares of common and/or Preferred reissued by the Corporation following repurchase of such shares pursuant to any restricted stock purchase agreement, (v) securities issued with the unanimous approval of the Board of Directors, and (vi) shares of Common Stock issued upon conversion of the Preferred Stock. (B) In the case of an issue or sale for cash of shares of Common Stock, the consideration actually received by the Corporation therefor shall be deemed to be the amount of cash received, before deducting therefrom any commissions or expenses paid by the Corporation. (C) In case of the issuance (otherwise than upon conversion or exchange of obligations or shares of stock of the Corporation) of additional shares of Common Stock for a consideration other than cash or a consideration partly other than cash, the amount of the consideration other than cash received by the Corporation for such shares shall be deemed to be the value of such consideration as determined in good faith by the Board of Directors. (D) In case of the issuance by the Corporation in any manner of any rights to subscribe for or to purchase shares of Common Stock, or any options for the purchase of shares of Common Stock or stock convertible into Common Stock, all shares of Common Stock or stock convertible into Common Stock to which the holders of such rights or options shall be entitled to subscribe for or purchase pursuant to such rights or options shall be deemed outstanding as of the date of the offering of such rights or the granting of such options, as the case may be, and the minimum aggregate consideration named in such rights or options for the shares of Common Stock or stock convertible into Common Stock covered thereby, plus the consideration, if any, received by the Corporation for such rights or options, shall be deemed to be the consideration actually received by the Corporation (as of the date of the offering of such rights or the granting of such options, as the case may be) for the issuance of such shares. (E) In case of the issuance or issuances by the Corporation in any manner of any obligations or of any shares of stock of the Corporation that shall be convertible into or exchangeable for Common Stock, all shares of Common Stock issuable upon the conversion or exchange of such obligations or shares shall be deemed issued as of the date such obligations or shares are issued, and the amount of the consideration actually received by the Corporation for such additional shares of Common Stock shall be deemed to be the total of (x) the amount of consideration received by the Corporation upon the issuance of such obligations or shares, as the case may be, plus (y) the minimum aggregate consideration, if any, other than such obligations or shares, receivable by the Corporation upon such conversion or exchange, except in adjustment of dividends. (F) The amount of the consideration actually received by the Corporation upon the issuance of any rights or options referred to in subsection (D) above or upon the issuance of any obligations or shares which are 10

convertible or exchangeable as described in subsection (E) above, and the amount of the consideration, if any, other than such obligations or shares so convertible or exchangeable, receivable by the Corporation upon the exercise, conversion or exchange thereof shall be determined in the same manner provided in subsections (B) and (C) above with respect to the consideration received by the Corporation in case of the issuance of additional shares of Common Stock; provided, however, that if such obligations or shares of stock so convertible or exchangeable are issued in payment or satisfaction of any dividend upon any stock of the Corporation other than Common Stock, the amount of the consideration actually received by the Corporation upon the original issuance of such obligations or shares or stock so convertible or exchangeable shall be deemed to be the value of such obligations or shares of stock, as of the date of the adoption of the resolution declaring such dividend, as determined by the Board of Directors at or as of that date. On the expiration of any rights or options referred to in subsection (C), or the termination of any right of conversion or exchange referred to in subsection (D), or any change in the number of shares of Common Stock deliverable upon exercise of such options or rights or upon conversion of or exchange of such convertible or exchangeable securities, the Conversion Price then in effect shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustments made upon the issuance of such option, right or convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered or to be delivered upon the exercise of such rights or options or upon the conversion or exchange of such securities. (G) In the event this Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this Corporation or other persons or options or rights not referred to in this Section 2(e)(2), then, in each such case, the holders of the Preferred Stock shall be entitled to the distributions provided for in Section 2(a) above, and no adjustment to the Conversion Price provided for in this Section 2(e) shall be applicable. (3) This Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 2(e) and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Preferred Stock against impairment. (4) Upon the occurrence of each adjustment or readjustment of any Conversion Price pursuant to this Section 2(e), this Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof, and shall prepare and furnish to each holder of Preferred Stock affected thereby a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This Corporation shall, upon the written request at any time of any holder of any series of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment or 11

readjustment, (B) the Conversion Price of such series at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of his shares. (f) Status of Redeemed and Converted Stock . In the event any shares of Preferred Stock shall be converted pursuant to Section 2(d) above or otherwise acquired by the Corporation, the shares so converted shall be canceled and shall not be issuable by the Corporation, and the Certificate of Incorporation of this Corporation shall be appropriately amended to effect the corresponding reduction in the Corporation‘s authorized capital stock. (g) Protective Provisions . So long as at least 7,000,000 shares of Preferred Stock or any shares of Series D Preferred Stock or Series E Preferred Stock are outstanding, the Corporation shall not, without first obtaining (x) the approval by vote or written consent, in the manner provided by law, of the holders of at least a majority of the total number of shares of Preferred Stock outstanding, voting together as a class, (y) so long as any shares of Series D Preferred Stock are outstanding, the approval by vote or written consent, in the manner provided by law, of the holders of at least a majority of the total number of shares of Series D Preferred Stock outstanding, and (z) so long as any shares of Series E Preferred Stock are outstanding, the approval by vote or written consent, in the manner provided by law, of the holders of at least a majority of the total number of shares of Series E Preferred Stock outstanding: (1) create any new class of shares senior to or on parity with the Preferred Stock with respect to dividends or other distributions or liquidation; (2) amend the Corporation‘s Certificate of Incorporation or Bylaws if such action alters or changes the rights, preferences or privileges of the Preferred Stock; or (3) effect any transactions, including any merger of the Corporation with or into another entity or sale of all or substantially all of the Corporation‘s assets, which results in a change in voting control of the Corporation. (h) Residual Rights . All rights accruing to the outstanding shares of the Corporation not expressly provided for to the contrary herein shall be vested in the Common Stock. 12

ARTICLE V BYLAWS In furtherance and not in limitation of the powers conferred by statute and except as provided herein, the Board of Directors shall have the power to adopt, amend, repeal or otherwise alter the bylaws without any action on the part of the stockholders; provided, however, that any bylaws made by the Board of Directors and any and all powers conferred by any of said bylaws may be amended, altered or repealed by the stockholders. ARTICLE VI INDEMNIFICATION OF DIRECTORS A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director‘s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing provisions of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ARTICLE VII ELECTION OF DIRECTORS The election of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. ARTICLE VIII The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 13

IN WITNESS WHEREOF, SalesForce.com, Inc. has caused this Certificate to be signed by John Dillon, its President, this 16th day of November, 2000. SALESFORCE.COM, INC. By: /s/ John Dillon

John Dillon, President 14

EXHIBIT 3.3 AMENDED AND RESTATED BY-LAWS OF SALESFORCE.COM, INC.

TABLE OF CONTENTS
Page

ARTICLE I STOCKHOLDERS Section 1.1 Annual Meeting Section 1.2 Special Meetings Section 1.3 Notice of Meetings Section 1.4 Quorum Section 1.5 Organization Section 1.6 Conduct of Business Section 1.7 Notice of Stockholder Business Section 1.8 Proxies and Voting Section 1.9 Stock List Section 1.10 Stockholder Action by Written Consent ARTICLE II BOARD OF DIRECTORS Section 2.1 Number and Term of Office Section 2.2 Vacancies and Newly Created Directorships Section 2.3 Removal Section 2.4 Regular Meetings Section 2.5 Special Meetings Section 2.6 Quorum Section 2.7 Participation in Meetings by Conference Telephone Section 2.8 Powers Section 2.9 Action Without Meeting. Section 2.10 Compensation of Directors Section 2.11 Nomination of Director Candidates ARTICLE III COMMITTEES Section 3.1 Committees of the Board of Directors Section 3.2 Conduct of Business ARTICLE IV OFFICERS Section 4.1 Generally Section 4.2 Chairman of the Board Section 4.3 President Section 4.4 Vice President Section 4.5 Treasurer Section 4.6 Secretary Section 4.7 Delegation of Authority Section 4.8 Removal Section 4.9 Action With Respect to Securities of Other Corporations ARTICLE V STOCK Section 5.1 Certificates of Stock Section 5.2 Transfers of Stock Section 5.3 Record Date Section 5.4 Lost, Stolen or Destroyed Certificates Section 5.5 Regulations

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ARTICLE VI NOTICES Section 6.1 Notices Section 6.2 Waivers ARTICLE VII MISCELLANEOUS Section 7.1 Facsimile Signatures Section 7.2 Corporate Seal Section 7.3 Reliance Upon Books, Reports and Records Section 7.4 Fiscal Year Section 7.5 Time Periods ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.1 Right to Indemnification Section 8.2 Right of Claimant to Bring Suit Section 8.3 Indemnification of Employees and Agents Section 8.4 Non-Exclusivity of Rights Section 8.5 Indemnification Contracts Section 8.6 Insurance Section 8.7 Effect of Amendment Section 8.8 Savings Clause ARTICLE IX AMENDMENTS 2

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AMENDED AND RESTATED BY-LAWS OF SALESFORCE.COM, INC. ARTICLE I STOCKHOLDERS Section 1.1 Annual Meeting . An annual meeting of the stockholders, for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months after the organization of the corporation or after its last annual meeting of stockholders. Section 1.2 Special Meetings . Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by (a) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), (b) the Chairman of the Board, (c) the President or (d) the holders of shares entitled to cast not less than twenty percent (20%) of the votes at the meeting, and shall be held at such place, on such date, and at such time as they shall fix. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice. Section 1.3 Notice of Meetings . Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation). When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 1.4 Quorum . At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or by the Certificate of Incorporation. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 1.5 Organization . Such person as the Board of Directors may have designated or, in the absence of such a person, the chief executive officer of the Corporation or, in his absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. The secretary of the meeting shall be such person as the chairman appoints. Section 1.6 Conduct of Business . The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Section 1.7 Notice of Stockholder Business . At an annual or special meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board of Directors, or (c) properly brought before an annual meeting by a stockholder and if, and only if, the notice of a special meeting provides for business to be brought before the meeting by stockholders, properly brought before the special meeting by a stockholder. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder‘s notice must be delivered to or mailed and received at the principal offices of the Corporation no later than (i) in the case of an annual meeting, ninety (90) days before the anticipated date of the next annual meeting, under the assumption that the next annual meeting will occur on the same calendar day as the day of the most recent annual 2

meeting, and (ii) in the case of a special meeting, ten (10) days prior to date of such meeting. A stockholder‘s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual or special meeting (1) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the annual or special meeting, (2) the name and address, as they appear on the Corporation‘s books, of the stockholder proposing such business, (3) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (4) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with the procedures set forth in this Section 1.7. The chairman of an annual or special meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 1.7, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 1.8 Proxies and Voting . At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors, and except where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or by his proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation or the By-Laws of this Corporation, all other matters shall be determined by a majority of the votes cast. Section 1.9 Stock List . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in 3

the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 1.10 Stockholder Action by Written Consent . An action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the actions so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Prompt notice of the taking of a corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II BOARD OF DIRECTORS Section 2.1 Number and Term of Office . The number of directors shall initially be four (4), and, thereafter, the number and term of office shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). Each director shall hold office until his successor is elected and qualified or until his earlier death, resignation, retirement, disqualification or removal. Section 2.2 Vacancies and Newly Created Directorships . Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, or other cause (other than removal from office by a vote of the stockholders) may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 4

Section 2.3 Removal . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of at least a majority of the voting power of its then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Vacancies in the Board of Directors resulting from such removal may be filled by (i) a majority of the directors then in office, though less than a quorum, or (ii) the stockholders at a special meeting of the stockholders properly called for that purpose, by the vote of the holders of a plurality of the shares entitled to vote at such special meeting. Directors so chosen shall hold office until the next annual meeting of stockholders. Section 2.4 Regular Meetings . Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Section 2.5 Special Meetings . Special meetings of the Board of Directors may be called by three (3) of the directors then in office, by the chairman of the board or by the chief executive officer and shall be held at such place, on such date, and at such time as they or he shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director who does not waive the right to a notice by (i) mailing written notice not less than five (5) days before the meeting, (ii) sending notice one (1) day before the meeting by an overnight courier service and two (2) days before the meeting if by overseas courier service, or (iii) by telephoning, telecopying, telegraphing or personally delivering the same not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 2.6 Quorum . At any meeting of the Board of Directors, a majority of the total number of authorized directors shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof. Section 2.7 Participation in Meetings by Conference Telephone . Members of the Board of Directors, or of any committee of the Board of Directors, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. 5

Section 2.8 Conduct of Business . At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Section 2.9 Powers . The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power: (a) To declare dividends from time to time in accordance with law; (b) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; (c) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; (d) To remove any officer of the Corporation with or without cause, and from time to time to pass on the powers and duties of any officer upon any other person for the time being; (e) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; (f) To adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; (g) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and (h) To adopt from time to time regulations, not inconsistent with these By-Laws, for the management of the Corporation‘s business and affairs. Section 2.10 Action Without Meeting . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to such action. Such written consent or consents shall 6

be filed with the minutes of the proceedings of the board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 2.11 Compensation of Directors . Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors. Section 2.12 Nomination of Director Candidates . Subject to any limitations stated in the Certificate of Incorporation of this Corporation, nominations for the election of Directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors. ARTICLE III COMMITTEES Section 3.1 Committees of the Board of Directors . The Board of Directors, by a vote of a majority of the whole Board, may from time to time designate one or more committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Section 3.2 Conduct of Business . Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-half of the authorized members shall constitute a quorum unless the committee shall consist of one or two members, in which event all members of the committee shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting 7

if all members thereof consent thereto in writing. Such written consent or consents shall be filed with the minutes of the proceedings of such committee. ARTICLE IV OFFICERS Section 4.1 Generally . The officers of the Corporation shall consist of a President, a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office at the pleasure of the Board, until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same person. Section 4.2 Chairman of the Board . The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or as provided by these By-Laws. Section 4.3 President . Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the general manager and chief executive officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and other officers, employees and agents of the Corporation. He shall preside at all meetings of the stockholders. He shall be ex-officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these By-Laws. He shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized by the Board of Directors. Section 4.4 Vice President . In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents, if any, shall have such other powers and perform such 8

other duties as from time to time may be prescribed for them respectively by the Board of Directors or these By-Laws. Section 4.5 Treasurer . The Treasurer shall keep and maintain or cause to be kept and maintained, adequate and correct financial books and records of account of the Corporation in written form or any other form capable of being converted into written form. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. He shall disburse all funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these By-Laws. Section 4.6 Secretary . The Secretary shall keep, or cause to be kept, a book of minutes in written form of the proceedings of the Board of Directors, committees of the Board, and stockholders. Such minutes shall include all waivers of notice, consents to the holding of meetings, or approvals of the minutes of meetings executed pursuant to these By-Laws or the General Delaware Corporation Law. The Secretary shall keep, or cause to be kept at the principal executive office or at the office of the Corporation‘s transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of shares held by each. The Secretary shall give or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required by these By-Laws or by law to be given, and shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these By-Laws. Section 4.7 Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 4.8 Removal . Subject to the rights and obligations set forth in a written Employment Agreement, if any, any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors. 9

Section 4.9 Action With Respect to Securities of Other Corporations . Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V STOCK Section 5.1 Certificates of Stock . Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and the Secretary, an Assistant Secretary or the Treasurer, certifying the number of shares owned by him or her. Any or all the signatures on the certificate may be facsimile. Section 5.2 Transfers of Stock . Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.4 of these By-Laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor. Section 5.3 Record Date . The Board of Directors may fix a record date, which shall not be more than sixty (60) nor fewer than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for the other action hereinafter described, as of which there shall be determined the stockholders who are entitled: to notice of or to vote at any meeting of stockholders or any adjournment thereof; to express consent to corporate action in writing without a meeting; to receive payment of any dividend or other distribution or allotment of any rights; or to exercise any rights with respect to any change, conversion or exchange of stock or with respect to any other lawful action. Section 5.4 Lost, Stolen or Destroyed Certificates . In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. 10

Section 5.5 Regulations . The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI NOTICES Section 6.1 Notices . Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram, mailgram or commercial courier service. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at this last known address as the same appears on the books of the Corporation. The time when such notice is received by such stockholder, director, officer, employee or agent, or by any person accepting such notice on behalf of such person, if hand delivered, or dispatched, if delivered through the mails or by telegram, courier or mailgram, shall be the time of the giving of the notice. Section 6.2 Waivers . A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance of a person at a meeting shall constitute a waiver of notice for such meeting, except when the person attends a meeting for the express purpose of objecting, and does in fact object, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VII MISCELLANEOUS Section 7.1 Facsimile Signatures . In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. 11

Section 7.2 Corporate Seal . The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or other officer designated by the Board of Directors. Section 7.3 Reliance Upon Books, Reports and Records . Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser. Section 7.4 Fiscal Year . The fiscal year of the Corporation shall begin on the first day of March and end on the last day of February. Section 7.5 Time Periods . In applying any provision of these By-Laws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.1 Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (―Proceeding‖), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said Law permitted the Corporation to provide prior to such amendment) against all expenses, liability and loss 12

(including attorneys‘ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 8.2, the Corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such Proceeding in advance of its final disposition; provided, however, that, if required by the General Corporation Law of Delaware, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such Proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Section or otherwise. Any indemnification as provided herein (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of a director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law of Delaware. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 8.2 Right of Claimant to Bring Suit . If a claim under Section 8.1 is not paid in full by the Corporation within ninety (90) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of Delaware for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of Delaware, nor an actual determination by the Corporation (including its Board of 13

Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. Section 8.3 Indemnification of Employees and Agents . The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of related expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification of and advancement of expenses to directors and officers of the Corporation. Section 8.4 Non-Exclusivity of Rights . The rights conferred on any person by Sections 8.1, 8.2 and 8.3 shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provisions of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 8.5 Indemnification Contracts . The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to those provided for in this Article VIII. Section 8.6 Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under Delaware General Corporation Law. Section 8.7 Effect of Amendment . Any amendment, repeal or modification of any provision of this Article VIII by the stockholders or the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification. Section 8.8 Savings Clause . If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys‘ fees), judgments, fines and amounts paid in settlement with respect 14

to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE IX AMENDMENTS The Board of Directors is expressly empowered to adopt, amend, alter or repeal By-Laws of the Corporation, subject to the right of the stockholders to adopt, amend, alter or repeal the By-Laws of the Corporation. Any adoption, amendment or repeal of By-Laws of the Corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend, alter or repeal the By-Laws of the Corporation. [The remainder of this page deliberately left blank] 15

EXHIBIT 4.1 SALESFORCE.COM, INC. SECOND AMENDED AND RESTATED RIGHTS AGREEMENT November 28, 2000

TABLE OF CONTENTS
Page

1.

2.

3.

Registration Rights 1.1 Definitions 1.2 Request for Registration 1.3 Company Registration 1.4 Form S-3 Registration 1.5 Obligations of the Company 1.6 Furnish Information 1.7 Expenses of Registration 1.8 Underwriting Requirements 1.9 Delay of Registration 1.10 Indemnification 1.11 Reports Under Securities Exchange Act of 1934 1.12 Assignment of Registration Rights 1.13 Limitations on Subsequent Registration Rights 1.14 ―Market Stand-Off‖ Agreement 1.15 Termination of Registration Rights Covenants of the Company 2.1 Delivery of Financial Statements 2.2 Right of First Offer 2.3 Board Observer Rights 2.4 Termination of Covenants Miscellaneous 3.1 Successors and Assigns 3.2 Amendments and Waivers 3.3 Notices 3.4 Severability 3.5 Governing Law 3.6 Counterparts 3.7 Titles and Subtitles 3.8 Aggregation of Stock; Adjustment of Share Numbers; Adjustment of Share Numbers 3.9 Additional Parties

2 3 4 6 6 7 9 9 10 11 11 14 15 16 16 17 17 17 18 19 20 20 20 20 21 22 22 22 22 22 22

SALESFORCE.COM, INC. SECOND AMENDED AND RESTATED RIGHTS AGREEMENT This Second Amended and Restated Rights Agreement (the ―Agreement‖) is made as of November 28, 2000 by and among SalesForce.com, Inc., a Delaware corporation (the ―Company‖), the investors listed on Exhibit A-1 hereto, each of which is herein referred to as a ―Prior Purchaser‖ and the investors listed on Exhibit A-2, hereto, each of whom is herein referred to as a ―Purchaser.‖ The Prior Purchasers and the Purchasers are collectively referred to herein as the ―Investors.‖ RECITALS WHEREAS, the Prior Purchasers hold shares of, and/or rights to purchase shares of, the Company‘s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and/or Series D Preferred Stock, and/or shares of Common Stock issued upon conversion thereof (the ―Existing Preferred Stock‖) and possess registration rights, information rights, rights of first offer and other rights pursuant to an Amended and Restated Rights Agreement, dated as of June 29, 2000, by and among the Company and such Prior Purchasers (the ―Prior Agreement‖); WHEREAS, the undersigned Prior Purchasers who hold Existing Preferred Stock desire to terminate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement; and WHEREAS, the Purchasers are parties to the Series D Preferred Stock Purchase Agreement, dated as of November 28, 2000, by and among the Company and such Purchasers (the ―Series D Agreement‖), certain of the Company‘s and such Purchasers‘ obligations under which are conditioned upon the execution and delivery by such Purchasers, holders of in excess of 50% of the Existing Preferred Stock, and the Company of this Agreement. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Prior Purchasers who are parties to the Prior Agreement hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows: 1. Registration Rights . The Company and the Investors covenant and agree as follows: 2

1.1 Definitions . For purposes of this Section 1: (a) The terms ― register ,‖ ― registered ‖ and ― registration ‖ refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the ―Securities Act‖), and the declaration or ordering of effectiveness of such registration statement or document; (b) The term ―Registrable Securities‖ means (i) the shares of Common Stock issuable or issued upon conversion of the Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock, and (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i); provided , however , that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned. Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale; (c) The number of shares of ―Registrable Securities then outstanding‖ shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities; (d) The term ―Holder‖ means any Investor owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.12 of this Agreement; (e) The term ―Form S-3‖ means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act; (f) The term ―SEC‖ means the Securities and Exchange Commission; and 3

(g) The term ―Qualified IPO‖ means an underwritten public offering by the Company of shares of its Common Stock pursuant to a registration statement under the Securities Act, prior to or in connection with which all shares of the Company‘s Preferred Stock are converted into shares of Common Stock. 1.2 Request for Registration . (a) If the Company shall receive at any time after the earlier of November 15, 2003, or one hundred eighty (180) days after the effective date of the first registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), a written request from (i) the Holders of a majority of the Registrable Securities then outstanding, (ii) the Holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock, or (iii) the Holders of a majority of the Registrable Securities then outstanding with respect to the Series E Preferred Stock that the Company file a registration statement under the Securities Act covering the registration of at least twenty percent (20%) or, with respect to clauses (ii) or (iii) above, fifteen percent (15%) of the Registrable Securities then outstanding, in each case, which would involve an anticipated aggregate offering price, net of underwriting discounts and commissions, exceeding $10,000,000, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of subsection 1.2(b), use its best efforts to effect as soon as practicable, and in any event within sixty (60) days of the receipt of such request, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.3. (b) If the Holders initiating the registration request hereunder (―Initiating Holders‖) intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by a majority in interest of the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder‘s participation in such underwriting and the inclusion of such Holder‘s Registrable Securities in the underwriting (unless 4

otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (i) After the Company has effected two (2) registrations pursuant to Section 1.2 (a)(i) or one (1) registration pursuant to this Section 1.2(a)(ii), as applicable, and such registrations have been declared or ordered effective; (ii) During the period starting with the date sixty (60) days prior to the Company‘s good faith estimate of the date of filing of, and ending on a date sixty (60) days after the effective date of, a registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or 5

(iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below. 1.3 Company Registration . If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan or a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.3, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. 1.4 Form S-3 Registration . In case the Company shall receive from any Holder or Holders of Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder‘s or Holders‘ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Holders, together with the holders of any other 6

securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters‘ discounts or commissions) of less than $1,000,000; (iii) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 1.4; provided , however, that the Company shall not utilize this right more than once in any twelve (12) month period; (iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 for the Holders pursuant to this Section 1.4; (v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance; or (vi) during the period ending ninety (90) days after the effective date of a registration statement subject to Section 1.3 (one hundred eighty (180) days in the case of the Company‘s initial public offering of securities pursuant to a registration statement under the Securities Act). (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 1.5 Obligations of the Company . Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days. The Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. 7

(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for up to one hundred twenty (120) days. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue for one hundred twenty (120) days. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 8

(i) Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (1) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (2) a ―comfort‖ letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 1.6 Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder‘s Registrable Securities. The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement if, as a result of the application of the preceding sentence, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company‘s obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.4(b)(2), whichever is applicable. 1.7 Expenses of Registration . (a) Demand Registration; Company Registration . All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2 or 1.3, including (without limitation) all registration, filing and qualification fees, printers‘ and 9

accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements (not to exceed $30,000) of one counsel for the selling Holders selected by them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or 1.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2 or 1.3, provided further , however , that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company that was not known to the Holders at the time of their request, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2 or 1.3. (b) Registrations on Form S-3 . All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications of Registrable Securities pursuant to Section 1.4 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers‘ and accounting fees, fees and disbursements of counsel for the selling Holder or Holders, shall be borne by the selling Holder or Holders pro rata based upon the number of shares being offered. 1.8 Underwriting Requirements . In connection with any offering involving an underwriting of shares of the Company‘s capital stock, the Company shall not be required under Section 1.3 to include any of the Holders‘ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling 10

stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall (i) any shares being sold by a stockholder exercising a demand registration right similar to that granted in Section 1.2 be excluded from such offering, (ii) the amount of securities of the selling Holders included in the offering be reduced below twenty percent (20%) of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company‘s securities, in which case, except as provided in (i), the selling stockholders may be excluded if the underwriters make the determination described above and no other stockholder‘s securities are included, or (iii) any securities held by a Founder be included if any securities held by any selling Holder are excluded. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single ―selling stockholder,‖ and any pro-rata reduction with respect to such ―selling stockholder‖ shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such ―selling stockholder,‖ as defined in this sentence. 1.9 Delay of Registration . No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 Indemnification . In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the ―Exchange Act‖), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a ―Violation‖): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or 11

alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or controlling person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. 12

(c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a Holder under this Subsection 1.10(d) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties‘ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 13

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.11 Reports Under Securities Exchange Act of 1934 . With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant 14

whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12 Assignment of Registration Rights . The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) (a) by a Holder that is a partnership, to a partner or retired partner, (b) by a Holder that is a limited liability company, to a member or retired member, (c) by a Holder that is an individual, to such individual‘s estate or by gift, will or intestate succession to a spouse or lineal descendant or antecedent or any trust for any of the foregoing, or (d) by a Holder to a transferee or assignee of at least 500,000 shares, or in the case of Registrable Securities with respect to the Series D Preferred Stock, at least 64,267 shares, or in the case of Registrable Securities with respect to the Series E Preferred Stock, at least 50,000 shares, provided, that, in the case of Registrable Securities with respect to the Series D Preferred Stock or Series E Preferred Stock, each such transfer of Securities is of at least 50,000 shares; provided, further, the Company is, within thirty (30) days following such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act; and provided, further, that no transferee or assignee may be a person or entity that develops or distributes products or services that perform substantially the same functions as or have substantially the same features, or competes for substantially the same end user customers and for the same purposes, as the products or services of the Company. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under Section 1.

15

1.13 Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of (a) the Holders of a majority of the outstanding Registrable Securities, (b) the Holders of a majority of the outstanding Registrable Securities with respect to the Series D Preferred Stock, and (c) the Holders of a majority of the outstanding Registrable Securities with respect to the Series E Preferred Stock, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (i) to include such securities in any registration filed under Section 1.3 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included, or (ii) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) or within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 1.2. 1.14 ― Market Stand-Off‖ Agreement . Each Holder hereby agrees that, during the period of duration (up to, but not exceeding, 180 days) specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock (or other securities) included in such registration or acquired in the public market after the offering; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; and (b) all officers and directors of the Company, all one-percent securityholders, and all other persons with registration rights (whether or not pursuant to this Agreement) shall be subject to similar restrictions. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) 16

until the end of such period, and each Holder agrees that, if so requested, such Holder will execute an agreement in the form provided by the underwriter containing terms which are essentially consistent with the provisions of this Section 1.14. Notwithstanding the foregoing, the obligations described in this Section 1.14 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms which may be promulgated in the future. 1.15 Termination of Registration Rights . No Holder shall be entitled to exercise any right provided for in this Section 1 at such date (i) seven (7) years following the consummation of a Qualified IPO or (ii) after the Company‘s initial registered public offering when all remaining Registrable Securities held or entitled to be held by such Holder may be sold under Rule 144 during any three (3) month period. 2. Covenants of the Company . 2.1 Delivery of Financial Statements . The Company shall deliver to each Holder of at least 400,000 shares of Registrable Securities (as measured on the date of such Holder‘s becoming a party to the Prior Agreement or this Agreement, as applicable) (a ―Major Holder‖): (a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholder‘s equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, setting forth in each case in comparative form the figures from the Company‘s prior fiscal year, prepared in accordance with generally accepted accounting principles (―GAAP‖), and audited and certified by an independent public accounting firm of nationally recognized standing selected by the Company; (b) within thirty (30) days of the end of each quarter, an unaudited income statement and a statement of cash flows and balance sheet for and as of the end of such quarter, in reasonable detail, together with a comparison to the Company‘s operating plan and budget; 17

(c) as soon as practicable, but in any event thirty (30) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, and, as soon as prepared, any other budgets or revised budgets prepared by the Company. 2.2 Right of First Offer . Subject to the terms and conditions specified in this Section 2.2, the Company hereby grants to each Major Holder a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). Each time the Company proposes to offer any Equity Securities (as defined in its Eighth Amended and Restated Certificate of Incorporation), the Company shall first make an offering of such Equity Securities to each Major Holder in accordance with the following provisions: (a) The Company shall deliver a notice by certified mail (―Notice‖) to the Major Holders stating (i) its bona fide intention to offer such Equity Securities, (ii) the number of such Equity Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Equity Securities. (b) Within ten (10) calendar days after delivery of the Notice, the Major Holder may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Equity Securities which equals the proportion that the number of shares of Common Stock issued or issuable to such Major Holder upon conversion of Series A, Series B, Series C, or Series D Preferred Stock bears to the total number of shares of Common Stock then outstanding (assuming full conversion and exercise of all outstanding convertible or exercisable securities). A written notice to the Company indicating a Major Holder‘s intention to exercise its right of first offer shall not be binding unless and until the Company obtains binding commitments to purchase all of the Equity Securities specified in the Notice on the terms stated in the Notice. The Company shall promptly, in writing, inform each Major Holder that purchases all the shares available to it (each, a ―Fully-Exercising Investor‖) of any other Major Holder‘s failure to do likewise. During the ten (10)-day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Additional Shares for which Major Holders were entitled to subscribe but which were not subscribed for by the Major Holders that is equal to the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable securities then held, by such Fully-Exercising Investor bears to the total number of shares of Common Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable securities then held, by all Fully-Exercising Investors. 18

(c) The Company may, during the 45-day period following the expiration of the period provided in subsection 2.2(b) hereof, offer the remaining unsubscribed portion of the Equity Securities to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Equity Securities within such period, or if such agreement is not consummated within sixty (60) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Equity Securities shall not be offered unless first reoffered to the Major Holders in accordance herewith. (d) For purposes of the application of the rights of first offer established by this Section 2.2, Equity Securities shall not include (i) up to 12,650,000 shares of Series D Preferred Stock or any shares of capital stock issuable upon conversion thereof, (ii) up to 5,000,000 shares of Series E Preferred Stock or any shares of capital stock issuable upon conversion thereof, and (iii) securities currently excluded from the definition of the term Equity Securities and issued prior to the date hereof, in which the rights arising from this section are expressly waived for all parties hereto. 2.3 Board Observer Rights . For so long as any of the Prior Purchasers continues to hold any amount of equity securities of the Company owned by such Prior Purchasers as of the Closing Date under the Series D Stock Purchase Agreement, dated as of March 30, 2000, by and among the Company and such Prior Purchasers, (provided that such securities shall be deemed to be owned and to remain outstanding notwithstanding any conversion, exercise or exchange of such securities for other securities unless such conversion, exercise or exchange is in connection with a merger or consolidation of the Company in which the Company is not the surviving corporation), the Company will permit a representative of the Prior Purchasers, reasonably acceptable to the Company (the ―Observer‖) to attend all meetings of the Company‘s Board of Directors (whether in person, telephonic or other) in a non-voting, observer capacity and shall provide to the Observer, concurrently with the members of the Board, and in the same manner, notice of each such meeting and a copy of all materials provided to such members; provided, however, that the Observer shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided, further, that the Company reserves the rights to withhold any information and to exclude the Observer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in the disclosure of trade secrets to the Observer. 19

2.4 Termination of Covenants . (a) The covenants set forth in Sections 2.1 (b) and (c), Section 2.2 and Section 2.3 shall terminate as to each Holder and be of no further force or effect (i) immediately prior to the consummation of a Qualified IPO, or (ii) when the Company shall sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of, provided that this subsection (ii) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Corporation. (b) The covenants set forth in Sections 2.1(b) and (c) and 2.2 shall terminate as to each Holder and be of no further force or effect when the Company first becomes subject to the periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act, if this occurs earlier than the events described in Section 2.3(a) above. 3. Miscellaneous . 3.1 Successors and Assigns . Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties (including transferees of any of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or any Common Stock issued upon conversion thereof). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2 Amendments and Waivers . Subject to the provisions of Section 3.9 below, any term of this Agreement may be amended or waived only with the written consent of: (a) the Company; (b) the holders of a majority of the Registrable Securities then outstanding, not including the Founders‘ Stock, provided that if such 20

amendment has the effect of affecting the Founders‘ Stock (i) in a manner materially different than securities issued to the Investors and (ii) in a manner materially adverse to the interests of the holders of the Founders‘ Stock, then such amendment shall require the consent of the holder or holders of a majority of the Founders‘ Stock; (c) the holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock; and (d) the holders of a majority of the Registrable Securities then outstanding with respect to the Series E Preferred Stock. In addition, any amendment or waiver of Section 1.2(a)(ii), Section 1.13(b) or Section 1.14 shall require the written consent of Attractor Ventures LLC. Any amendment or waiver effected in accordance with this Section 3.2 shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company; provided , however , that no such amendment or waiver shall alter, modify or otherwise affect detrimentally the rights or obligations hereunder of any Holder of Registrable Securities with respect to the Series D Preferred Stock or Series E Preferred Stock in a manner materially different from the effect of such amendment or waiver on the rights or obligations hereunder of the holders of other Registrable Securities then outstanding, except upon the written consent of such Holder. Except as set forth in this Section 3.2, each Holder acknowledges that by the operation of this Section 3.2, the holders of a majority of the Registrable Securities then outstanding, not including the Founders‘ Stock, together with the holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock and the holders of a majority of the Registrable Securities then outstanding with respect to the Series E Preferred Stock, may have the right and power to diminish or eliminate all rights of such Holder under this Agreement. 3.3 Notices . Unless otherwise provided, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by telegram or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party‘s address or fax number as set forth on the signature page on Exhibit A-1 or Exhibit A-2 hereto or as subsequently modified by written notice. 21

3.4 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms. 3.5 Governing Law . This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of laws. 3.6 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 3.7 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.8 Aggregation of Stock; Adjustment of Share Numbers; Adjustment of Share Numbers . All shares of the Preferred Stock held or acquired by affiliated entities or persons (within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934, as amended) and entities under common investment management shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. All share numbers in this Agreement shall be appropriately adjusted to reflect any subsequent stock splits, stock dividends, recapitalizations and similar transactions. 3.9 Additional Parties . In the event that any purchaser of Series D Preferred Stock listed on Exhibit A to the Series D Agreement purchases shares of Series D Preferred Stock set forth opposite such purchaser‘s name on such Exhibit A after the Closing (as such term is defined in the Series D Agreement), any such purchaser, upon execution of a counterpart signature page hereto and without need for an amendment hereto, shall, as of the date of execution of such counterpart signature page, be deemed an ―Investor‖ under this Agreement and shall be entitled to all rights, and be subject to all obligations, of an Investor under this Agreement. In addition, the Company may add additional parties to this Agreement in connection 22

with warrants or other securities issued by the Company in connection with credit agreements, real estate or equipment leases, or other commercial transactions or in connection with a strategic partnering, pursuant to a plan, agreement or arrangement approved by the Company‘s Board of Directors. Any such party, upon execution of a counterpart signature page hereto and without need for an amendment hereto, shall, as of the date of execution of such counterpart signature page, be deemed an ―Investor‖ under this Agreement and shall be entitled to all rights, and be subject to all obligations, of an Investor under this Agreement.

23

The parties have executed this Second Amended and Restated Rights Agreement as of the date first above written. COMPANY: SALESFORCE.COM, INC. By: John Dillon President By: Name: (Print Name) 24 INVESTORS:

EXHIBIT A-1 The ―Prior Purchasers‖ Series A Preferred Benioff, Marc Harris, G. Parker Moellenhoff, David Domingues Jr. Frank Young, Adam & Julie Series B Preferred Minor, Halsey Tako Ventures Yesil, Magdalena Benioff, Marc Sill Family Burleigh, James Mark, Diane Benfield, Nancy Harris, G. Parker Kramer, Margot Moellenhoff, David Series C Preferred The Minor Revocable Trust Attractor QP LP McGovern, Patrick Benioff, Marc Tako Ventures, LLC Geneva Venture Partners Hambrecht, William J.F. Shea Co., Inc. as nominee 1999-73 Attractor LP Attractor Ventures LLC The Martin Group of Companies, Inc. Paul Nakada and Christine Hoang Robert R. Anderson Attractor Offshore Ltd.

Geneva Group Attractor Institutional LP Freidenrich Family Partnership Joseph Levy Tien Tzuo The Timothy Anderson Trust Outcast Communications, Inc. Monica Mylet John Jordano Robert S. Jacobs Dan Rowley Design One Keenan Vision, Inc. Glenda Martin Alpine DPR Solutions TMG/Landmark, L.P. The Martin Group of Companies, Inc. Comdisco, Inc. Series D Preferred The Minor Revocable Trust Attractor QP LP Marc Benioff Attractor LP Credit Suisse First Boston Venture Fund I, LP W.R. Hambrecht/Salesforce, LLC Attractor Ventures LLC Attractor Institutional LP Attractor Offshore Ltd. Aman Ventures II, LLC Edward Coppola Geneva Venture Partners Carson Levit Stratton Sclavos Project Capital Special Reserve Partners Gregory C. Smith Avalon, Inc. The Sill Family Limited Partnership GenevaGroup International TMG/Landmark, L.P. 2

EXHIBIT A-2 The ―Purchasers‖ Allen Miner DRW Venture Partners LP SunBridge Thomas Berson Aman Ventures LLC Geneva Venture Partners Sill Family LP GenevaGroup International John Appleby Frank De Marco Arjun Gupta Marc Benioff Marc Friend Esquisse Limited

A MENDMENT TO THE S ALES F ORCE . COM , I NC . S ECOND A MENDED AND R ESTATED R IGHTS A GREEMENT , D ATED AS OF N OVEMBER 28, 2000 This amendment (the ―Amendment‖) to the SalesForce.com, Inc. Second Amended and Restated Rights Agreement, dated as of November 28, 2000 (the ―Agreement‖), is among SalesForce.com, Inc. (the ―Company‖) and the Investors, as defined in the Agreement. W HEREAS , Section 3.2 of the Agreement provides for the Agreement to be amended with the consent of the Company, the holders of a majority of the Registrable Securities then outstanding, and the holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock; and W HEREAS , the Company and the undersigned Investors who are parties to the Agreement desire to amend the Agreement to include additional purchasers of Series D Preferred Stock as Investors under the Agreement. W HEREAS , the undersigned Investors who are listed on Exhibit A-3 hereto agree to be subject to all obligations of an Investor under the Agreement. N OW T HEREFORE , the Agreement shall be amended as follows: Exhibit A-3 to this Amendment is added as Exhibit A-3 to the Agreement. The last sentence of the introductory paragraph of the Agreement is replaced with the following sentence: ―The Prior Purchasers, the Purchasers and the investors listed on Exhibit A-3, hereto, are collectively referred to herein as the ‗Investors.‘‖ Except as specifically modified herein, all other terms and conditions of the Agreement shall remain in full force and effect. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. I N W ITNESS W HEREOF , the undersigned have executed this Amendment as of June 1, 2001. C OMPANY : S ALES F ORCE . COM , I NC . By: John Dillon, President I NVESTOR : Print Name of Investor: By: Name:

EXHIBIT A-3 The Individuals‘ Venture Fund (1999) L.P. The Individuals‘ Venture Fund (1999) Q L.P. The Individuals‘ Venture Fund (Seed) Q L.P. The Individuals‘ Venture Fund (Seed) R L.P.

AMENDMENT TO THE SALESFORCE.COM, INC. SECOND AMENDED AND RESTATED RIGHTS AGREEMENT This amendment (the “Amendment”) to the salesforce.com, inc. Second Amended and Restated Rights Agreement, dated as of November 28, 2000, as amended (the “Rights Agreement”), is among salesforce.com, inc. (the “Company”) and the Investors, as defined in the Rights Agreement. Capitalized terms defined in the Rights Agreement shall have the same meanings if used in this Amendment, unless otherwise defined herein. WHEREAS, Section 3.2 of the Rights Agreement provides that the Rights Agreement may be amended with the consent of the Company, the holders of a majority of the Registrable Securities then outstanding, and the holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock; WHEREAS, the Company is planning an underwritten initial public offering of its Common Stock (the “Offering”) pursuant to a Registration Statement (the “Registration Statement”) to be filed with the Securities and Exchange Commission ( “SEC” ); and WHEREAS, in connection with the Offering and in order to help secure the commitments of the investment banks that propose to underwrite the Offering (the “Representatives”), the Company and the undersigned Investors who are parties to the Rights Agreement and who hold sufficient Registrable Securities, including Registrable Securities with respect to the Series D Preferred Stock, to amend the Rights Agreement on behalf of all holders of any Registrable Securities currently outstanding, each future holder of all such Registrable Securities and the Company under Section 3.2 of the Rights Agreement, desire to amend the Rights Agreement as provided herein. NOW THEREFORE, the Rights Agreement shall be amended as follows: 1. Subsection 1.2(a) of the Rights Agreement shall be amended as follows: ―(a) If the Company shall receive at any time after the earlier of November 15, 2003, or date that is one hundred eighty (180) days after the effective date of the first registration statement for a public offering of securities of the Company (other that a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), a written request from (i) the Holders of a majority of the Registrable Securities then outstanding, (ii) the Holders of a majority of the Registrable Securities then outstanding with respect to the Series D Preferred Stock, or (iii) the Holders of a majority of the Registrable Securities then outstanding with respect to the Series E Preferred Stock that the Company file a registration statement under the Securities Act covering the registration of at least twenty percent (20%) or, with respect to clauses (ii) or (iii) above, fifteen percent (15%) of the Registrable Securities then outstanding, in each case, which would involve an anticipated aggregate offering price, net of underwriting discounts and commissions, exceeding $10,000,000, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of subsection 1.2(b), use its best efforts to effect as soon as practicable, and in any event within sixty (60) days of the receipt of such request, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.3.‖

2. Section 1.3 of the Rights Agreement shall be amended as follows: ―1.3 Company Registration . If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration pursuant to a Qualified IPO , a registration relating solely to the sale of securities to participants in a Company stock plan or a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.3, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.‖ 3. Except as specifically modified herein, all other terms and conditions of the Rights Agreement shall remain in full force and effect. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of December 5, 2003. SALESFORCE.COM, INC. By: Name: Title: INVESTOR Print Name: By: Name: Title:

EXHIBIT 10.2 SALESFORCE.COM, INC. 1999 STOCK OPTION PLAN 1. ” ). 1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. 1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed. However, all Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the stockholders of the Company. 2. D EFINITIONS AND C ONSTRUCTION . 2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below: (a) “ Board ” means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, “ Board ” also means such Committee(s). (b) “ Code ” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. (c) “ Committee ” means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. (d) “ Company ” means SalesForce.com, Inc., a Delaware corporation, or any successor corporation thereto. (e) “ Consultant ” means any person, including an advisor, engaged by a Participating Company to render services other than as an Employee or a Director. 1 E STABLISHMENT , P URPOSE AND T ERM OF P LAN . 1.1 Establishment. This Stock Option Plan (the “ Plan ” ) is hereby established effective as of April 1,1999 (the “ Effective Date

(f) “ Director ” means a member of the Board or of the board of directors of any other Participating Company. (g) “ Disability ” means the inability of the Optionee, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Optionee‘s position with the Participating Company Group because of the sickness or injury of the Optionee. (h) “ Employee ” means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a director‘s fee shall be sufficient to constitute employment for purposes of the Plan. (i) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended. (j) “ Fair Market Value ” means, as of any date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following: (i) If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion. (ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse. (k) “ Incentive Stock Option ” means an Option intended to be (as set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code. (l) “ Insider ” means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act. 2

(m) “ Nonstatutory Stock Option ” means an Option not intended to be (as set forth in the Option Agreement) or which does not qualify as an Incentive Stock Option. (n) “ Option ” means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option. (o) “ Option Agreement ” means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof. (p) “ Optionee ” means a person who has been granted one or more Options. (q) “ Parent Corporation ” means any present or future ―parent corporation‖ of the Company, as defined in Section 424(e) of the Code. (r) “ Participating Company ” means the Company or any Parent Corporation or Subsidiary Corporation. (s) “ Participating Company Group ” means, at any point in time, all corporations collectively which are then Participating Companies. (t) “ Rule 16b-3 ” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation. (u) “ Securities Act ” means the Securities Act of 1933, as amended. (v) “ Service ” means an Optionee‘s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. The Optionee‘s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee‘s Service. Furthermore, an Optionee‘s Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee‘s Service shall be deemed to have terminated unless the Optionee‘s right to return to Service with the Participating Company Group is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Optionee‘s Option Agreement. The Optionee‘s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Optionee performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Optionee‘s Service has terminated and the effective date of such termination. 3

(w) “ Stock ” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2. (x) “ Subsidiary Corporation ” means any present or future ―subsidiary corporation‖ of the Company, as defined in Section 424(f) of the Code. (y) “ Ten Percent Owner Optionee ” means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code. 2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term ―or‖ is not intended to be exclusive, unless the context clearly requires otherwise. 3. A DMINISTRATION .

3.1 Administration by the Board. The Plan shall be administered by the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. 3.2 Authority of Officers. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election. 3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3. 3.4 Powers of the Board. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its discretion: (a) to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to each Option; (b) to designate Options as Incentive Stock Options or Nonstatutory Stock Options; 4

(c) to determine the Fair Market Value of shares of Stock or other property; (d) to determine the terms, conditions and restrictions applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee‘s termination of Service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan; (e) to approve one or more forms of Option Agreement; (f) to amend, modify, extend, cancel, renew, reprice or otherwise adjust the exercise price of, or grant a new Option in substitution for, any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof; (g) to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee‘s termination of Service with the Participating Company Group; (h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and (i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent consistent with the Plan and applicable law. 4. S HARES S UBJECT TO P LAN .

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be Two Million (2,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is terminated or canceled or if shares of Stock are acquired upon the exercise of an Option subject to a Company repurchase option and are repurchased by the Company at the 5

Optionee‘s exercise price, the shares of Stock allocable to the unexercised portion of such Option or such repurchased shares of Stock shall again be available for issuance under the Plan. Notwithstanding the foregoing, at any such time as the offer and sale of securities pursuant to the Plan is subject to compliance with Section 260.140.45 of Title 10 of the California Code of Regulations ( “ Section 260.140.45 ” ), the total number of shares of Stock issuable upon the exercise of all outstanding Options (together with options outstanding under any other stock option plan of the Company) and the total number of shares provided for under any stock bonus or similar plan of the Company shall not exceed thirty percent (30%) (or such other higher percentage limitation as may be approved by the stockholders of the Company pursuant to Section 260.140.45) of the then outstanding shares of the Company as calculated in accordance with the conditions and exclusions of Section 260.140.45. 4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the “ New Shares ” ), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive. 5. E LIGIBILITY AND O PTION L IMITATIONS .

5.1 Persons Eligible for Options. Options may be granted only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, ―Employees,‖ ―Consultants‖ and ―Directors‖ shall include prospective Employees, prospective Consultants and prospective Directors to whom Options are granted in connection with written offers of an employment or other service relationships with the Participating Company Group. Eligible persons may be granted more than one (1) Option. 5.2 Option Grant Restrictions. Any person who is not an Employee on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences Service with a Participating Company, with an exercise price determined as of such date in accordance with Section 6.1. 6

5.3 Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by an Optionee for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portions of such options which exceed such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.3, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. 6. T ERMS AND C ONDITIONS OF O PTIONS .

Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form, as the Board shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Board; provided, however, that (a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option, (b) the exercise price per share for a Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option, and (c) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code. 6.2 Exercise Period. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration 7

of five (5) years after the effective date of grant of such Option, (c) no Option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service with a Participating Company, and (d) with the exception of an Option granted to an officer, Director or Consultant, no Option shall become exercisable at a rate less than twenty percent (20%) per year over a period of five (5) years from the effective date of grant of such Option, subject to the Optionee‘s continued Service. Subject to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option granted hereunder shall have a term of ten (10) years from the effective date of grant of the Option. 6.3 Payment of Exercise Price. (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “ Cashless Exercise ” ), (iv) by the Optionee‘s promissory note in a form approved by the Company, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at any time or from time to time, by adoption of or by amendment to the standard forms of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration. (b) Limitations on Forms of Consideration. (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company‘s stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the Company‘s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise. 8

(iii) Payment by Promissory Note. No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms, as the Board shall determine at the time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company‘s securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations. 6.4 Tax Withholding. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company Group‘s tax withholding obligations have been satisfied by the Optionee. 6.5 Repurchase Rights. Shares issued under the Plan may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Board in its discretion at the time the Option is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions. 6.6 Effect of Termination of Service. (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein, an Option shall be exercisable after an Optionee‘s termination of Service as follows: (i) Disability. If the Optionee‘s Service with the Participating Company Group is terminated because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee‘s Service terminated, may be 9

exercised by the Optionee (or the Optionee‘s guardian or legal representative) at any time prior to the expiration of six (6) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee‘s Service terminated, but in any event no later than the date of expiration of the Option‘s term as set forth in the Option Agreement evidencing such Option (the “ Option Expiration Date ” ). (ii) Death. If the Optionee‘s Service with the Participating Company Group is terminated because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee‘s Service terminated, may be exercised by the Optionee‘s legal representative or other person who acquired the right to exercise the Option by reason of the Optionee‘s death at any time prior to the expiration of six (6) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee‘s Service terminated, but in any event no later than the Option Expiration Date. The Optionee‘s Service shall be deemed to have terminated on account of death if the Optionee dies within thirty (30) days (or such longer period of time as determined by the Board, in its discretion) after the Optionee‘s termination of Service. (iii) Other Termination of Service. If the Optionee‘s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee‘s Service terminated, may be exercised by the Optionee within thirty (30) days (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee‘s Service terminated, but in any event no later than the Option Expiration Date. (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.6(a) is prevented by the provisions of Section 11 below, the Option shall remain exercisable until thirty (30) days (or such longer period of time as determined by the Board, in its discretion) after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date. (c) Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.6(a) of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee‘s termination of Service, or (iii) the Option Expiration Date. 7. S TANDARD F ORMS OF O PTION A GREEMENT .

7.1 General. An Option shall comply with and be subject to the terms and conditions set forth in the form of Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time. 10

7.2 Authority to Vary Terms. The Board shall have the authority from time to time to vary the terms of any of the standard forms of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan. 8. C HANGE IN C ONTROL . 8.1 Definitions. (a) An “ Ownership Change Event ” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. (b) A “ Change in Control ” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a “ Transaction ” ) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company‘s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “ Transferee Corporation(s) ” ), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. 8.2 Effect of Change in Control on Options. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “ Acquiring Corporation ” ), may either assume the Company‘s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation‘s stock. For purposes of this Section 8.2, an Option shall be deemed assumed if, following the Change in Control, the Option confers the right to purchase in accordance with its terms and conditions, for each share of Stock subject to the Option immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. In the event the Acquiring Corporation elects not to assume or substitute for outstanding Options in connection with a Change in Control, any unexercisable or unvested portions of outstanding Options held by Optionees whose Service has 11

not terminated prior to such date shall become immediately exercisable and vested in full (and any unvested share repurchase option shall lapse) as of the date ten (10) days prior to the date of the Change in Control. The accelerated exercise or vesting of any Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the Change in Control. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board otherwise provides in its discretion. 9. P ROVISION OF I NFORMATION .

At least annually, copies of the Company‘s balance sheet and income statement for the just completed fiscal year shall be made available to each Optionee and purchaser of shares of Stock upon the exercise of an Option. The Company shall not be required to provide such information to key employees whose duties in connection with the Company assure them access to equivalent information. 10. N ONTRANSFERABILITY OF O PTIONS .

During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee‘s guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution. 11. C OMPLIANCE WITH S ECURITIES L AW .

The grant of Options and the issuance of shares of Stock upon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the 12

Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company‘s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 12. I NDEMNIFICATION .

In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys‘ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 13. T ERMINATION OR A MENDMENT OF P LAN .

The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company‘s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company‘s stockholders under any applicable law, regulation or rule. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule. 14. S HAREHOLDER A PPROVAL .

The Plan or any increase in the maximum aggregate number of shares of Stock issuable thereunder as provided in Section 4.1 (the “ Authorized Shares ” ) shall be approved by the stockholders of the Company within twelve (12) months of the date of adoption thereof by 13

the Board. Options granted prior to shareholder approval of the Plan or in excess of the Authorized Shares previously approved by the stockholders shall become exercisable no earlier than the date of shareholder approval of the Plan or such increase in the Authorized Shares, as the case may be. 14

SALESFORCE.COM, INC. TERMS OF STOCK OPTION AGREEMENT The Company has granted to the Optionee, pursuant to a Stock Option Grant Agreement (the “ Grant Agreement ” ) and the Company‘s 1999 Stock Option Plan (the “ Plan ” ), an Option to purchase certain shares of Stock, upon the terms and conditions set forth in this Agreement (―the Agreement‖). The Option shall in all respects be subject to the terms and conditions of the Grant Agreement and the Plan, the provisions of which are incorporated herein by reference. 1. D EFINITIONS AND C ONSTRUCTION .

1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Agreement or the Plan. 1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term ―or‖ is not intended to be exclusive, unless the context clearly requires otherwise. 2. T AX C ONSEQUENCES .

2.1 Tax Status of Option. As indicated in the Grant Agreement, this Option is intended to be either an Incentive Stock Option (―ISO‖) within the meaning of Section 422(b) of the Code or a nonstatutory stock option, which is not intended to qualify as an ISO. The Optionee should consult with the Optionee‘s own tax advisor regarding the tax effects of this Option (and any requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements). 2.2 ISO Fair Market Value Limitation. If this Option is designated an ISO in the Grant Agreement , to the extent that the Option (together with all Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued 1

upon the exercise of the Option. ( NOTE : If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option. 2.3 Election Under Section 83(b) of the Code. ( NOTE: IGNORE this Section 2.3 unless this Option is designated in the Grant Agreement as Immediately Exercisable). If an Optionee exercises this Option prior to vesting (or otherwise nontransferable and subject to a substantial risk of forfeiture), the Optionee understands that the Optionee should consult with the Optionee‘s tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code. This election must be filed no later than thirty (30) days after the date on which the Optionee exercises the Option. Shares acquired upon exercise of the Option are nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are unvested and are subject to a right of the Company to repurchase such shares at the Optionee‘s original purchase price if the Optionee‘s Service terminates, or (b) the Optionee is an Insider and, under certain circumstances, exercises the Option within six (6) months of the Date of Option Grant (if a class of equity security of the Company is registered under Section 12 of the Exchange Act). Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Optionee. The Optionee acknowledges that the Optionee has been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE‘S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF. 3. E XERCISE OF THE O PTION .

3.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the Date of Option Grant and prior to the termination of the Option (as provided in Section 5) in an amount not to exceed the Number of Option Shares less the number of shares previously acquired upon exercise of the Option, subject to the Optionee‘s agreement that any shares purchased upon exercise are subject to the Company‘s Unvested Share Repurchase Option and Right of First Refusal (as such terms are defined herein). 3.2 Method of Exercise. Exercise of the Option shall be by written notice in the form attached to the Company which must state the election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Optionee‘s investment intent with respect to such shares as may be required pursuant to the provisions of this Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company 2

may permit, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in Section 5, accompanied by (i) full payment of the aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed copy, if required herein, of the then current form of escrow agreement referenced below. The Option shall be deemed to be exercised upon receipt by the Company of such written notice, the aggregate Exercise Price, and, if required by the Company, such executed agreement. 3.3 Payment of Exercise Price. (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 3.3(b), or (iv) by any combination of the foregoing. (b) Limitations on Forms of Consideration. (i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender, or attestation to the ownership, of Stock would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company‘s stock. The Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. (ii) Cashless Exercise. A “ Cashless Exercise ” means the assignment in a form acceptable to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company‘s sole and absolute discretion, to decline to approve or terminate any such program or procedure. Generally, and without limiting the Company‘s absolute discretion, a ―cashless exercise‖ will only be permitted at such times in which the shares underlying this Option are publicly traded . 3.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax 3

withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon exercise of the Option. The Optionee is cautioned that the Option is not exercisable unless the tax withholding obligations of the Participating Company Group are satisfied. Accordingly, the Optionee may not be able to exercise the Option when desired even though the Option is vested, and the Company shall have no obligation to issue a certificate for such shares or release such shares from any escrow provided for herein. 3.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, the Optionee‘s heirs. 3.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company‘s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 3.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option. 4. N ONTRANSFERABILITY OF THE O PTION .

The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee‘s guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following 4

the death of the Optionee, the Option, to the extent provided in Section 6, may be exercised by the Optionee‘s legal representative or by any person empowered to do so under the deceased Optionee‘s will or under the then applicable laws of descent and distribution. 5. T ERMINATION OF THE O PTION .

The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising the Option following termination of the Optionee‘s Service as described in Section 6, or (c) pursuant to a Change in Control, to the extent provided in the Plan. 6. E FFECT OF T ERMINATION OF S ERVICE . 6.1 Option Exercisability. (a) Disability. If the Optionee‘s Service with the Participating Company Group is terminated because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee‘s Service terminated, may be exercised by the Optionee (or the Optionee‘s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Optionee‘s Service terminated, but in any event no later than the Option Expiration Date. (NOTE: If the Option is exercised more than three (3) months after the date on which the Optionee‘s Service as an Employee terminated as a result of a Disability other than a permanent and total disability as defined in Section 22(e)(3) of the Code, the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.) (b) Death. If the Optionee‘s Service with the Participating Company Group is terminated because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee‘s Service terminated, may be exercised by the Optionee‘s legal representative or other person who acquired the right to exercise the Option by reason of the Optionee‘s death at any time prior to the expiration of twelve (12) months after the date on which the Optionee‘s Service terminated, but in any event no later than the Option Expiration Date. The Optionee‘s Service shall be deemed to have terminated on account of death if the Optionee dies within one (1) month after the Optionee‘s termination of Service. (c) Other Termination of Service. If the Optionee‘s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee‘s Service terminated, may be exercised by the Optionee within thirty (30) days (or such other longer period of time as determined by the Board, in its sole discretion) after the date on which the Optionee‘s Service terminated, but in any event no later than the Option Expiration Date. 6.2 Additional Limitations on Option Exercise. Notwithstanding the provisions of Section 7.1, the Option may not be exercised after the Optionee‘s termination of Service to the extent that the shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase Option. 5

6.3 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 6.1 is prevented by the provisions of Section 3.6, the Option shall remain exercisable until one (1) month after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date. The Company makes no representation as to the tax consequences of any such delayed exercise. The Optionee should consult with the Optionee‘s own tax advisor as to the tax consequences of any such delayed exercise. 6.4 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee‘s termination of Service, or (iii) the Option Expiration Date. The Company makes no representation as to the tax consequences of any such delayed exercise. The Optionee should consult with the Optionee‘s own tax advisor as to the tax consequences of any such delayed exercise. 7. R IGHTS AS A S TOCKHOLDER , E MPLOYEE OR C ONSULTANT .

The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2 of the Plan. If the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Optionee, the Optionee‘s employment is ―at will‖ and is for no specified term. Nothing in this Agreement shall confer upon the Optionee any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee‘s Service as an Employee or Consultant, as the case may be, at any time. 8. U NVESTED S HARE R EPURCHASE O PTION .

8.1 Grant of Unvested Share Repurchase Option . ( NOTE: IGNORE Section 8 unless this Option is designated as Immediately Exercisable in the Grant Agreement). If Optionee‘s Service with the Participating Company Group is terminated for any reason or no reason, with or without cause, or, if the Optionee, the Optionee‘s legal representative, or other holder of shares acquired upon exercise of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event) any shares acquired upon exercise of the Option which exceed the Vested Shares as defined in Section 8.2 below (the “ Unvested Shares ” ), the Company shall have the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth in this Section 8 (the “ Unvested Share Repurchase Option ” ). 6

8.2 Vested Shares and Unvested Shares Defined. The “ Vested Shares ” shall mean, on any given date, a number of shares of Stock equal to the Number of Option Shares multiplied by the Vested Ratio determined as of such date and rounded down to the nearest whole share. On such given date, the “ Unvested Shares ” shall mean the number of shares of Stock acquired upon exercise of the Option which exceed the Vested Shares determined as of such date. 8.3 Exercise of Unvested Share Repurchase Option. The Company may exercise the Unvested Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a) termination of the Optionee‘s Service (or exercise of the Option, if later) or (b) the Company has received notice of the attempted disposition of Unvested Shares. If the Company fails to give notice within such sixty (60) day period, the Unvested Share Repurchase Option shall terminate unless the Company and the Optionee have extended the time for the exercise of the Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at all, for all of the Unvested Shares, except as the Company and the Optionee otherwise agree. 8.4 Payment for Shares and Return of Shares to Company. The purchase price per share being repurchased by the Company shall be an amount equal to the Optionee‘s original cost per share, as adjusted pursuant to Section 4.2 of the Plan (the “ Repurchase Price ” ). The Company shall pay the aggregate Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written notice to the Optionee of the Company‘s exercise of the Unvested Share Repurchase Option. For purposes of the foregoing, cancellation of any purchase money indebtedness of the Optionee to any Participating Company for the shares shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The shares being repurchased shall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee. 8.5 Assignment of Unvested Share Repurchase Option. The Company shall have the right to assign the Unvested Share Repurchase Option at any time, whether or not such option is then exercisable, to one or more persons as may be selected by the Company. 8.6 Ownership Change Event. Upon the occurrence of an Ownership Change Event, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee‘s ownership of Unvested Shares shall be immediately subject to the Unvested Share Repurchase Option and included in the terms ―Stock‖ and ―Unvested Shares‖ for all purposes of the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event. While the aggregate Repurchase Price shall remain the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as appropriate. For purposes of determining the Vested Ratio following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event. 7

9.

R IGHT OF F IRST R EFUSAL .

9.1 Grant of Right of First Refusal. Except as provided in Section 9.7 below, in the event the Optionee, the Optionee‘s legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested Shares (the “ Transfer Shares ” ) to any person or entity, including, without limitation, any stockholder of a Participating Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 9 (the “ Right of First Refusal ” ). This Right of First Refusal terminates in accordance with Section 9.9. 9.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Optionee shall deliver written notice (the “ Transfer Notice ” ) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “ Proposed Transferee ” ) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Optionee proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal. 9.3 Bona Fide Transfer. If the Company determines that the information provided by the Optionee in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice of the Optionee‘s failure to comply with the procedure described in this Section 9, and the Optionee shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 9. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide. 9.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company‘s exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company‘s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice 8

is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. 9.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree) within the period specified in Section 9.4 above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this Section 9. 9.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Option Agreement, including this Section 9 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this Section 9 are met. 9.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of a Participating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 9.9 below result in a termination of the Right of First Refusal. 9.8 Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company. 9.9 Early Termination of Right of First Refusal. The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes the Company‘s rights and obligations under the Option or substitutes a 9

substantially equivalent option for the Acquiring Corporation‘s stock for the Option, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal. A “ public market ” shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefore are published daily on business days in a recognized financial journal. 10. E SCROW .

10.1 Establishment of Escrow. To ensure that shares subject to the Unvested Share Repurchase Option will be available for repurchase, the Company may require the Optionee to deposit the certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an agent designated by the Company under the terms and conditions of escrow and security agreements approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, the Company reserves the right at any time to require the Optionee to so deposit the certificate in escrow. Upon the occurrence of an Ownership Change Event or a change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee‘s ownership of shares of Stock acquired upon exercise of the Option that remain, following such Ownership Change Event or change described in Section 4.2 of the Plan, subject to the Unvested Share Repurchase Option shall be immediately subject to the escrow to the same extent as such shares of Stock immediately before such event. The Company shall bear the expenses of the escrow. 10.2 Delivery of Shares to Optionee. As soon as practicable after the expiration of the Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow agent shall deliver to the Optionee the shares and any other property no longer subject to such restriction. 10.3 Notices and Payments. In the event the shares and any other property held in escrow are subject to the Company‘s exercise of the Unvested Share Repurchase Option or the Right of First Refusal, the notices required to be given to the Optionee shall be given to the escrow agent, and any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the shares and any other property which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee. 11. S TOCK D ISTRIBUTIONS S UBJECT TO T HIS A GREEMENT .

If, from time to time, there is any stock dividend, stock split or other change, as described in Section 4.2 of the Plan, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Agreement, then in such event any and all new, substituted or additional securities to which the Optionee is entitled by reason of the Optionee‘s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Unvested Share Repurchase Option and the Right of First Refusal 10

with the same force and effect as the shares subject to the Unvested Share Repurchase Option and the Right of First Refusal immediately before such event. 12. N OTICE OF S ALES U PON D ISQUALIFYING D ISPOSITION .

The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year after the date of the Optionee exercises all or part of the Option or within two (2) years after the Date of Grant. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee‘s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company‘s stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence. 13. L EGENDS .

The Company may at any time place legends referencing the Unvested Share Repurchase Option, the Right of First Refusal, and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following: 13.1 ―THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ―ACT‖) AND ARE ―RESTRICTED SECURITIES‖ AS DEFINED UNDER RULE 144 PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT, (II) IN COMPLIANCE WITH RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION.‖ 13.2 ―THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERED OR DISPOSED OF FOR ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT OF THE FIRST UNDERWRITTEN REGISTRATION OF THE COMPANY 11

FILED UNDER THE ACT, AS MAY BE REQUESTED BY THE COMPANY OR THE REPRESENTATIVE OF THE UNDERWRITERS.‖ 13.3 ―THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OR SUCH HOLDER‘S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.‖ 13.4 ―THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER‘S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.‖ 14. P UBLIC O FFERING .

The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. The Optionee shall be subject to this Section provided and only if the officers and directors of the Company are also subject to similar arrangements. 15. R ESTRICTIONS ON T RANSFER OF S HARES .

No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred. 12

16.

B INDING E FFECT .

Subject to the restrictions on transfer set forth herein, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 17. T ERMINATION OR A MENDMENT .

The Board may terminate or amend the Plan or the Option at any time; provided, however, that except in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation or is required to enable the Option to qualify as an Incentive Stock Option. No amendment or addition to this Agreement shall be effective unless in writing. 18. N OTICES .

Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address shown on the Notice or at such other address as such party may designate in writing from time to time to the other party. 19. I NTEGRATED A GREEMENT .

The Grant Agreement, this Agreement and the Plan constitute the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein and therein and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Participating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of the Grant Agreement and this Agreement shall survive any exercise of the Option and shall remain in full force and effect. 20. A PPLICABLE L AW .

This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California. 13

SALESFORCE.COM, INC. STOCK OPTION GRANT AGREEMENT ( “ Optionee ” ) has been granted an option (the “ Option ” ) to purchase shares of Common Stock of SalesForce.com, Inc. (the “ Company ” ) pursuant to this Stock Option Grant Agreement, the Company‘s 1999 Stock Option Plan (the “ Plan ” ) and a standard form of the Terms of Stock Option Agreement (the “ Option Agreement ” ), the provisions of all of which are incorporated herein by reference. Any capitalized terms not defined herein shall have the meanings set forth in the Plan. The following terms shall be as defined below or, if not defined below, as in the Plan. ―Date of Option Grant‖: ―Number of Option Shares‖: ―Exercise Price‖: ―Immediately Exercisable‖: ―Type of Option‖: ―Vesting Commencement Date‖: ―Option Expiration Date‖ : the date ten (10) years after the Date of Option Grant. ―Vested Ratio‖: on any relevant date, the ratio as determined as follows: One year after the Vesting Commencement Date, provided Optionee‘s service has not terminated prior to such date: Monthly thereafter, provided Optionee‘s service has not terminated, until the Vested Ratio equals 1/1, an additional: 1/4 1/48  Yes  Incentive Stock Option  No  Nonstatutory Stock Option

Optionee represents that he or she is familiar with the terms and provisions of the Option Agreement, including, but not limited to, the Unvested Share Repurchase Option and the Right of First Refusal, and hereby accepts the Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board as to any questions arising under the Option. Optionee acknowledges that of a copy of the Plan has been made available. OPTIONEE [Employee Name] SALESFORCE.COM, INC. By:

Its: The Landmark @ One Market, Suite 300 San Francisco, CA 94105 Attachments: Terms of Stock Option Agreement 1999 Stock Option Plan Consent of Spouse

EXHIBIT 10.6 OFFICE LEASE THE LANDMARK @ ONE MARKET San Francisco, California TMG/ONE MARKET, L.P. And CROSSMARKET, LLC LANDLORD SALESFORCE.COM, INC. TENANT JUNE 23, 2000 -1-

OFFICE LEASE THE LANDMARK @ ONE MARKET San Francisco, California BASIC LEASE INFORMATION Lease Date: Landlord: Tenant: Premises: June 23, 2000 TMG/ONE MARKET, L.P., a Delaware limited partnership and CROSSMARKET, LLC, a Nevada limited liability company SALESFORCE.COM, INC., a Delaware corporation 58,988 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,513 square feet of Rentable Area, the ―Third Floor Portion‖), on the Cityside portion of the Fourth (4 ) Floor of the Building (14,528 square feet of Rentable Area, the ―Fourth Floor Portion‖) and on the First (1st) Floor and Mezzanine of the Building (15,947 square feet of Rentable Area, the ―First Floor Portion‖), as shown on the Floor Plans attached as Exhibit A . The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A , located in the basement of the Building containing approximately 3,500 square feet (the ―Storage Space‖). The entire Building contains 360,021 square feet of Rentable Area.
th

Term:

Commencing on the Initial Possession Date (as defined in Section 5.1 of Exhibit C attached to this Lease) and continuing until a date ten (10) years from the Commencement Date (the ―Initial Term‖), subject to Landlord‘s option of partial termination, described in Section 2.2, hereof and one (1) option to extend the Term for a single period of five (5) years (the ―Extended Term‖). June 23, 2000 The date one hundred twenty (120) days after the Possession Date. The term ―Initial Commencement Date‖ shall mean October 21, 2000. The date which is ten (10) years after the Commencement Date, or the last day of the Extended Term, if the Extended Term is properly exercised. -2-

Anticipated Possession Date: Commencement Date: Expiration Date:

Period of Term

Amount

Base Rent: Initial Commencement Date to Commencement Date Commencement Date to Second anniversary of Commencement Date Second anniversary of Commencement Date to Fourth anniversary of Commencement Date Fourth anniversary of Commencement Date to Seventh anniversary of Commencement Date Seventh anniversary of Commencement Date to End of Initial Term Extended Term: $215,824.16/month (―Start Rent‖) $3,865,650.00/year (―Preliminary Base Rent‖)

$4,017,197.00/year (―Initial Base Rent‖)

$4,175,215.20/year (―Middle Base Rent‖) $4,258,962.20/year (―Final Base Rent‖) The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease

Base Year: Tenant‘s Percentage Share: Permitted Use: Security Deposit: Building Directory Spaces: Tenant‘s Address: Landlord‘s Address:

The 2000 calendar year. 16.38% (Excludes Storage Space) General office use $3,500,000.00 See Section 33.13 below 101 Spear Street #203, San Francisco, CA 94105, until Tenant‘s occupancy of the Premises, then the Premises 100 Bush Street, Suite 2600 San Francisco, CA 94104 -3-

Brokers: Landlord‘s Broker: Tenant‘s Broker: Exhibits and Addenda: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit F-1: Exhibit F-2: Floor Plan(s) of Premises Legal Description of Land Work Letter Rules and Regulations of the Building Confirmation of Lease Term Janitorial Specifications Holidays Security CB Richard Ellis, Inc. BT Commercial Real Estate

The Basic Lease Information is incorporated into and made a part of the Lease. Each reference in the Lease to any Basic Lease Information shall mean the applicable information set forth above. In the event of any conflict between an item in the Basic Lease Information and the Lease, the Lease shall control. -4-

OFFICE LEASE THIS LEASE is made and entered into by and between Landlord and Tenant as of the Lease Date. This Lease amends and restates in its entirety that certain Office Lease between Landlord and Tenant dated April 26, 2000. Landlord and Tenant hereby agree as follows: 1. Definitions . 1.1. Terms Defined . The following terms have the meanings set forth below. Certain other terms have the meanings set forth in the Basic Lease Information or elsewhere in this Lease. Alterations : Alterations, additions or other improvements to the Premises made by or on behalf of Tenant (but not including Tenant‘s moveable trade fixtures, moveable items of personal property or the alterations, additions or other improvements, if any, made by or on behalf of Tenant during the initial improvement of the Premises pursuant to and governed by the provisions of the Work Letter attached hereto as Exhibit C ). Annex : The office building consisting of 6-stories located adjacent to the westerly wing of the Building. Annex Lease : That certain sublease dated as of even date with this Lease, between Landlord and Tenant for a portion of the space located in the Annex. Base Operating Expenses and Base Real Estate Taxes : The Operating Expenses and the Real Estate Taxes paid or incurred by Landlord in the Base Year. For purposes of determining Real Estate Taxes for the Base Year, Landlord shall make an appropriate adjustment to the Real Estate Taxes for such year as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Real Estate Taxes (including the annual installment of any special assessment, including any special assessment first assessed after 2000, but relating to the renovation of the Building or the initial buildout of the Premises) that would have been incurred during such year if the tenant improvements in the Building had been fully constructed and the Land, the Building, and all tenant improvements in the Building had been fully assessed for Real Estate Tax purposes. For purposes of determining Operating Expenses for the Base Year, if Landlord does not obtain earthquake insurance for the Building during the Base Year, Landlord shall make an appropriate adjustment to the amount of Operating Expenses for the Base Year at such time as Landlord elects to obtain earthquake insurance so as to impute the amount of the premium that would have been incurred as an Operating Expense if not self insured (assuming such insurance was competitively bid and included customary coverage and exclusions and commercially reasonable deductibles). Building : The office building consisting of an 11-story building located on the Land, commonly known as The Landmark @ One Market, One Market Street, San Francisco, California, and any additions to such Building. Escalation Rent : Tenant‘s Percentage Share of the total dollar increase, if any, in Operating Expenses and in Real Estate Taxes, each as paid or incurred by Landlord in each calendar year, or part thereof, after the Base Year, over the amount of Base Operating Expenses and Base Real Estate Taxes. If the Building is less than ninety-five percent (95%) occupied during any part of any year (including the Base Year), Landlord shall make an appropriate adjustment of the variable components of Operating -5-

Expenses and Real Estate Taxes for that year, as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Operating Expenses and Real Estate Taxes that would have been incurred during such year if the Building had been ninety-five percent (95%) occupied during the entire year. If the management fees for the Building for any year are calculated as a different percentage of gross revenue than in the Base Year, then the percentage used in the calculation of management fees in any such year shall be adjusted upward or downward to be identical to the percentage used during the Base Year. This amount shall be considered to have been the amount of Operating Expenses and Real Estate Taxes for that year. For purposes hereof, ―variable components‖ include only those component expenses that are affected by variations in occupancy levels. Impositions : Taxes, assessments, charges, excises and levies, business taxes, licenses, permits, inspection and other authorization fees, transit development fees, assessments or charges for housing funds, service payments in lieu of taxes and any other fees or charges of any kind at any time levied, assessed, charged or imposed by any federal, state or local entity, (i) upon, measured by or reasonably attributable to the cost or value of Tenant‘s equipment, furniture, fixtures or other personal property located in the Premises, or the cost or value of any alterations, additions or other improvements to the Premises made by or on behalf of Tenant during the initial improvement of the Premises pursuant to and governed by the Work Letter which exceed Building standard improvements (which are defined to mean tenant improvements costing less than $37.50 per square foot of Rentable Area) and any subsequent Alterations; (ii) upon, or measured by, any Rent payable hereunder, including any gross receipts tax; (iii) upon, with respect to or by reason of the development, possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; or (iv) upon this Lease transaction, or any document to which Tenant is a party creating or transferring any interest or estate in the Premises. Impositions do not include Real Estate Taxes, franchise, transfer, inheritance or capital stock taxes, or income taxes measured by the net income of Landlord from all sources, unless any such taxes are levied or assessed against Landlord as a substitute for, in whole or in part, any Imposition. Land : The parcel of land described on Exhibit B attached to this Lease. Operating Expenses : All costs of management, operation, maintenance and repair of the Building and the Land, including, but not limited to, the following: (i) salaries, wages, benefits and other payroll expenses of employees engaged in the operation, maintenance or repair of the Building; (ii) property management fees and expenses (not to exceed 3.5% of the gross revenue from the Building and the Land); (iii) rent (or rental value) and expenses for Landlord‘s and any property manager‘s offices in the Building; (iv) electricity, natural gas, water, waste disposal, sewer, heating, lighting, air conditioning and ventilating and other utilities; (v) janitorial, maintenance, security, life safety and other services, such as alarm service, window cleaning and elevator maintenance and uniforms for personnel providing services; (vi) repair and replacement, resurfacing or repaving of paved areas, sidewalks, curbs and gutters (except that any such work which constitutes a capital improvement shall be included in Operating Expenses in the manner provided in clause (xiv) below); (vii) landscaping, ground keeping, management, operation, and maintenance and repair of all public, private and park areas adjacent to the Building; (viii) materials, supplies, tools and rental equipment; (ix) license, permit and inspection fees and costs; (x) insurance premiums and costs (including an imputed insurance premium if Landlord self-insures, or a proportionate share if Landlord insures under a ―blanket‖ policy), and the deductible portion of any insured loss under Landlord‘s insurance; (xi) sales, use and excise taxes; (xii) legal, accounting and other professional services for the Building, including costs, fees and expenses of contesting the validity or applicability of any law, ordinance, rule, regulation or order relating to the Building; (xiii) depreciation on personal property, including exterior window draperies provided by Landlord and floor coverings in the common areas and other public portions of the Building, and/or rental costs of leased furniture, fixtures, and equipment; and (xiv) the cost of any -6-

capital improvements to the Building made at any time that are intended in Landlord‘s judgment as labor saving devices, or to reduce or eliminate other Operating Expenses or to effect other economies in the operation, maintenance, or management of the Building, or that are necessary or appropriate in Landlord‘s judgment for the health and safety of occupants of the Building, or that are required under any law, ordinance, rule, regulation or order which was not applicable to the Building as of the Possession Date, all amortized over such reasonable period as Landlord shall determine at an interest rate of ten percent (10%) per annum, or, if applicable, the rate paid by Landlord on funds borrowed for the purpose of constructing or installing such capital improvements. Operating Expenses shall not include: (A) Real Estate Taxes; (B) legal fees, brokers‘ commissions or other costs incurred in the negotiation, termination, or extension of leases or in proceedings involving a specific tenant; (C) depreciation, except as set forth above; (D) interest, amortization or other payments on loans to Landlord except as a component of amortization as set forth above; (E) the cost of capital improvements, except as set forth above; (F) except as provided in item (xiv) above, costs incurred in connection with the original construction of the Building or in connection with any major change in the Building, such as adding or deleting floors; (G) except as provided in item (xiv) above, costs of alterations or improvements, other than maintenance items to the Premises or the leased premises of other tenants; (H) interest, principal, late charges, default fees, prepayment penalties or premiums on any debt owed by Landlord, including any mortgage debt; (i) costs of correcting defects in or inadequacy of the renovation of the Building; (J) expenses directly resulting from the negligence of the Landlord, its agents, servants or employees; (K) legal fees, space planners‘ fees, real estate brokers‘ leasing commissions and advertising expenses incurred in connection with the original development or original leasing of the Building or future leasing of the Building; (L) costs for which Landlord is fully reimbursed by any tenant or occupant of the Building or by insurance by its carrier or any tenant‘s carrier or by anyone else; (M) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (N) expenses of extraordinary services provided to other tenants in the Building which are made available to Tenant at cost or for which Tenant is separately charged; (O) costs associated with the operation of the business of the partnership which constitutes Landlord, as the same are distinguished from the costs of operation of the Building, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be the issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord‘s interest in the Building, costs (including attorneys‘ fees and costs of settlement, judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitrations respecting Landlord and/or the Building and/or the site upon which the Building is situated; (P) the wages and benefits of any employee who does not devote substantially all of his or her time to the Building unless such wages and benefits are prorated to reflect time spent on maintaining, securing, repairing, operating or managing the Building vis-a-vis time spent on matters unrelated to such activities; (Q) damages, costs, fees, fines, penalties and interest arising from a default by Landlord under any obligation to a third party; (R) amounts paid as ground rental by Landlord; (S) any costs or expenses incurred in connection with any portion of the ground floor, to the extent devoted to retail operation, unless such square footage is included in the Rentable Area computation for the Building; (T) costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building; (U) costs paid to Landlord or to affiliates of Landlord for services in the Building to the extent the same materially exceed or would materially exceed the costs for such services if rendered by first class unaffiliated third parties on a competitive basis; (V) electric power costs for which any tenant directly contracts with the local public service company; (W) costs arising from Landlord‘s political or charitable contributions; (X) costs arising from latent defects in the Building or improvements installed by Landlord; (Y) costs, other than those incurred in ordinary maintenance, for sculpture, paintings or other objects of art; (Z) Landlord‘s general corporate overhead; (AA) all costs in connection with the ownership, operation and maintenance of any off-site garage facilities associated with the Building, and all costs in connection with the operation of any parking facilities in the Building except -7-

costs of all utilities (heating, ventilating, air cooling, if any, electricity, water, serer, elevators), for repairs and replacements and for steam cleaning; (BB) capital expenditures required solely by Landlord‘s failure to comply with laws applicable to the Building, including the Premises, as of the Possession Date; (CC) income, franchise taxes and dividends; (DD) capital expenditures to common areas on multi-tenant floors to the extent such expenditures are made solely to accommodate the tenants on such floors; and (EE) the cost of removal or remediation of hazardous substances required in order to comply with any Environmental Law (as defined below) (i) applicable to the Building, including the Premises, as of the Possession Date or (ii) with respect to subsurface removal or remediation only, not applicable to the Building, including the Premises, as of the Possession Date, which subsurface removal or remediation is required in connection with the re-construction of the Building following an earthquake or casualty. Subject to the provisions of this definition, the determination of Operating Expenses shall be made by Landlord in accordance with generally accepted accounting principles and practices consistently applied. Real Estate Taxes : All taxes, assessments and charges now or hereafter levied or assessed upon, or with respect to, the Building or any portion thereof, or any personal property of Landlord used in the operation thereof or located therein, or Landlord‘s interest in the Building or such personal property, by any federal, state or local entity, including: (i) all real property taxes and general and special assessments; (ii) charges, fees or assessments for transit, housing, day care, open space, art, police, fire or other governmental services or benefits to the Building; (iii) service payments in lieu of taxes; (iv) any tax, fee or excise on the use or occupancy of any part of the Building, or on rent for space in the Building; (v) any other tax, fee or excise, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes; and (vi) reasonable fees and expenses, including those of consultants or attorneys, incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes. Real Estate Taxes do not include: (A) franchise, transfer, inheritance or capital stock taxes, or income taxes measured by the net income of Landlord from all sources, unless any such taxes are levied or assessed against Landlord as a substitute for, in whole or in part, any Real Estate Tax; (B) Impositions and all similar amounts payable by tenants of the Building under their leases; and (C) penalties, fines, interest or charges due for late payment of Real Estate Taxes by Landlord. If any Real Estate Taxes are payable, or may at the option of the taxpayer be paid, in installments, such Real Estate Taxes shall, together with any interest that would otherwise be payable with such installment, be deemed to have been paid in installments, amortized over the maximum time period allowed by applicable law. Rent : Base Rent, Escalation Rent and all other additional charges and amounts payable by Tenant in accordance with this Lease. Rentable Area : The aggregate of (i) the Leased Area (as defined below) of the portion of the floor occupied by Tenant, plus (ii) the result obtained by multiplying (1) the area of the Common Area (as defined below) on such floor by (2) a fraction whose numerator is the Leased Area of Tenant‘s portion of the floor and whose denominator is the Leased Area of all tenant space on such floor, plus (iii) in the event that Landlord must enlarge or alter in any way, shape or fashion the Common Area to accommodate Tenant‘s Leased Area, the total additional Common Area space. For purposes of this paragraph, ―Leased Area‖ shall mean all floor area in a tenant space, measured to the inside glass surface of exterior Building walls, to the center of corridors and other permanent partitions, and to the center of partitions that separate tenant space from adjoining tenant spaces, without deduction for columns and projections necessary to the Building; and ―Common Area‖ shall mean the total area on a floor consisting of restrooms, janitor, telephone and electrical closets, mechanical areas and public corridors providing access to tenant space on such floor, but excluding the main Building lobby, public stairs, elevator shafts and pipe shafts. At any time within three (3) business days after the Lease Date, Tenant may engage an independent licensed architect or surveyor to measure the Rentable Area of the Premises. Tenant‘s architect or surveyor -8-

shall determine the Rentable Area in accordance with the standards set forth in this paragraph. If the architect‘s or surveyor‘s measurement of the Rentable Area is less than the area of the Premises set forth in the Basic Lease Information by greater than two percent (2%), then Tenant shall have the right to terminate the Lease by delivering to Landlord, within three (3) business days after the Lease Date, written notice of its intentions to terminate the Lease based upon such variance. Tenant‘s failure to deliver such notice to Landlord within such three (3) business day period shall constitute Tenant‘s waiver of its right to terminate the Lease pursuant to this paragraph. In addition, before the Possession Date, Landlord‘s architect shall reasonably remeasure the Rentable Area of the First Floor Portion (the ―Remeasurement‖). If such Remeasurement discloses that the Rentable Area of the First Floor Portion is less than or greater than 15,947 square feet, then Landlord and Tenant shall execute an amendment to this Lease pursuant to which Landlord equitably adjusts the Rentable Area of the Premises, the Base Rent and the Tenant‘s Percentage Share. Scient Lease . That certain lease dated October 15, 1999 between Landlord and Scient Corporation (―Scient‖) for a portion of the Building, without reference to any amendment or modification that is subsequent to such date. Tenant‘s Percentage Share : The percentage figure specified in the Basic Lease Information. Landlord and Tenant acknowledge that Tenant‘s Percentage Share has been obtained by dividing the Rentable Area of the Premises, as specified in the Basic Lease Information by the total Rentable Area of the Building, and multiplying such quotient by one hundred (100). In the event Tenant‘s Percentage Share is changed during a calendar year by reason of a change in the Rentable Area of the Premises or a change in the total Rentable Area of the Building, Tenant‘s Percentage Share shall thereafter mean the result obtained by dividing the then Rentable Area of the Premises by the then total Rentable Area of the Building and multiplying such quotient by one hundred (100). For the purposes of determining Tenant‘s Percentage Share of Escalation Rent, Tenant‘s Percentage Share shall be determined on the basis of the number of days during such calendar year at each such Percentage Share. Term : The period from the Possession Date to the Expiration Date. Wattage Allowance : The product obtained by multiplying the Rentable Area of the Premises by 6 watts. ―Lighting Wattage Allowance‖ means thirty-three percent (33%) of the Wattage Allowance. 1.2. Effect of Certain Defined Terms . The parties acknowledge that the Rentable Area of the Premises and the Building have been finally determined by the parties as part of this Lease for all purposes, including the calculation of Tenant‘s Percentage Share and will not, except as otherwise provided in this Lease, be changed. 2. Lease of Premises . 2.1. Premises . Landlord leases to Tenant and Tenant leases from Landlord the Premises, together with the non-exclusive right to use, in common with others, the lobbies, entrances, stairs, elevators, plazas, pedestrian walkways, restrooms, and other public portions of the Building, all subject to the terms, covenants and conditions set forth in this Lease. Subject to compliance with applicable law, Tenant shall have the right at its cost to decorate the stair wells within its Premises and to install a card access system to the doors from the stairwells to the Premises (including all cabling required for such system) so as to permit travel by Tenant between the floors of the Premises. The right to use the stairwells however shall remain non-exclusive. All the windows and exterior walls of the Premises, the terraces adjacent to the Premises, if any, and any space in the Premises used for shafts, columns, projections, stacks, pipes, conduits, ducts, -9-

electric utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of management, operation, maintenance and repairs, are reserved to Landlord. 2.2. Deletion of Portion of Premises . Only if Scient exercises its right to expand its premises pursuant to the terms of the Scient Lease during the twelve (12) month period described in Section 2.4 of the Scient Lease, and provided that Landlord terminates the Annex Lease as of the same date, then Landlord shall have the right, in Landlord‘s sole discretion, upon providing Tenant nine (9) months written notice and a copy of written notice of Scient exercising such right (―Deletion Notice‖), to terminate this Lease as to the Fourth Floor Portion of the Premises (which termination shall not be effective before a date three (3) years after the Commencement Date). If Landlord timely delivers a Deletion Notice to Tenant, then Landlord shall concurrently deliver to Tenant an amendment to this Lease memorializing the termination of this Lease as to the Fourth Floor Portion from the Premises (the ―Deletion Amendment‖). The Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Fourth Floor Portion, (ii) Tenant‘s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Initial Base Rent shall be reduced by $1,033,868.00 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $813,568.00), (iv) the Middle Base Rent shall be reduced by $1,058,506.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $857,152.00), (v) the Final Base Rent shall be reduced by $1,081,846.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $871,680.00), and (vi) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease. If Tenant fails to execute the Deletion Amendment within thirty (30) days after receipt of the Deletion Amendment from Landlord, or if Tenant fails to vacate the Fourth Floor Portion of the Premises on or before the effective date of the Deletion Amendment, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. If Scient properly rescinds its notice delivered with the Retention Notice, then Landlord shall advise Tenant of such rescission in writing and Tenant shall have the right, for a period of ten (10) days after receipt of Landlord‘s notice, to elect in writing to cause the Deletion Amendment to be rescinded and to remain in possession of the Fourth Floor Portion on the terms and conditions of this Lease. 2.3. Satellite Dish/Antennae . Subject to Tenant‘s compliance (at Tenant‘s sole cost and expense) with all applicable laws, rules and ordinances, and subject to Tenant obtaining Landlord‘s prior written consent, which shall not be unreasonably withheld, Tenant shall have the right to elect, by delivery of written notice to Landlord, to install, at Tenant‘s sole cost and expense, an antenna or satellite dish on the roof of the Building in a location determined by Landlord in its sole discretion (the ―Dish‖). Tenant shall be solely responsible for the installation, insurance, maintenance and repair of the Dish and the repair of any damage to the roof of the Building caused by Tenant‘s use, installation or maintenance of the Dish. The Dish shall be of reasonable size and design so as not to materially and adversely affect the Building structure, loading, systems or aesthetics. The use and installation of any antenna or satellite dish on the roof of the Building by any other tenant or occupant of the Building shall not interfere with Tenant‘s use of the Dish and Tenant‘s use and installation of the Dish shall not interfere with the use of antennas or satellite dishes by other tenants of the Building. The Dish may be installed only after the acquisition by Tenant of all appropriate permits, consents and licenses. The provisions of this Lease regarding Alterations shall apply as if the installation of the Dish were a Tenant Alteration. 2.4. Conditions Precedent . If Tenant does not obtain a reasonably satisfactory subordination, non-disturbance and attornment agreement from Union Bank on or before July 14, 2000, then Tenant may -10-

terminate this Lease at any time before July 17, 2000 by giving Landlord written notice, in which event Landlord shall promptly return all consideration previously paid by Tenant to Landlord. In addition, this Lease with respect to the Fourth Floor Portion only is expressly conditioned upon the approval of the Annex Lease by the master landlord (―Master Landlord‖) under the Annex Lease. If Landlord fails to obtain Master Landlord‘s consent on or before July 14, 2000, then Landlord or Tenant may terminate this Lease with respect to the Fourth Floor Portion only and the Annex Lease (but not one of such leases and not the other) at any time thereafter, but before the date such consent is obtained, by giving the other party written notice, in which event Landlord shall deliver to Tenant an amendment to this Lease memorializing the termination of this Lease as to the Fourth Floor Portion from the Premises (the ―Annex Deletion Amendment‖). The Annex Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Fourth Floor Portion, (ii) Tenant‘s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Preliminary Base Rent shall be reduced by $987,188.00, (iv) the Initial Base Rent shall be reduced by $1,033,868.00, (v) the Middle Base Rent shall be reduced by $1,058,506.20, (vi) the Final Base Rent shall be reduced by $1,081,846.20, (vii) the Start Rent shall be reduced to equal $133,558,50/month, and (viii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease, and Landlord shall promptly return all consideration previously paid by Tenant to Landlord with respect to the Fourth Floor Portion. If Tenant fails to execute the Annex Deletion Amendment within thirty (30) days after receipt of the Annex Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. Landlord shall use reasonable efforts to obtain the satisfaction of the foregoing conditions. 2.5 Use Change . Landlord and Tenant acknowledge that the First Floor Portion may not currently be used for office purposes. In addition, Landlord and Tenant acknowledge that it may be economically unfeasible to configure a mezzanine in the First Floor Portion (the ―Mezzanine‖) in accordance with the requirements of all Laws and this Lease (including Schedule 1 hereto). Landlord shall use reasonable efforts to obtain all approvals necessary to permit the use of the First Floor Portion for office purposes, at Landlord‘s sole cost and expense (the ―Office Permits‖), and Landlord shall use reasonable efforts to obtain an economically feasible plan for the configuration of the Mezzanine in the First Floor Portion in accordance with the requirements of all Laws and this Lease (including Schedule 1 hereto) (the ―Mezzanine Plans‖). Landlord shall promptly notify Tenant upon its receipt of all Office Permits (―Office Permits Notice‖). Landlord shall promptly notify Tenant upon its determination that it has developed economically feasible Mezzanine Plans to construct and deliver the Mezzanine as a portion of Landlord‘s Work (the ―Mezzanine Acceptance Notice‖). 2.5.1 Office Permits . If Landlord does not obtain the Office Permits on or before September 1, 2000, then Landlord or Tenant may terminate this Lease with respect to the First Floor Portion at any time thereafter, but before delivery of the Office Permits Notice, by giving the other party written notice (the ―First Floor Notice‖). Upon proper delivery of any First Floor Notice pursuant to this Section 2.5.1, Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the deletion of the First Floor Portion from the Premises (the ―First Floor Deletion Amendment‖). The First Floor Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the First Floor Portion, (ii) Tenant‘s Percentage Share shall be decreased to reflect the deletion of the First Floor Portion from the Premises, (iii) the Preliminary Base Rent shall be reduced by $1,275,760.00, (iv) the Initial Base Rent shall be reduced by $1,323,601.00, (v) the Middle Base Rent shall be reduced by $1,371,442.00, (vi) the Final Base Rent shall be reduced by $1,403,336.00, (vii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the percentage reduction in the Base Rent, (viii) the ―Initial Possession Date‖ shall be deemed to be the ―Possession Date‖, and (ix) all references in the Lease to the First -11-

Floor Portion shall be deemed deleted. If Tenant fails to execute the First Floor Deletion Amendment within thirty (30) days after receipt of the First Floor Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. 2.5.2 Mezzanine . If Landlord does not obtain economically feasible Mezzanine Plans on or before September 1, 2000, then Landlord or Tenant may terminate this Lease with respect to the Mezzanine at any time thereafter, but before delivery of the Mezzanine Acceptance Notice, by giving the other party written notice (the ―Mezzanine Notice‖). Upon proper delivery of any Mezzanine Notice pursuant to this Section 2.5.2, Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the deletion of the Mezzanine from the Premises (the ―Mezzanine Deletion Amendment‖). The Mezzanine Deletion Amendment shall provide the following: (i) the definition of the Premises shall be modified to exclude the Mezzanine and to reduce the Rentable Area of the First Floor Portion to 11,947 square feet, (ii) Tenant‘s Percentage Share shall be decreased to reflect the reduction in the Rentable Area of the First Floor Portion, (iii) the Preliminary Base Rent shall be reduced by $320,000.00, (iv) the Initial Base Rent shall be reduced by $332,000.00, (v) the Middle Base Rent shall be reduced by $344,000.00, (vi) the Final Base Rent shall be reduced by $352,000.00, (vii) the then current amount of the Security Deposit shall be proportionately reduced to reflect the percentage reduction in the Base Rent, (viii) Landlord shall have no obligation to construct an elevator or stairways in the First Floor Portion, and (ix) all references in the Lease to the Mezzanine shall be deemed deleted. If Tenant fails to execute the Mezzanine Deletion Amendment within thirty (30) days after receipt of the Mezzanine Deletion Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. 2.6. Termination of Annex Lease . If for any reason the Annex Lease terminates and the Fourth Floor Portion remains included in the Premises, then Landlord shall promptly deliver to Tenant an amendment to this Lease memorializing the termination of the Annex Lease (the ―Annex Termination Amendment‖). The Annex Termination Amendment shall provide only the following: (i) the Preliminary Base Rent shall be reduced by $202,676.00 (ii) the Initial Base Rent shall be reduced by $220,300.00, (iii) the Middle Base Rent shall be reduced by $201,354.00, and (iv) the Final Base Rent shall be reduced by $210,166.20. If Tenant fails to execute the Annex Termination Amendment within thirty (30) days after receipt of the Annex Termination Amendment from Landlord, then Tenant shall be in default under this Lease and Landlord shall have the right to exercise all of its rights and remedies under this Lease. 3. Term; Condition and Acceptance of Premises . 3.1 Initial Term and Acceptance of Premises . Except as hereinafter provided, and unless sooner terminated pursuant to the provisions of this Lease, the Term of this Lease shall commence on the earlier of the Initial Possession Date and the Possession Date and end on the Expiration Date. Except as otherwise provided in the Tenant Improvement Agreement attached to this Lease as Exhibit C (the ―Work Letter‖), Landlord shall deliver the Premises to Tenant on the Possession Date (and the Initial Possession Date with respect to the Third Floor Portion and the Fourth Floor Portion) in the condition required under the Work Letter and this Lease. If Landlord, for any reason whatsoever, cannot deliver the Premises to Tenant in the condition specified herein by the Anticipated Possession Date, this Lease shall not be void or voidable. No delay in delivery of the Premises for any reason whatsoever shall operate to extend the Expiration Date or the Term. In the event that the Premises are delivered to Tenant on any date other than the Anticipated Possession Date set forth in the Basic Lease Information of this Lease, Landlord and Tenant shall execute a Confirmation of Lease Term in the form as set forth in Exhibit E attached to this Lease. Tenant‘s occupancy of all or any portion of the (i) Third Floor Portion shall constitute Tenant‘s acceptance of the Third Floor -12-

Portion, (ii) Fourth Floor Portion shall constitute Tenant‘s acceptance of the Fourth Floor Portion and (iii) the First Floor Portion shall constitute Tenant‘s acceptance of the First Floor Portion, in the condition called for by this Lease, except for punchlist items described in Section 5.1 of the Work Letter and except for latent defects in the windows discovered within one (1) year after the Possession Date and latent defects in other Landlord‘s Work discovered within sixty (60) days after the Possession Date. Notwithstanding the foregoing, if the Possession Date occurs after September 1, 2000 as a result of events other than delays caused by the acts or omissions of Tenant, or Tenant‘s contractors, employees or agents (―Tenant Delays‖), then ―Commencement Date‖ shall be a date calculated as follows: (1) four (4) months after the Possession Date, plus (ii) the number of days by which the Possession Date exceeds September 1, 2000, minus (iii) the number of days of delay that Landlord is actually delayed in delivering the Premises to Tenant caused by Tenant Delays. 3.2 Option to Extend . 3.2.1. Exercise of Option to Extend Term . If no ―Suspension Condition‖ (as hereinafter defined) exists at the time of Tenant‘s exercise of the option to extend the Term or at the commencement of the Extended Term, and if Tenant has timely and properly exercised the option to extend set forth in the Annex Lease for the comparable extended term, Tenant shall have one (1) option (the ―Extension Option‖) to extend the Initial Term for an additional period of five (5) years (an ―Extended Term‖). To exercise Tenant‘s option with respect to the Extended Term, Tenant shall give notice to Landlord not less than twelve (12) months prior to the expiration of the Initial Term (―Election Notice‖). A ―Suspension Condition‖ shall mean the existence of any event or condition of default after the expiration of any applicable grace, notice or cure periods. Notwithstanding any provision in this Lease to the contrary, Tenant shall have no right to exercise the Extension Option unless Tenant simultaneously properly exercises the extension option under the Annex Lease. 3.2.2. Fair Market Rent . If Tenant properly and timely exercises the Extension Option pursuant to Section 3.2.1 above, such Extended Term shall be upon all of the same terms, covenants and conditions of this Lease; provided, however, that the Base Rent applicable to the Premises for the Extended Terms shall be the greater of: (1) the Base Rent and Escalation Rent as of the last month of the Initial Term, or (ii) one hundred percent (100%) of the ―Fair Market Rent‖ for space comparable to the Premises as of the commencement of the Extended Term; provided further, however, that the Base Year during the Extended Term shall be the first full calendar year following the first day of the Extended Term. ―Fair Market Rent‖ shall mean the annual rental being charged for first class space comparable to the Premises in buildings comparable to the Building in the financial district of San Francisco, taking into account location, condition and improvements to the space; provided, however, that Fair Market Rent shall not be discounted to reflect tenant improvement allowances granted to other tenants, but Landlord shall be obligated to contribute to Tenant upon commencement of the applicable Extended Term a refurbishment allowance equivalent to the refurbishment allowances granted to renewal tenants in buildings comparable to the Building in the financial district of San Francisco, which refurbishment allowance shall be used by Tenant, within one (1) year after receipt, for the improvement of the Premises. Tenant shall pay all leasing commissions and consulting fees payable in connection with such extensions, unless such leasing commissions or consulting fees arise solely out of a contractual relationship between Landlord and a broker or consultant. All other terms and conditions of the Lease, which may be amended from time to time by the parties in accordance with the provisions of the Lease, shall remain in full force and effect and shall apply during the Extended Term, except that there shall be no further option to extend the Term beyond a date five (5) years after the expiration of the Initial Term. -13-

3.2.3. Determination of Rent . Within forty-five (45) days after the date of the Election Notice, Landlord and Tenant shall negotiate in good faith in an attempt to determine Fair Market Rent for the Extended Term. If they are unable to agree within said forty-five (45) day period, then the Fair Market Rent shall be determined as provided in Section 3.2.4 below. 3.2.4. Appraisal . If it becomes necessary to determine the Fair Market Rent for the Premises by appraisal, the real estate appraiser(s) indicated in this Section 3.2.4, each of whom shall be members of the American Institute of Real Estate Appraisers and each of whom have at least five (5) years experience appraising office space located in the vicinity of the Premises, shall be appointed and shall act in accordance with the following procedures: (i) If the parties are unable to agree on the Fair Market Rent within the allowed time, either party may demand an appraisal by giving written notice to the other party, which demand to be effective must state the name, address and qualifications of an appraiser selected by the party demanding the appraisal (―Notifying Party‖). Within ten (10) days following the Notifying Party‘s appraisal demand, the other party (―Non-Notifying Party‖) shall either approve the appraiser selected by the Notifying Party or select a second properly qualified appraiser by giving written notice of the name, address and qualification of said appraiser to the Notifying Party. If the Non-Notifying Party fails to select an appraiser within the ten (10) day period, the appraiser selected by the Notifying Party shall be deemed selected by both parties and no other appraiser shall be selected. If two (2) appraisers are selected, they shall select a third appropriately qualified appraiser. If the two (2) appraisers fail to select a third qualified appraiser, the third appraiser shall be appointed by the then presiding judge of the county where the Premises are located upon application by either party. (ii) If only one appraiser is selected, that appraiser shall notify the parties in simple letter form of its determination of the Fair Market Rent for the Premises within fifteen (15) days following his or her selection, which appraisal shall be conclusively determinative and binding on the parties as the appraised Fair Market Rent. (iii) If multiple appraisers are selected, the appraisers shall meet not later than ten (10) days following the selection of the last appraiser. At such meeting, the appraisers shall attempt to determine the Fair Market Rent for the Premises as of the commencement date of the Extended Term by the agreement of at least two (2) of the appraisers. (iv) If two (2) or more of the appraisers agree on the Fair Market Rent for the Premises at the initial meeting, such agreement shall be determinative and binding upon the parties hereto and the agreeing appraisers shall forthwith notify both Landlord and Tenant of the amount set by such agreement. If multiple appraisers are selected and two (2) appraisers are unable to agree on the Fair Market Rent for the Premises, each appraiser shall submit to Landlord and Tenant his or her respective independent appraisal of the Fair Market Rent for the Premises, in simple letter form, within twenty (20) days following appointment of the final appraiser. The parties shall then determine the Fair Market Rent for the Premises by averaging the appraisals; provided that any high or low appraisal, differing from the middle appraisal by more than ten percent (10%) of the middle appraisal, shall be disregarded in calculating the average. (v) If only one (1) appraiser is selected, then each party shall pay one-half (1/2) of the fees and expenses of that appraiser. If three (3) appraisers are selected, each party shall bear the fees and expenses of the appraiser it selects and one-half (1/2) of the fees and expenses of the third appraiser. (vi) Notwithstanding anything to the contrary contained in this Section 3.2, in no event shall the Base Rent for the Extended Term be less than the Base Rent plus Escalation Rent immediately preceding the Extended Term. -14-

3.2.5. Amendment to Lease . Immediately after the Fair Market Rent has been determined, the parties shall enter into an amendment to this Lease setting forth the Base Rent for the Extended Term and the new Expiration Date of the Term of the Lease. 4. Rent . 4.1. Obligation to Pay Base Rent . Tenant shall pay Base Rent to Landlord with respect to the Third Floor Portion, the Fourth Floor Portion and the Storage Space, in advance, in equal monthly installments, commencing on or before the Initial Commencement Date, and thereafter on or before the first day of each calendar month during the Term until the Commencement Date. Commencing on the Commencement Date, Tenant shall pay Base Rent to Landlord, in advance, in equal monthly installments for the entire Premises, and thereafter on or before the first day of each calendar month during the Term. If the Initial Commencement Date, Commencement Date and/or Expiration Date is other than the first day of a calendar month, the installment of Base Rent for the applicable fractional month of the Term shall be prorated on a daily basis. On the Initial Commencement Date, Tenant shall pay to Landlord the first month‘s Base Rent with respect to the Third Floor Portion, the Fourth Floor Portion and the Storage Space. 4.2. Manner of Rent Payment . All Rent shall be paid by Tenant without notice, demand, abatement, deduction or offset, in lawful money of the United States of America, payable to Landlord, at Landlord‘s Address as set forth in the Basic Lease Information, or to such other person or at such other place as Landlord may from time to time designate by notice to Tenant. 4.3. Additional Rent . All Rent not characterized as Base Rent or Escalation Rent shall constitute additional rent, and if payable to Landlord shall, unless otherwise specified in this Lease, be due and payable fifteen (15) days after Tenant‘s receipt of Landlord‘s invoice therefor. 4.4. Late Payment of Rent; Interest . Tenant acknowledges that late payment by Tenant of any Rent will cause Landlord to incur administrative costs not contemplated by this Lease, the exact amount of which are extremely difficult and impracticable to ascertain based on the facts and circumstances pertaining as of the Lease Date. Accordingly, if any Rent is not paid by Tenant when due, Tenant shall pay to Landlord, with such Rent, a late charge equal to three percent (3%) of such Rent; provided, however, that the following additional provisions shall apply to such late charge: (i) the first two late payments in any calendar year shall not result in any late charge payment unless such payment of Rent is not received within one (1) business day after telephonic notice by Landlord to each of Tenant‘s Controller and Chief Financial Officer (or any person succeeding such person for whom notice has been provided to Landlord), and (ii) if there are more than three (3) late payments of Rent by Tenant in any calendar year, then the late charge for each subsequent late payment in such calendar year shall be five percent (5%). Any Rent, other than late charges, due Landlord under this Lease, if not paid when due, shall also bear interest from the date due until paid, at the rate of ten percent (10%) per annum or, if a higher rate is legally permissible, at the highest rate legally permitted. The parties acknowledge that such late charge and interest represent a fair and reasonable estimate of the administrative costs and loss of use of funds Landlord will incur by reason of a late Rent payment by Tenant, but Landlord‘s acceptance of such late charge and/or interest shall not constitute a waiver of Tenant‘s default with respect to such Rent or prevent Landlord from exercising any other rights and remedies provided under this Lease, at law or in equity. -15-

5. Calculation and Payments of Escalation Rent . During each full or partial calendar year of the Term subsequent to the Base Year, Tenant shall pay to Landlord Escalation Rent in accordance with the following procedures: 5.1. Payment of Estimated Escalation Rent . During December of the Base Year and December of each subsequent calendar year, or as soon thereafter as practicable (and Landlord shall use reasonable efforts to provide such information on or before March 1 of each subsequent calendar year), Landlord shall give Tenant notice of its estimate of Escalation Rent due for the next ensuing calendar year. On or before the first day of each month during such next ensuing calendar year, Tenant shall pay to Landlord in advance, in addition to Base Rent, one-twelfth (1/12th) of such estimated Escalation Rent. In the event such notice is given after December 31st of any year during the Term, (i) Tenant shall continue to pay Escalation Rent on the basis of the prior calendar year‘s estimate until the month after such notice is given, (ii) subsequent payments by Tenant shall be based of the estimate of Escalation Rent set forth in Landlord‘s notice, and (iii) with the first monthly payment of Escalation Rent based on the estimate set forth in Landlord‘s notice, Tenant shall also pay the difference, if any, between the amount previously paid for such calendar year and the amount which Tenant would have paid through the month in which such notice is given, based on Landlord‘s noticed estimate or, in the alternative, if such amount previously paid by Tenant for such calendar year through the month in which such notice is given exceeds the amount which Tenant would have paid through such month based on Landlord‘s noticed estimate, Landlord shall credit such excess amount against the next monthly payments of Escalation Rent due from Tenant. If at any time Landlord reasonably determines that the Escalation Rent for the current calendar year will vary from Landlord‘s estimate by more than five percent (5%), Landlord may, by notice to Tenant, revise its estimate for such calendar year, and subsequent payments by Tenant for such calendar year shall be based upon such revised estimate. 5.2. Escalation Rent Statement and Adjustment . Within one hundred twenty (120) days after the close of each calendar year, or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement of (i) the calculation of the Base Operating Expenses and the Base Real Estate Taxes with respect only to the initial calendar year following the Base Year and (ii) the actual Escalation Rent for such calendar year, accompanied by a statement prepared by Landlord showing in reasonable detail the Operating Expenses and the Real Estate Taxes comprising the actual Escalation Rent. If Landlord‘s statement shows that Tenant owes an amount less than the payments previously made by Tenant for such calendar year, Landlord shall credit the difference first against any sums then owed by Tenant to Landlord and then against the next payment or payments of Rent due Landlord, except that if a credit amount is due Tenant after termination of this Lease, Landlord shall pay to Tenant any excess remaining after Landlord credits such amount against any sums owed by Tenant to Landlord. If Landlord‘s statement shows that Tenant owes an amount more than the payments previously made by Tenant for such calendar year, Tenant shall pay the difference to Landlord within fifteen (15) days after delivery of the statement. Tenant shall have the right to inspect Landlord‘s books and records relating to the calculation of Base Operating Expenses and Base Real Estate Taxes and/or Operating Expenses and Real Estate Taxes, subject to the following limitations: (i) such inspection shall be conducted no more than one time per calendar year, (ii) such inspection shall be conducted within two (2) years after Tenant‘s receipt of Landlord‘s statement of Base Operating Expenses and Base Real Estate Taxes and Operating Expenses and Real Estate Taxes; (iii) subject to the following, such inspection may not be conducted by a person or entity whose compensation is in any way calculated based on the results of such audit; provided, however, that if such inspection is conducted by such person or entity, then Tenant shall pay to Landlord on demand all of Landlord‘s reasonable costs and expenses incurred in connection with such inspection; and (iv) such information shall be kept in the strictest confidence by Tenant and any other person or entity performing such inspection. If Tenant in good faith disputes the accuracy of any statement on the -16-

basis of any such inspection, such dispute must be alleged in reasonable detail in a written notice to Landlord within ninety (90) days following Tenant‘s completion of such inspection. If actual Operating Expenses or Real Estate Taxes are ultimately determined to have been overstated by Landlord for any calendar year, then Landlord shall within thirty (30) days thereafter refund to Tenant the applicable overpayment of Escalation Rent. 5.3. Proration for Partial Year . If this Lease terminates other than on the last day of a calendar year (other than due to Tenant‘s default), the amount of Escalation Rent for such fractional calendar year shall be prorated on a daily basis. Upon such termination, Landlord may, at its option, calculate the adjustment in Escalation Rent prior to the time specified in Section 5.2 above. Tenant‘s obligation to pay Escalation Rent, as set forth in Paragraph 5.2, above, shall survive the expiration or termination of this Lease. 6. Impositions Payable by Tenant . Tenant shall pay all Impositions prior to delinquency. If billed directly to Tenant, then, subject to Tenant‘s right to contest such Impositions (upon the posting of a bond or other security reasonably satisfactory to Landlord), Tenant shall pay such Impositions and concurrently deliver to Landlord evidence of such payments. If any Impositions are billed to Landlord or included in bills to Landlord for Real Estate Taxes or other charges, then Tenant shall pay to Landlord all such amounts within fifteen (15) days after delivery of Landlord‘s invoice therefor. If applicable law prohibits Tenant from reimbursing Landlord for an Imposition, but Landlord may lawfully increase the Base Rent to account for Landlord‘s payment of such Imposition, the Base Rent payable to Landlord shall be increased to net to Landlord the same return without reimbursement of such Imposition as would have been received by Landlord with reimbursement of such Imposition. Tenant‘s obligation to pay Impositions which have accrued and remain unpaid upon the expiration or earlier termination of this Lease shall survive the expiration or earlier termination of this Lease. 7. Use of Premises . 7.1. Permitted Use . The Premises shall be used solely for the Permitted Use and for no other use or purpose. 7.2. No Violation of Legal and Insurance Requirements . Tenant shall not do or permit to be done, or bring or keep or permit to be brought or kept, in or about the Premises, or any other portion of the Building, anything which (i) is prohibited by or will in any way conflict with any law, ordinance, rule or regulation; (ii) would invalidate or be in conflict with the provisions of any insurance policy carried by Landlord or Tenant on any portion of the Building or Premises, or any property therein; or (iii) would cause a cancellation of any such insurance, increase the existing rate of or affect any such Landlord‘s insurance, or subject Landlord to any liability or responsibility for injury to any person or property. If Tenant does or permits anything to be done which increases the cost of any of Landlord‘s insurance, or which results in the need, in Landlord‘s reasonable judgment, for additional insurance by Landlord or Tenant with respect to any portion of the Building or Premises, then Tenant shall reimburse Landlord, upon demand, for any such additional costs or the costs of such additional insurance, and/or procure such additional insurance at Tenant‘s sole cost and expense. Exercise by Landlord of such right to require reimbursement of additional costs (including the costs of procuring of additional insurance) shall not limit or preclude Landlord from prohibiting Tenant‘s impermissible use of the Premises or from invoking any other right or remedy available to Landlord under this Lease. 7.3. Compliance with Legal, Insurance and Life Safety Requirements . Except as provided in clauses (i) through (iii) below, Tenant, at its cost and expense, shall promptly comply with all laws, ordinances, rules, regulations, orders and other governmental requirements, the requirements of any board -17-

of fire underwriters or other similar body, any directive or occupancy certificate issued pursuant to any law by any public officer or officers which is delivered to Tenant by Landlord, the provisions of all recorded documents affecting any portion of the Building which is delivered to Tenant by Landlord and all life safety programs, procedures and rules implemented or promulgated by Landlord (―Laws‖). Tenant shall not, however, be required to comply with Laws requiring Tenant to make structural changes to the Premises unless necessitated, in whole or in part, by (i) Tenant‘s special use or occupancy of, or business conducted in, the Premises, (ii) any acts or omissions of Tenant, its employees, agents, contractors, invitees or licensees, or (iii) Alterations (including any alterations, additions or other improvements to the Premises made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter, but excluding any structural changes which are part of Landlord‘s Work under the Work Letter.) 7.4. No Nuisance . Tenant shall not (i) do or permit anything to be done in or about the Premises, or any other portion of the Building, which would injure, or obstruct or interfere with the rights of, Landlord or other occupants of the Building, or others lawfully in or about the Building; (ii) use or allow the Premises to be used in any manner inappropriate for a Class A office building, or for any improper or objectionable purposes; or (iii) cause, maintain or permit any nuisance or waste in, on or about the Premises, or any other portion of the Building. 7.5 Hazardous Substances . The term ―hazardous substances‖ as used in the Lease, is defined as follows: Any element, compound, mixture, solution, particle or substance, which presents danger or potential danger of damage or injury to health, welfare or to the environment including, but not limited to: (i) those substances which are inherently or potentially radioactive, explosive, ignitable, corrosive, reactive, carcinogenic or toxic and (ii) those substances which have been recognized as dangerous or potentially dangerous to health, welfare or to the environment by any federal, municipal, state, county or other governmental or quasi-governmental authority and/or any department or agency thereof. Tenant represents and warrants to Landlord and agrees that at all times during the term of this Lease and any extensions or renewals thereof, Tenant shall: (i) promptly comply at Tenant‘s sole cost and expense, with all laws, orders, rules, regulations, certificates of occupancy, or other requirements, as the same now exist or may hereafter be enacted, amended or promulgated, of any federal, municipal, state, county or other governmental or quasi-governmental authorities and/or any department or agency thereof relating to the manufacturing, processing, distributing, using, producing, treating, storing (above or below ground level), disposing or allowing to be present (the ―Environmental Activity‖) of hazardous substances in or about the Premises (each, an ―Environmental Law‖, and all of them, ―Environmental Laws‖), to the extent Tenant is responsible for the presence of such hazardous substances. (ii) indemnify and hold Landlord, its agents and employees, harmless from any and all demands, claims, causes of action, penalties, liabilities, judgments, damages (including consequential damages) and expenses including, without limitation, court costs and reasonable attorneys‘ fees incurred by Landlord as a result of (a) Tenant‘s failure or delay in properly complying with any Environmental Law as required by item (i) above, or (b) any adverse effect which results from the Environmental Activity, whether Tenant or Tenant‘s subtenants or any of their respective agents, employees, contractors or invitees, with or without Tenant‘s consent has caused, either intentionally or unintentionally, such Environmental Activity. If any action or proceeding is brought against -18-

Landlord, its agents or employees by reason of any such claim, Tenant, upon notice from Landlord, will defend such claim at Tenant‘s expense with counsel reasonably satisfactory to Landlord. This indemnity obligation by Tenant of Landlord will survive the expiration or earlier termination of this Lease. (iii) promptly disclose to Landlord by delivering, in the manner prescribed for delivery of notice in this Lease, a copy of any forms, submissions, notices, reports, or other written documentation (each, a ―Communication‖) relating to any Environmental Activity, whether any such Communication is delivered to Tenant or any of its subtenants or is requested of Tenant or any of its subtenants by any federal, municipal, state, county or other government or quasi-governmental authority and/or any department or agency thereof. (iv) in the event there is a release of any hazardous substance as a result of or in connection with any Environmental Activity by Tenant or any of Tenant‘s subtenants or any of their respective agents, employees, contractors or invitees, which must be remediated under any Environmental Law, Landlord shall perform the necessary remediation; and Tenant shall reimburse Landlord for all costs thereby incurred within fifteen (15) days after delivery of a written demand therefor from Landlord (which shall be accompanied by reasonable substantiation of such costs). In the alternative, Landlord shall have the right to require Tenant, at its sole cost and expense, to perform the necessary remediation in accordance with a detailed plan of remediation which shall have been approved in advance in writing by Landlord. Landlord shall give notice to Tenant within thirty (30) days after Landlord receives notice or obtains knowledge of the required remediation. The rights and obligations of Landlord and Tenant set forth in this subparagraph (iv) shall survive the expiration or earlier termination of this Lease. (v) notwithstanding any other provisions of this Lease, allow Landlord, and any authorized representative of Landlord, access and the right to enter and inspect the Premises for Environmental Activity, at any time deemed reasonable by Landlord, without prior notice to Tenant. Compliance by Tenant with any provision of this Section 7.5 shall not be deemed a waiver of any other provision of this Lease. Without limiting the foregoing, Landlord‘s consent to any Environmental Activity shall not relieve Tenant of its indemnity obligations under the terms hereof. Landlord represents and warrants to Tenant that as of the date of this Lease Landlord has no actual knowledge of the presence of any hazardous substance in the Building in violation of any applicable Environmental Law, rules or ordinances, except as described in the Phase I and Phase II hazardous materials reports prepared by Geomatrix and delivered by Landlord to Tenant before the execution of this Lease. Landlord shall promptly disclose to Tenant by delivering, in the manner prescribed for delivery of notice in this Lease, a copy of any material Communication relating to any Environmental Activity from any federal, municipal, state, county or other government or quasi-governmental authority and/or any department or agency thereof to the extent such notice is required by Environmental Laws. Landlord shall comply with all Environmental Laws applicable to the Building to the extent such compliance is required of Landlord as owner of the Building. 7.6. Special Provisions Relating to The Americans With Disabilities Act of 1990 . 7.6.1. Allocation of Responsibility to Landlord . Subject to the provisions of the second sentence of Section 10.2 of this Lease, as between Landlord and Tenant, Landlord shall be responsible that the public entrances, stairways, corridors, restrooms, elevators and elevator lobbies and other public areas -19-

in the Building comply with the requirements of Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq., The Provisions Governing Public Accommodations and Services Operated by Private Entities), and all regulations promulgated thereunder, and all amendments, revisions or modifications thereto now or hereafter adopted or in effect in connection therewith (hereinafter collectively referred to as the ―ADA‖), and to take such actions and make such alterations and improvements as are necessary for such compliance. As of the Commencement Date, Landlord shall cause such portions of the Building to so comply with ADA, as interpreted by the local building officials. All costs incurred by Landlord in discharging its responsibilities under this Section 7.6.1 shall be included in Operating Expenses as provided in Section 1.1 , except to the extent such costs relate to violations of ADA laws which occurred before the Commencement Date. 7.6.2. Allocation of Responsibility to Tenant . As between Landlord and Tenant, Tenant, at its sole cost and expense, shall be responsible that the Premises (other than the restrooms constructed by Landlord in the Premises), all Alterations to the Premises, Tenant‘s use and occupancy of the Premises, and Tenant‘s performance of its obligations under this Lease, comply with the requirements of the ADA, and to take such actions and make such Alterations as are necessary for such compliance; provided, however, that Tenant shall not make any such Alterations except upon Landlord‘s prior written consent pursuant to the terms and conditions of this Lease; provided further, however, that Landlord shall be responsible for compliance with the requirements of the ADA with respect to the initial construction of an elevator and stairways in the First Floor Portion of the Premises as part of Landlord‘s Work. Tenant shall protect, defend, indemnify and hold Landlord harmless from and against any claim, demand, cause of action, obligation, liability, loss, cost or expense (including reasonable attorneys‘ fees) which may be asserted against or incurred by Landlord as a result of Tenant‘s failure in any respect to comply with its obligations set forth in this Section 7.6.2 . Tenant‘s indemnity obligations set forth in the immediately preceding sentence shall survive the expiration or earlier termination of this Lease. 7.6.3. General . Notwithstanding anything in this Lease to the contrary, no act or omission of Landlord, including any approval, consent or acceptance by Landlord or Landlord‘s agents, employees or other representatives, shall be deemed an agreement, acknowledgment, warranty, or other representation by Landlord that Tenant has complied with the ADA or that any action, alteration or improvement by Tenant complies or will comply with the ADA or constitutes a waiver by Landlord of Tenant‘s obligations to comply with the ADA under this Lease or otherwise. Any failure of Landlord to comply with the obligations of the ADA shall not relieve Tenant from any obligations under this Lease or constitute or be construed as a constructive or other eviction of Tenant or disturbance of Tenant‘s use and possession of the Premises. 8. Building Services . 8.1. Maintenance of Building . Landlord shall maintain the Building (other than the Premises and the premises of other tenants of the Building) in good order and condition, except for ordinary wear and tear, damage by casualty or condemnation, or damage occasioned by the act or omission of Tenant or Tenant‘s employees, agents, contractors, licensees or invitees, which damage shall be repaired by Landlord at Tenant‘s expense. Landlord‘s maintenance of, and provision of services to, the Building shall be performed in a manner consistent with that of comparable Class A office buildings in the San Francisco, California area. Landlord shall have the right in connection with its maintenance of the Building hereunder (i) to change the arrangement and/or location of any amenity, installation or improvement in the public entrances, stairways, corridors, elevators and elevator lobbies, and other public areas in the Building, and (ii) to utilize portions of the public areas in the Building from time to time for entertainment, displays, product shows, leasing of kiosks or such other uses that in Landlord‘s reasonable judgment tend to attract the public, so long as such -20-

uses do not materially interfere with or impair Tenant‘s access to or use or occupancy of the Premises. Landlord shall not be in default under this Lease or liable for any damages directly or indirectly resulting from or incidental to, nor shall the rental reserved in this Lease be abated by reason of, Landlord‘s failure to make any repair or to perform any maintenance required to be made or performed by Landlord under this Section 8.1 , unless such failure shall persist for an unreasonable time after written notice of the need for such repair or maintenance is given to Landlord by Tenant; provided, however, that Landlord shall be liable to Tenant for actual, out of pocket, costs or expenses incurred by Tenant as a direct result of Landlord‘s failure to cause the ground floor lobby, shared lobbies on Floors occupied by Tenant or elevators of the Building to comply with laws which are immediately applicable to, and enforceable against, the Building (subject to Landlord‘s reasonable right of contest of such laws). 8.2. Building Standard Services . Landlord shall cause to be furnished to Tenant: (1) tepid and cold water to those points of supply and in volumes provided for general use of tenants in the Building; (ii) electricity up to the Wattage Allowance for lighting and the operation of electrically powered office equipment; (iii) heat, ventilation and air conditioning to the extent reasonably required for the comfortable occupancy by Tenant of the Premises during the period from 8:00 a.m. to 6:00 p.m on weekdays (except Building holidays determined by Landlord), or such shorter period as may be prescribed by any applicable policies, regulations or guidelines adopted by any federal, state or local governmental or quasi-governmental entities or utility suppliers; (iv) passenger elevator service; (v) freight elevator service subject to then applicable Building standard procedures and scheduling; (vi) lighting replacement for Building standard lights; (vii) restroom supplies; (viii) window washing as determined by Landlord (which shall not be less than 2 times per year for the exterior portions of Building windows, and 2 times per year for the interior portions of Building windows); (ix) janitor service on a five (5) day per week basis (excluding Building holidays), except for portions of the Premises used for preparing or consuming food or beverages (such janitorial services to include the services described on Exhibit F attached to this Lease); (x) security if and to the extent deemed appropriate by Landlord for the Building (but not less than as set forth on Exhibit F-2 attached to this Lease) (but not individually for Tenant or the Premises - provided that Tenant shall have the right to install its own security service in the Premises), except that Landlord shall not be liable in any manner for acts of others, criminal or otherwise, or for any direct, consequential or other loss, damage, death or injury related to any interruption, discontinuance, malfunction, circumvention or failure of such security service and (xi) access to the Building 24 hours/day seven days/week. Landlord may establish in the Premises or other portions of the Building such measures as are required by laws, ordinances, rules or regulations or as it deems necessary or appropriate to conserve energy, including automatic switching of lights and/or more efficient forms of lighting. Security personnel shall be on-duty, on-site 24 hours/day seven days/week during the Term. The initial Building holidays are described on Exhibit F-1 attached to this Lease. 8.3. Interruption or Unavailability of Services . Rent shall not abate, no constructive or other eviction shall be construed to have occurred, Tenant shall not be relieved from any of its obligations under this Lease, and Landlord shall not be in default hereunder or liable for any damages directly or indirectly resulting from, the failure of Landlord to furnish, or delay in furnishing, any maintenance or services under this Article 8 as a result of repairs, alterations, improvements or any circumstances beyond Landlord‘s reasonable control. Landlord shall use reasonable diligence to remedy any failure or interruption in the furnishing of such maintenance or services. Notwithstanding anything set forth in this Lease to the contrary, if such interruption or unavailability of services continues for more than thirty (30) consecutive days and such interruption or unavailability prevents Tenant from using the Premises, then commencing upon the expiration of such thirty (30) day period, Rent shall abate until beneficial use of the Premises is restored. -21-

8.4. Tenant‘s Use of Excess Electricity and Water . Tenant shall not, without Landlord‘s prior consent, given or withheld in Landlord‘s sole discretion, (i) install in the Premises (A) lighting, the aggregate average daily power usage of which exceeds the Lighting Wattage Allowance, or lighting and equipment, the aggregate average daily power usage of which exceeds the Wattage Allowance, or which requires a voltage other than 110/208 volts single-phase, (B) heat generating equipment or lighting other than lights deemed standard for the Building, or (C) supplementary air conditioning facilities, or (ii) permit average permanent occupancy levels in excess of one person per two hundred (200) feet of Rentable Area. If, pursuant to this Section 8.4 , heat-generating equipment or lighting other than Building standard lights are installed or used in the Premises, or occupancy levels are greater than set forth above, or if the Premises or fixtures therein are reconfigured by Alterations, and such equipment, lighting, occupancy levels or Premises reconfiguration affects the temperature otherwise maintained by the Building air conditioning system, or if equipment is installed in the Premises which requires a separate temperature-controlled room, Landlord may, at Landlord‘s election after notice to Tenant or upon Tenant‘s request, install supplementary air conditioning facilities in the Premises, or otherwise modify the ventilating and air conditioning serving the Premises, in order to maintain the temperature otherwise maintained by the Building air conditioning system or to serve such separate temperature-controlled room. Tenant shall pay the cost of any transformers, additional risers, panel boards and other facilities if, when and to the extent required to furnish power for, and all maintenance and service costs of, any supplementary air conditioning facilities or modified ventilating and air conditioning, or for lighting and/or equipment the power usage of which exceeds the standards set forth in this Section 8.4 . Notwithstanding the foregoing, Landlord acknowledges that Tenant intends to construct a temperature-controlled computer equipment room in the Premises which will require supplementary air conditioning facilities and Landlord will permit Tenant to install such facilities subject to Landlord‘s approval of the plans therefor. The capital, maintenance and service costs of such facilities and modifications shall be paid by Tenant as Rent. Landlord, at its election and at Tenant‘s expense, may also install and maintain an electric current meter or water meter (together with all necessary wiring and related equipment) at the Premises to measure the power and/or water usage of such lighting, equipment or ventilation and air conditioning equipment, or may otherwise cause such usage to be measured by reasonable methods. 8.5. Provision of Additional Services . If Tenant desires services in additional amounts or at different times than set forth in Section 8.2 above, or any other services that are not provided for in this Lease, Tenant shall make a request for such services to Landlord with such advance notice as Landlord may reasonably require. If Landlord provides such services to Tenant, Tenant shall pay Landlord‘s charges for such services within fifteen (15) days after Tenant‘s receipt of Landlord‘s invoice; provided, however, that Landlord hereby agrees that upon Tenant‘s written request Landlord shall provide HVAC service to the Premises 24 hours per day during the Term so long as Tenant pays Landlord‘s actual costs for such services, plus an administrative fee not to exceed 15% of the cost of such services, which costs may be based on a reasonable allocation of Landlord‘s actual costs. 9. Maintenance of Premises . Tenant shall, at all times during the Term, at Tenant‘s cost and expense, keep the Premises in good condition and repair, except for ordinary wear and tear and damage by casualty or condemnation. Except as may be specifically set forth in this Lease (including the Work Letter), Landlord has no obligation to alter, remodel, improve, repair, decorate or paint the Premises, or any part thereof, or any obligation respecting the condition, maintenance and repair of the Premises or any other portion of the Building. Tenant hereby waives all rights, including those provided in California Civil Code Section 1941 or any successor statute, to make repairs which are Landlord‘s obligation under this Lease at the expense of Landlord or to receive any setoff or abatement of Rent or in lieu thereof to vacate the Premises or terminate this Lease. -22-

10. Alterations to Premises . 10.1. Landlord Consent; Procedure . Tenant shall not make or permit to be made any Alterations without Landlord‘s prior consent, which consent may be granted or withheld in Landlord‘s reasonable discretion; no consent shall be required for non-structural Alterations to any single floor within the Premises which do not require a building permit and which, in the aggregate, cost less than $50,000.00 to construct. Any Alterations to which Landlord has consented shall be made in accordance with procedures as then established by Landlord and the provisions of this Article 10 . Tenant shall provide Landlord with written notice of the commencement of all Alterations, within five (5) days before the commencement of such Alterations. 10.2. General Requirements . All Alterations shall be made at Tenant‘s cost and expense. Tenant shall be solely responsible for compliance with applicable laws, ordinances, rules and regulations in connection with all Alterations. Without limiting the foregoing or any other provisions of this Lease, if any applicable law, ordinance, rule or regulation provides that any Alteration by Tenant will result in the requirement of the performance of any other work, repair, capital improvement or other expenditure with respect to any portion of the Building (including in the premises of other tenants), then Tenant shall be solely responsible, at Tenant‘s sole cost and expense, to perform such work, repair or capital improvement, or to pay such expenditure. Tenant shall be responsible for the cost of any additional alterations required by applicable laws, ordinances, rules and regulations to be made by Landlord to any portion of the Building as a result of Alterations. Tenant shall promptly commence or cause the commencement of construction of all Alterations and complete or cause completion of the same with due diligence as soon as possible after commencement in order to cause the least disruption to Building operations and occupants and to continue Tenant‘s business in the Premises. In connection with installing or removing Alterations, Tenant shall pay to Landlord on demand Landlord‘s reasonable actual costs incurred in connection with the administration by Landlord (or its agent) of the construction, installation or removal of Alterations, and restoration of the Premises to their previous condition. 10.3. Removal of Alterations . If Landlord has not consented to an Alteration (for which such consent is required), Tenant shall, prior to the expiration of the Term or termination of this Lease, remove such Alteration and Tenant‘s trade fixtures and personal property at Tenant‘s cost and expense and restore the Premises to the condition existing prior to the installation of such Alteration. Tenant shall have no obligation to remove the Tenant‘s Work. If Tenant fails so to do, then Landlord may remove such Alteration, trade fixtures and personal property and perform such restoration and Tenant shall reimburse Landlord for Landlord‘s cost and expense incurred to perform such removal and restoration (which obligation of Tenant shall survive the expiration or earlier termination of this Lease). Tenant shall repair at its cost and expense all damage to the Premises or the Building caused by the removal of any Alteration. Subject to the foregoing provisions regarding removal, all Alterations (including any above Building standard improvements to the Premises) shall be Landlord‘s property and from and after the expiration or earlier termination of this Lease shall remain on the Premises without compensation to Tenant; Tenant‘s trade fixtures and personal property shall remain Tenant‘s property, subject to applicable California laws regarding abandoned property. 11. Liens . Tenant shall keep the Premises and the Building free from any liens arising out of any work performed or obligations incurred by or for, or materials furnished to, Tenant pursuant to this Lease or otherwise. Landlord shall have the right to post and keep posted on the Premises any notices required by law or which Landlord may deem to be proper for the protection of Landlord, the Premises and the Building from such liens and to take any other action at the expense of Tenant that Landlord deems necessary or appropriate to prevent, remove or discharge such liens. Tenant shall protect, defend, indemnify and hold Landlord harmless from and against any claim, demand, cause of action, obligation, liability, loss, cost or expense -23-

(including reasonable attorneys‘ fees) which may be asserted against or incurred by Landlord as a result of Tenant‘s failure to comply with the foregoing obligation (which indemnity obligation shall survive the expiration or earlier termination of this Lease). 12. Damage or Destruction . 12.1. Obligation to Repair . Except as otherwise provided in this Article 12 , if the Premises, or any other portion of the Building necessary for Tenant‘s use and occupancy of the Premises, are damaged or destroyed by fire or other casualty, Landlord shall, within thirty (30) days after such event, notify Tenant of the estimated time, in Landlord‘s reasonable judgment, required to repair such damage or destruction. If Landlord‘s estimate of time is less than one hundred eighty (180) days after the date that Landlord obtains the required building permits for the repair of such damage or destruction, then (i) Landlord shall proceed with all due diligence to repair the Premises, and/or the portion of the Building necessary for Tenant‘s use and occupancy of the Premises, to substantially the condition existing immediately before such damage or destruction, as permitted by and subject to then applicable laws, ordinances, rules and regulations; (ii) this Lease shall remain in full force and effect; and (iii) Base Rent and Escalation Rent shall abate for such part of the Premises rendered unusable by Tenant, in Tenant‘s reasonable, good faith judgment, in the conduct of its business during the time such part is so unusable, in the proportion that the Rentable Area contained in the unusable part of the Premises bears to the total Rentable Area of the Premises. 12.2. Landlord‘s Election . If Landlord determines that the necessary repairs cannot be completed within one hundred eighty (180) days after the date that Landlord obtains the required building permits for the repair of such damage or destruction, or if such damage or destruction arises from causes not covered by Landlord‘s insurance policy then in force, and would cost in the aggregate more than $2,000,000 to repair, Landlord may elect, in its notice to Tenant pursuant to Section 12.1 , to (i) terminate this Lease or (ii) repair the Premises or the portion of the Building necessary for Tenant‘s use and occupancy of the Premises pursuant to the applicable provisions of Section 12.1 above. If Landlord terminates this Lease, then this Lease shall terminate as of the date of occurrence of the damage or destruction. 12.3. Cost of Repairs . Landlord shall pay the cost for repair of the Building and all improvements in the Premises, other than any Alterations. Tenant shall pay the costs to repair all Alterations (but Landlord shall make available to Tenant for such purpose any insurance proceeds received by Landlord for such purpose under Landlord‘s insurance policy then in force). Tenant shall also replace or repair, at Tenant‘s cost and expense, Tenant‘s movable furniture, equipment, trade fixtures and other personal property in the Premises which Tenant shall be responsible for insuring during the Term of this Lease. 12.4. Damage at End of Term . Notwithstanding anything to the contrary contained in this Article 1 2, unless Tenant shall have extended the Term in accordance with Section 3.2 hereof, if the Premises, or any other portion thereof or of the Building, are materially damaged or destroyed by fire or other casualty within the last twelve (12) months of the Term, then Landlord shall have the right, in its sole discretion, to terminate this Lease by notice to Tenant given within ninety (90) days after the date of such event. Such termination shall be effective on the date specified in Landlord‘s notice, but in no event later than the end of such 90-day period. For purposes hereof, the Premises or other portion of the Building shall be deemed to be materially damaged if such damage costs more than $2,000,000 to repair. Notwithstanding the foregoing, if Landlord seeks to terminate the Lease in circumstances where the Premises were not affected by any such damage or destruction, Landlord may do so only if Landlord is terminating all other office leases in the Building on account thereof. -24-

12.5. Tenant‘s Right to Terminate . Notwithstanding anything to the contrary contained in this Article 12 , if the Premises are materially damaged or destroyed by fire or other casualty and the date by which Landlord determines that the necessary repairs could be completed would occur in the last twelve (12) months of the Term, then Tenant shall have the right, in its sole discretion, to terminate this Lease by notice to Landlord given within ninety (90) days after the date of such casualty. Landlord shall, within thirty (30) days after such casualty, notify Tenant of the estimated time, in Landlord‘s reasonable judgment, required to repair such damage or destruction. Such termination shall be effective on the date specified in Tenant‘s notice, but in no event later than the end of such 90-day period. 12.6. Waiver of Statutes . The respective rights and obligations of Landlord and Tenant in the event of any damage to or destruction of the Premises, or any other portion of the Building, are governed exclusively by this Lease. Accordingly, Tenant hereby waives the provisions of any law to the contrary, including California Civil Code Sections 1932(2) and 1933(4) providing for the termination of a lease upon destruction of the leased property. 13. Eminent Domain . 13.1. Effect of Taking . Except as otherwise provided in this Article 13 , if all or any part of the Premises is taken as a result of the exercise of the power of eminent domain or condemned for any public or quasi-public purpose, or if any transfer is made in avoidance of such exercise of the power of eminent domain (collectively, ―taken‖ or a ―taking‖), this Lease shall terminate as to the part of the Premises so taken as of the effective date of such taking. On a taking of a portion of the Premises, Landlord and Tenant shall each have the right to terminate this Lease by notice to the other given within thirty (30) days after the effective date of such taking, if the portion of the Premises taken is of such extent and nature so as to materially impair Tenant‘s business use of the balance of the Premises, as reasonably determined by the party giving such notice. Such termination shall be operative as of the effective date of the taking. Landlord may also terminate this Lease on a taking of any other portion of the Building if Landlord reasonably determines that such taking is of such extent and nature as to render the operation of the remaining Building economically infeasible or to require a substantial alteration or reconstruction of such remaining portion. Landlord shall elect such termination by notice to Tenant given within thirty (30) days after the effective date of such taking, and such termination shall be operative as of the effective date of such taking. Upon a taking of the Premises which does not result in a termination of this Lease, the Base Rent shall thereafter be reduced as of the effective date of such taking in the proportion that the Rentable Area of the Premises so taken bears to the total Rentable Area of the Premises. 13.2. Condemnation Proceeds . Except as hereinafter provided, in the event of any taking, Landlord shall have the right to all compensation, damages, income, rent or awards made with respect thereto (collectively an ―award‖), including any award for the value of the leasehold estate created by this Lease. No award to Landlord shall be apportioned and, subject to Tenant‘s rights hereinafter specified, Tenant hereby assigns to Landlord any right of Tenant in any award made for any taking. So long as such claim will not reduce any award otherwise payable to Landlord under this Section 13.2 , Tenant may seek to recover, at its cost and expense, as a separate claim, any damages or awards payable on a taking of the Premises to compensate for the unamortized cost paid by Tenant for the alterations, additions or improvements, if any, made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter and for any Alterations, or for Tenant‘s personal property taken, or for interference with or interruption of Tenant‘s business (including goodwill), or for Tenant‘s removal and relocation expenses. 13.3. Restoration of Premises . On a taking of the Premises which does not result in a termination of this Lease, Landlord and Tenant shall restore the Premises as nearly as possible to the -25-

condition they were in prior to the taking in accordance with the applicable provisions and allocation of responsibility for repair and restoration of the Premises on damage or destruction pursuant to Article 12 above, and both parties shall use any awards received by such party attributable to the Premises for such purpose. 13.4. Tenant Waiver . The rights and obligations of Landlord and Tenant on any taking of the Premises or any other material portion of the Building are governed exclusively by this Lease. Accordingly, Tenant hereby waives the provisions of any law to the contrary, including California Code of Civil Procedure Sections 1265.120 and 1265.130, or any similar successor statute. 14. Insurance . 14.1. Liability Insurance . Landlord, with respect to the Building, and Tenant, at its cost and expense with respect to the Premises, shall each maintain or cause to be maintained, from the Lease Date and throughout the Term, a policy or policies of Commercial General Liability insurance with limits of liability not less than Five Million Dollars ($5,000,000.00) per occurrence and in the aggregate. Each policy shall contain coverage for blanket contractual liability, personal injury liability, and premises operations, and, as to Tenant‘s insurance, fire legal liability. Tenant‘s policy shall be subject to deductible amounts as Tenant may reasonably elect based on prudent risk management practices for business comparable to Tenant‘s business and for Tenant‘s financial condition. 14.2. Form of Policies . All insurance required by this Article 14 shall be issued on an occurrence basis by solvent companies qualified to do business in the State of California. Any insurance required under this Article 14 may be maintained under a ―blanket policy‖, insuring other parties and other locations, so long as the amount and coverage required to be provided hereunder is not thereby diminished. Tenant shall provide Landlord a copy of each policy of insurance or a certificate thereof certifying that the policies contain the provisions required hereunder. Tenant shall deliver such policies or certificates to Landlord within ten (10) business days prior to the Possession Date or such earlier date as Tenant or Tenant‘s contractors, agents, licensees, invitees or employees first enter the Premises and, upon renewal, not less than five (5) business days prior to the expiration of such coverage. All evidence of insurance provided to Landlord shall provide (i) that Landlord, Landlord‘s managing agent and any other person requested by Landlord who has an insurable interest, is designated as an additional insured without limitation as to coverage afforded under such policy; (ii) for severability of interests or that the acts or omissions of one of the insureds or additional insureds shall not reduce or affect coverage available to any other insured or additional insured; (iii) that the insurer agrees not to cancel or alter the policy without at least thirty (30) days prior written notice to all additional insureds; (iv) that the aggregate liability applies solely to the Premises and the remainder of the Building; and (v) that Tenant‘s insurance is primary and noncontributing with any insurance carried by Landlord. 14.3. Workers‘ Compensation Insurance . Tenant, at its sole cost and expense, shall maintain Workers‘ Compensation insurance as required by law and employer‘s liability insurance in an amount of not less than Five Hundred Thousand Dollars ($500,000). 14.4. Additional Tenant Insurance . Tenant, at its sole cost and expense, shall maintain such other insurance as Landlord may reasonably require from time to time, but in no event may Landlord require any other insurance which is (i) not then being required of comparable tenants leasing comparable amounts of space in comparable buildings in the vicinity of the Building or (ii) not then available at commercially reasonable rates. -26-

14.5. Landlord‘s Casualty Insurance . Landlord shall, during the Term of this Lease, procure and maintain in full force and effect, at a minimum, a policy or policies of fire insurance covering the Building and the permanent tenant improvements in the Premises, with standard extended coverage, vandalism, malicious mischief and sprinkler leakage endorsements. The amount and scope of coverage of Landlord‘s insurance hereunder shall be determined by Landlord from time to time in its reasonable discretion based on prudent risk management practices for buildings comparable to the Building (but shall not be less than 90% of full replacement value of the Building and Tenant‘s permanent tenant improvements in the Premises, and shall be subject to such deductible amounts as Landlord may reasonably elect based on prudent risk management practices for buildings comparable to the Building. Landlord shall have the right to reduce or terminate any insurance or coverage called for by this Section 14.5 to the extent that any such coverage is not reasonably available in the commercial insurance industry from recognized carriers or not available at a cost which is in Landlord‘s judgment commercially reasonable under the circumstances. Landlord shall at Tenant‘s request provide a description of Landlord‘s coverage then maintained by Landlord pursuant to this Section 14.5 . 15. Waiver of Subrogation Rights . Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant, for themselves and their respective insurers, agree to and do hereby release each other of and from any and all claims, demands, actions and causes of action that each may have or claim to have against the other for loss or damage to property, both real and personal, notwithstanding that any such loss or damage may be due to or result from the negligence of either of the parties hereto or their respective employees or agents. Each party shall, to the extent such insurance endorsement is lawfully available at commercially reasonable rates, obtain or cause to be obtained, for the benefit of the other party, a waiver of any right of subrogation which the insurer of such party may acquire against the other party by virtue of the payment of any such loss covered by such insurance. 16. Tenant‘s Waiver of Liability and Indemnification . 16.1. Waiver and Release . Except to the extent due to the gross negligence or willful misconduct of Landlord, Landlord shall not be liable to Tenant or Tenant‘s employees, agents, contractors, licenses or invitees for, and Tenant waives and releases Landlord and Landlord‘s managing agent from, all claims for loss or damage to any property or injury, illness or death of any person in, upon or about the Premises (including claims caused in whole or in part by the act, omission, or neglect of other tenants, contractors, licensees, invitees or other occupants of the Building or their agents or employees). The waiver and release contained in this Section 16.1 extends to the officers, directors, shareholders, partners, employees, agents and representatives of Landlord. 16.2. Indemnification of Landlord . Except to the extent due to Landlord‘s gross negligence or willful misconduct, Tenant shall indemnify, defend, protect and hold Landlord harmless of and from any and all loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with (i) the making of any alterations, additions or other improvements made by or on behalf of Tenant during the initial improvement of the Premises pursuant to the Work Letter or any Alterations, or (ii) injury to or death of persons or damage to property occurring or resulting directly or indirectly from: (A) the use or occupancy of, or the conduct of business in, the Premises by Tenant or its subtenants or any of their respective officers, directors, employees, agents, contractors, invitees or licensees; (B) any other occurrence or condition in or on the Premises; and (C) acts, neglect or omissions of Tenant, or its subtenants or any of their respective officers, directors, employees, agents, contractors, invitees or licensees, in or about any portion of the Building. Tenant‘s indemnity obligation includes reasonable attorneys‘ fees and costs, investigation costs and other reasonable costs and expenses incurred by Landlord. If Landlord reasonably disapproves the legal counsel proposed by Tenant for the defense of any claim indemnified against hereunder, -27-

Landlord shall have the right to appoint its own legal counsel, the reasonable fees, costs and expenses of which shall be included as part of Tenant‘s indemnity obligation hereunder. The indemnification contained in this Section 16.2 shall extend to the officers, directors, shareholders, partners, employees, agents and representatives of Landlord. 16.3. Indemnification of Tenant . Landlord shall indemnify, defend, protect and hold Tenant harmless of and from any and all loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with (i) any breach or default by Landlord in the performance of any of its obligations under this Lease, or (ii) Landlord‘s gross negligence or willful misconduct, or (iii) any loss or damage to property or injury to person occurring in the public entrances, stairways, corridors, elevators and elevator lobbies, and other public areas in the Building or the other public areas in the Building (except for such loss, damage or injury for which Tenant is obligated to indemnify Landlord under Section 16.2 ). Landlord‘s indemnity obligation includes reasonable attorneys‘ fees and costs, investigation costs and other reasonable costs and expenses incurred by Tenant. The indemnification contained in this Section 16.3 shall extend to the officers, directors, shareholders, partners, employees, agents and representatives of Tenant. 17. Assignment and Subletting . 17.1. Compliance Required . Tenant shall not, directly or indirectly, voluntary or by operation of law, sell, assign or otherwise transfer this Lease, or any interest herein (collectively, ―assign‖ or ―assignment‖), or sublet the Premises, or any part thereof, or permit the occupancy of the Premises by any person other than Tenant (collectively, ―sublease‖ or ―subletting‖, the assignee or sublessee under an assignment or sublease being referred to as a ―transferee‖), without Landlord‘s prior consent given or withheld in accordance with the express standards and conditions of this Article 17 and compliance with the other provisions of this Article 17 . Any assignment or subletting made in violation of this Article 17 , shall be void. As used herein, an ―assignment‖ includes any sale or other transfer (such as by consolidation, merger or reorganization) of a majority of the voting stock of Tenant, if Tenant is a corporation (other than a corporation publicly traded on The New York Stock Exchange or NASDAQ or similar exchange), or any sale or other transfer of a majority of the beneficial interest in Tenant, if Tenant is any other form of entity. Tenant acknowledges and agrees that the limitations on Tenant‘s right to sublet or assign which are set forth in this Article 17 are reasonable and, in particular, that the express standards and conditions upon Tenant‘s right to assign or sublet which are set forth in this Article 17 are reasonable as of the Lease Date. 17.2. Request by Tenant; Landlord Response . If Tenant desires to effect an assignment or sublease, Tenant shall submit to Landlord a request for consent together with the identity of the parties to the transaction, the nature of the transferee‘s proposed business use for the Premises, the proposed documentation for and terms of the transaction, and all other information reasonably requested by Landlord concerning the proposed transaction and the parties involved therein, including certified financial information, credit reports, the business background and references regarding the transferee, and an opportunity to meet and interview the transferee. Within twenty (20) days after the later of such interview or the receipt of all such information required by Landlord, or within thirty (30) days after the date of Tenant‘s request to Landlord if Landlord does not request additional information or an interview, Landlord shall have the right, by notice to Tenant, to: (i) consent to the assignment or sublease, subject to the terms of this Article 17 ; (ii) decline to consent to the assignment or sublease; (iii) in the case of a subletting of at least one floor of the Premises for a term in excess of six (6) months (other than a sublease of the Fourth Floor Portion during the first three (3) years of the Term), to sublet from Tenant the portion of the Premises proposed to be sublet on the terms and conditions set forth in Tenant‘s request to Landlord; or (iv) in the case of an assignment, to terminate this Lease as of the date specified by Tenant as the effective date of the proposed assignment, in which event Tenant will be relieved of all unaccrued obligations hereunder as of such date, other than those obligations -28-

which survive termination of this Lease; notwithstanding the foregoing, with respect to items (iii) and (iv) above, to the extent that any such request for sublease or assignment is also made under the Annex Lease, then Landlord‘s actions shall be consistent with its actions under the Annex Lease. If Landlord elects so to terminate, Tenant shall have the right, by notice to Landlord within five (5) days after Landlord‘s exercise of such right, to rescind its request for the proposed assignment, in which event this Lease shall not terminate and shall remain in full force and effect. Notwithstanding any provision of this Section 17.2 to the contrary, if Tenant desires to sublease or assign all or a portion of the Fourth Floor Portion and concurrently desires to sublease or assign to the same subtenant a portion of the premises under the Annex Lease, and if Tenant does not obtain all necessary consents for the sublease or assignment of such space in the Annex, then Tenant shall have the right to rescind its request to sublease or assign all or a portion of the Fourth Floor Portion by delivering notice to Landlord within five (5) days after receipt of refusal of such consent by the landlord under the Annex Lease. 17.3. Conditions for Landlord Approval . In the event Landlord elects not to sublet from Tenant or terminate this Lease (in whole or in part) as provided in clauses (iii) and (iv) of Section 17.2 , Landlord shall not unreasonably withhold its consent to a proposed subletting or assignment by Tenant. Without limiting the grounds on which it may be reasonable for Landlord to withhold its consent to an assignment or sublease, Tenant agrees that Landlord would be acting reasonably in withholding its consent in the following instances: (i) if Tenant is in default under this Lease; (ii) if the transferee is a governmental or quasi-governmental agency, foreign or domestic; (iii) if the transferee is an existing tenant in the Building; (iv) if, in Landlord‘s sole judgment, the transferee‘s business, use and/or occupancy of the Premises would (A) violate any of the terms of this Lease or the lease of any other tenant in the Building, or (B) not be comparable to and compatible with the types of use by other tenants in the Building, (C) fall within any category of use for which Landlord would not then lease space in the Building under its leasing guidelines and policies then in effect, (D) require any Alterations which would reduce the value of the existing leasehold improvements in the Premises, or (E) result in increased density per floor in excess of one person/200 square feet of Rentable Area, or require increased services by Landlord; (v) in the case of a sublease, it would result in more than four (4) occupancies on one floor of the Premises, including Tenant and subtenants; or (vi) if the financial condition of the transferee does not meet the requirements applied by Landlord for other tenants in the Building under leases with comparable terms, or in Landlord‘s reasonable judgment the business reputation of the transferee is not consistent with that of other tenants of the Building. If Landlord consents to an assignment or sublease, the terms of such assignment or sublease transaction shall not be modified without Landlord‘s prior written consent pursuant to this Article 17 . Landlord‘s consent to an assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. 17.4. Costs and Expenses . As a condition to the effectiveness of any assignment or subletting under this Article 17 , Tenant shall pay to Landlord a processing fee of Five Hundred Dollars ($500.00) and all reasonable costs and expenses, including reasonable attorneys‘ fees and disbursements, incurred by Landlord in evaluating Tenant‘s requests for assignment or sublease, whether or not Landlord consents to an assignment or sublease. Tenant shall pay the processing fee with Tenant‘s request for Landlord‘s consent under Section 17.2 . Tenant shall also pay to Landlord all costs and expenses incurred by Landlord due to a transferee taking possession of the Premises, including freight elevator operation, security service, janitorial service and rubbish removal. 17.5. Payment of Excess Rent and Other Consideration . Tenant shall also pay to Landlord, promptly upon Tenant‘s receipt thereof, fifty percent (50%) of any and all rent, sums or other consideration, howsoever denominated, realized by Tenant in connection with any assignment or sublease transaction in excess of the Base Rent and Escalation Rent payable hereunder (prorated to reflect the Rent allocable to the portion of the Premises if a sublease), after first deducting, (i) in the case of an assignment, the unamortized -29-

actual out of pocket, third-party, costs of Alterations paid for by Tenant and actual out of pocket third party real estate commissions paid by Tenant solely in connection with such assignment, and (ii) in the case of a sublease, the actual out of pocket, third-party, cost of Alterations made to the Premises at Tenant‘s cost to effect the sublease, and the actual amount of any real estate commissions paid by Tenant to a third party solely in connection with such sublease, both amortized over the term of the sublease. 17.6. Assumption of Obligations; Further Restrictions on Subletting . Each assignee shall, concurrently with any assignment, assume all obligations of Tenant under this Lease. Each sublease shall be made subject to this Lease and all of the terms, covenants and conditions contained herein; and the surrender of this Lease by Tenant, or a mutual cancellation thereof, or the termination of this Lease in accordance with its terms, shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or operate as an assignment to Landlord of any or all such subleases. No sublessee (other than Landlord) shall have the right further to sublet more than one additional time, without Landlord‘s prior written consent, which may be withheld in Landlord‘s sole discretion; provided, however, that such sublessee shall have one right further to sublet subject to obtaining Landlord‘s reasonable consent. Any assignment by a sublessee of its sublease shall be subject to Landlord‘s prior consent in the same manner as a sublease by Tenant. No sublease, once consented to by Landlord, shall be modified without Landlord‘s prior consent. No assignment or sublease shall be binding on Landlord unless the transferee delivers to Landlord a fully executed counterpart of the assignment or sublease which contains the assumption by the assignee, or recognition by the sublessee, of the provisions of this Section 17.6 , in form and substance satisfactory to Landlord, but the failure or refusal of a transferee to deliver such instrument shall not release or discharge such transferee from the provisions and obligations of this Section 17.6 , but such failure shall constitute a default by Tenant under this Lease. 17.7. No Release . No assignment or sublease shall release Tenant from its obligations under this Lease, whether arising before or after the assignment or sublease. The acceptance of Rent by Landlord from any other person shall not be deemed a waiver by Landlord of any provision of this Article 17 . On a default by any assignee of Tenant in the performance of any of the terms, covenants or conditions of this Lease, Landlord may proceed directly against Tenant without the necessity of commencing or exhausting remedies against such assignee. No consent by Landlord to any further assignments or sublettings of this Lease, or any modification, amendment or termination of this Lease, or extension, waiver or modification of payment or any other obligations under this Lease, or any other action by Landlord with respect to any assignee or sublessee, or the insolvency, or bankruptcy or default of any such assignee or sublessee, shall affect the continuing liability of Tenant for its obligations under this Lease and Tenant waives any defense arising out of or based thereon, including any suretyship defense of exoneration. Landlord shall have no obligation to notify Tenant or obtain Tenant‘s consent with respect to any of the foregoing matters. 17.8. No Encumbrance . Notwithstanding anything to the contrary contained in this Article 17 , Tenant shall have no right to encumber, pledge, hypothecate or otherwise transfer this Lease, or any of Tenant‘s interest or rights hereunder, as security for any obligation or liability of Tenant. 17.9 Assignment or Sublease to Related Entity . As long as no Suspension Condition then exists, Tenant shall have the right, subject to the terms and conditions set forth in this Section 17.9 , without the consent of Landlord, but without in any way releasing Salesforce.com, Inc. from any of its obligations under this Lease, to (a) assign its interest in this Lease to (i) any corporation which is a successor to Tenant either by merger or consolidation, or (ii) a purchaser of all or substantially all of Tenant‘s assets (provided such purchaser shall have also assumed substantially all of Tenant‘s liabilities), or (iii) to a corporation or other entity which shall control, be under the control of, or be under common control with Salesforce.com, Inc. (the term ―control‖ as used herein shall be deemed to mean ownership -30-

of more than fifty percent (50%) of the outstanding voting stock of a corporation, or other majority equity and control interest if Tenant is not a corporation) (any such entity being a ―Related Entity‖), or (b) sublease all or any portion of the Premises to a Related Entity, so long as such sublease does not result in the demising of any space in the Premises. Any assignment or sublease to a Related Entity pursuant to this Section 17.9 shall be subject to the following conditions: (i) the principal purpose of such assignment or sublease is not the acquisition of Tenant‘s interest in this Lease (except if such assignment or sublease is made to a Related Entity and is made for a valid intra-corporate business purpose and is not made to circumvent the provisions of this Article 17 ), (ii) such assignment or sublease shall be subject to the terms of this Lease, including the provisions of Sections 17.6 and 17.7 , and (iii) such Related Entity shall have executed all documents reasonably requested by Landlord to memorialize the foregoing. Tenant shall, within ten (10) business days after execution thereof, deliver to Landlord (A) a duplicate original instrument of assignment in form and substance reasonably satisfactory to Landlord, duly executed by Tenant, (B) if applicable, evidence reasonably satisfactory to Landlord establishing compliance by the assignee with the net worth, income and cash flow requirements of clause (b)(ii) above, (C) an instrument in form and substance reasonably satisfactory to Landlord, duly executed by the assignee, in which such assignee shall assume observance and performance of, and agree to be personally bound by, all of the terms, covenants and conditions of this Lease on Tenant‘s part to be observed and performed or (D) a duplicate original sublease in form and substance reasonably satisfactory to Landlord, duly executed by Tenant and subtenant. 18. Rules and Regulations . Tenant shall observe and comply, and shall cause its sublessees, employees, agents, contractors, licensees and invitees to observe and comply, with the Rules and Regulations of the Building, a copy of which are attached to this Lease as Exhibit D , and, after notice thereof, with all reasonable modifications and additions thereto from time to time promulgated in writing by Landlord. Landlord shall not be responsible to Tenant, or Tenant‘s sublessees, employees, agents, contractors, licensees or invitees, for noncompliance with any Rules and Regulations of the Building by any other tenant, sublessee, employee, agent, contractor, licensee, invitee or other occupant of the Building. Such Rules and Regulations shall be enforced by Landlord in a non-discriminatory manner. In case of a conflict between the Lease and the Rules and Regulations, the Lease shall prevail. 19. Entry of Premises by Landlord . 19.1. Right to Enter . Upon 24 hours advance notice to Tenant (except in emergencies or in order to provide regularly scheduled or other routine Building standard services or additional services requested by Tenant, or post notices of nonresponsibility or other notices permitted or required by law when no such notice shall be required), Landlord and its authorized agents, employees, and contractors may enter the Premises at reasonable hours to: (i) inspect the same; (ii) determine Tenant‘s compliance with its obligations hereunder; (iii) exhibit the same to prospective purchasers, lenders or tenants; (iv) supply any services to be provided by Landlord hereunder; (v) post notices of nonresponsibility or other notices permitted or required by law; (vi) make repairs, improvements or alterations, or perform maintenance in or to, the Premises or any other portion of the Building, including Building systems; and (vii) perform such other functions as Landlord deems reasonably necessary or desirable. Landlord may also grant access to the Premises to government or utility representatives and bring and use on or about the Premises such equipment as reasonably necessary to accomplish the purposes of Landlord‘s entry. Landlord shall use reasonable good faith efforts to effect all entries and perform all work hereunder in such manner as to minimize interference with Tenant‘s use and occupancy of the Premises. Landlord shall have and retain keys with which to unlock all of the doors in or to the Premises (excluding Tenant‘s vaults, safes and similar secure areas designated in writing by Tenant in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper in an emergency in order to obtain entry to the Premises, including secure areas. -31-

19.2. Tenant Waiver of Claims . Except for damages to persons or property caused by the negligence or willful misconduct of Landlord or its employees, Tenant waives any claim for damages for any inconvenience to or interference with Tenant‘s business, or any loss of occupancy or quiet enjoyment of the Premises, or any other loss, occasioned by any entry effected or work performed under this Article 19 , and Tenant shall not be entitled to any abatement of Rent by reason of the exercise of any such right of entry or performance of such work. No entry to the Premises by Landlord or anyone acting under Landlord occasioned by any entry effected or work performed under this Article 19 , shall constitute a forcible or unlawful entry into, or a detainer of, the Premises or an eviction, actual or constructive, of Tenant from the Premises, or any portion thereof. 20. Default and Remedies . 20.1. Events of Default . The occurrence of any of the following events shall constitute a default by Tenant under this Lease: a. Nonpayment of Rent . Failure to pay any Rent when due. b. Unpermitted Assignment . An assignment or sublease made in contravention of any of the provisions of Article 17 above. c. Abandonment . Abandonment of the Premises for a continuous period in excess of five (5) business days. For purposes hereof, ―abandonment‖ shall have the meaning provided under California law. d. Other Obligations . Failure to perform or fulfill any other obligation, covenant, condition or agreement under this Lease. e. Bankruptcy and Insolvency . A general assignment by Tenant for the benefit of creditors, any action or proceeding commenced by Tenant under any insolvency or bankruptcy act or under any other statute or regulation for protection from creditors, or any such action commenced against Tenant and not discharged within sixty (60) days after the date of commencement; the employment or appointment of a receiver or trustee to take possession of all or substantially all of Tenant‘s assets or the Premises; the attachment, execution or other judicial seizure of all or substantially all of Tenant‘s assets or the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of ten (10) days after the levy thereof; the admission by Tenant in writing of its inability to pay its debts as they become due; or the filing by Tenant of a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, the filing by Tenant of an answer admitting or failing timely to contest a material allegation of a petition filed against Tenant in any such proceeding or, if within thirty (30) days after the commencement of any such proceeding against Tenant, such proceeding is not dismissed. For purposes of this Section 20.1(e) , ―Tenant‖ means Tenant and any partner of Tenant, if Tenant is a partnership, or any person or entity comprising Tenant, if Tenant is comprised of more than one person or entity, or any guarantor of Tenant‘s obligations, or any of them, under this Lease. f. Annex Lease . The occurrence of a default (after expiration of any applicable cure period) by Tenant under the Annex Lease. -32-

20.2. Notice to Tenant . Upon the occurrence of any default, Landlord shall give Tenant notice thereof. Such notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by California Code of Civil Procedure Section 1161 or any similar or successor statute; and giving of such notice in the manner required by Article 28 shall replace and satisfy any service-of-notice procedures set forth in any statute, including those required by California Code of Civil Procedure Section 1162 or any similar or successor statute. If a time period is specified below for cure of such default, then Tenant may cure such default within such time period. To the fullest extent allowed by law, Tenant hereby waives any right under law now or hereinafter enacted to any other time period for cure of default. a. Nonpayment of Rent . For failure to pay Rent, within five (5) days after Landlord‘s notice. b. Other Obligations . For failure to perform any obligation, covenant, condition or agreement under this Lease (other than nonpayment of Rent, an assignment or subletting in violation of Article 17 or Tenant‘s abandonment of the Premises) within ten (10) days after Landlord‘s notice or, if the failure is of a nature requiring more than 10 days to cure, then an additional sixty (60) days after the expiration of such 10-day period, but only if Tenant commences cure within such 10-day period and thereafter diligently pursues such cure to completion within such additional 60-day period. If Tenant has failed to perform any such obligation, covenant, condition or agreement more than two (2) times during the Term and notice of such event of default has been given by Landlord in each instance, then no cure period shall apply. c. No Cure Period . No cure period shall apply for any other event of default specified in Section 20.1 . 20.3. Remedies Upon Occurrence of Default . On the occurrence of a default which Tenant fails to cure after notice and expiration of the time period for cure, if any, specified in Section 20.2 above, Landlord shall have the right either (i) to terminate this Lease and recover possession of the Premises, or (ii) to continue this Lease in effect and enforce all Landlord‘s rights and remedies under California Civil Code Section 1951.4 (by which Landlord may recover Rent as it becomes due, subject to Tenant‘s right to assign pursuant to Article 17 ). Landlord may store any property of Tenant located in the Premises at Tenant‘s expense or otherwise dispose of such property in the manner provided by law. If Landlord does not terminate this Lease, Tenant shall in addition to continuing to pay all Rent when due, also pay Landlord‘s costs of attempting to relet the Premises, any repairs and alterations necessary to prepare the Premises for such reletting, and brokerage commissions and attorneys‘ fees incurred in connection therewith, less the rents, if any, actually received from such reletting. Notwithstanding Landlord‘s election to continue this Lease in effect, Landlord may at any time thereafter terminate this Lease pursuant to this Section 20.3 . 20.4. Damages Upon Termination . If and when Landlord terminates this Lease pursuant to Section 20.3 , Landlord may exercise all its rights and remedies available under California Civil Code Section 1951.2, including the right to recover from Tenant the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could have been reasonably avoided. As used herein and in Civil Code Section 1951.2, ―time of award‖ means either the date upon which Tenant pays to Landlord the amount recoverable by Landlord, or the date of entry of any determination, order or judgment of any court or other legally constituted body determining the amount recoverable, whichever occurs first. -33-

20.5. Computation of Certain Rent for Purposes of Default . For purposes of computing unpaid Rent pursuant to Section 20.4 above, Escalation Rent for the balance of the Term shall be determined by averaging the amount paid by Tenant as Escalation Rent for the calendar year prior to the year in which the default occurred (or, if the prior year is the Base Year or such default occurs during the Base Year, Escalation Rent shall be based on Landlord‘s operating budget for the Building for the Base Year), increasing such average amount for each calendar year (or portion thereof) remaining in the balance of the Term at a per annum compounded rate equal to the mean average rate of increase for the preceding five (5) calendar years in the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index (All Urban Consumers, All Items, 1982-1984 = 100) for the Metropolitan Area of which San Francisco, California, is a part, and adding together the resulting amounts. If such Index is discontinued or revised, such computation shall be made by reference to the index designated as the successor or substitute index by the United States Department of Labor, Bureau of Labor Statistics, or its successor agency, and if none is designated, by a comparable index as determined by Landlord in its sole discretion, which would likely achieve a comparable result to that achieved by the use of the Consumer Price Index. If the base year of the Consumer Price Index is changed, then the conversion factor specified by the Bureau, or successor agency, shall be utilized to determine the Consumer Price Index. 20.6. Right to Cure Defaults . If Tenant fails to pay Rent (other than Base Rent and Escalation Rent) required to be paid by it hereunder, or fails to perform any other obligation under this Lease, and Tenant fails to cure such default within the applicable cure period, if any, specified in Section 20.2 above, then Landlord may, without waiving any of Landlord‘s rights in connection therewith or releasing Tenant from any of its obligations or such default, make any such payment or perform such other obligation on behalf of Tenant. Prior to commencing such payment or performing such obligation on behalf of Tenant, Landlord shall notify Tenant of its intentions to do so. All payments so made by Landlord, and all costs and expenses incurred by Landlord to perform such obligations, shall be due and payable by Tenant as Rent immediately upon receipt of Landlord‘s demand therefor. If Landlord fails to perform its obligations under this Lease within fifteen (15) days after written notice from Tenant (provided Landlord shall have a longer time if reasonably necessary if Landlord commences cure within such fifteen (15) day period and diligently prosecutes such cure to completion) and such failure materially and adversely affects Tenant‘s use of the Premises, then Tenant shall give Landlord an additional three (3) business days prior notice. If Landlord has not commenced performance of its obligation within such three (3) business day period, Tenant shall have the right to perform such obligation on Landlord‘s behalf, and Landlord shall reimburse Tenant for the reasonable cost thereof within thirty (30) days after presentation of a reasonably detailed invoice demonstrating the expenses incurred by Tenant. In the event Tenant makes any repairs to the Premises on Landlord‘s behalf pursuant to this Section 20.6 , Tenant shall be responsible for damages or injuries caused by Tenant or its employees, contractors and subcontractors in making such repairs or any defect therein and shall indemnify Landlord against any liability, cost or expense (including attorneys‘ fees) arising out of such repair or any defect in the work performed. 20.7. Remedies Cumulative . The rights and remedies of Landlord under this Lease are cumulative and in addition to, and not in lieu of, any other rights and remedies available to Landlord at law or in equity. Landlord‘s pursuit of any such right or remedy shall not constitute a waiver or election of remedies with respect to any other right or remedy. 21. Subordination, Attornment and Nondisturbance . 21.1. Subordination and Attornment . This Lease and all of Tenant‘s rights hereunder shall be subordinate to any ground lease or underlying lease, and the lien of any mortgage, deed of trust, or any other security instrument now or hereafter affecting or encumbering the Building, or any part thereof or -34-

interest therein, and to any and all advances made on the security thereof or Landlord‘s interest therein, and to all renewals, modifications, consolidations, replacements and extensions thereof (an ―encumbrance‖, the holder of the beneficial interest thereunder being referred to as an ―encumbrancer‖). An encumbrancer may, however, subordinate its encumbrance to this Lease, and if an encumbrancer so elects by notice to Tenant, this Lease shall be deemed prior to such encumbrance. If any encumbrance to which this Lease is subordinate is foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer thereunder, Tenant shall attorn to the purchaser at the foreclosure sale or to the grantee under the deed in lieu of foreclosure; and if any encumbrance consisting of a ground lease or underlying lease to which this Lease is subordinate is terminated, Tenant shall attorn to the lessor thereof. Tenant shall execute, acknowledge and deliver in the form requested by Landlord or any encumbrancer, any documents required to evidence or effectuate the subordination hereunder, or to make this Lease prior to the lien of any encumbrance, or to evidence such attornment. 21.2. Nondisturbance . If any encumbrance to which this Lease is subordinate is foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer thereunder, or if any encumbrance consisting of a ground lease or underlying lease to which this Lease is subordinate is terminated, this Lease shall not terminate, and the rights and possession of Tenant under this Lease shall not be disturbed if (i) no default by Tenant then exists under this Lease; (ii) Tenant attorns to the purchaser, grantee, or successor lessor as provided in Section 21.1 above or, if requested, enters into a new lease for the balance of the Term upon the same terms and provisions contained in this Lease; and (iii) Tenant enters into a written agreement in a form reasonably acceptable to such encumbrancer with respect to subordination, attornment and non-disturbance. 22. Sale or Transfer by Landlord; Lease Non-Recourse . 22.1. Release of Landlord on Transfer . Landlord may at any time transfer, in whole or in part, its right, title and interest under this Lease and in the Building, or any portion thereof. If the original Landlord hereunder, or any successor to such original Landlord, transfers (by sale, assignment or otherwise) its right, title or interest in the Building, all liabilities and obligations of the original Landlord or such successor under this Lease accruing after such transfer shall terminate, the original Landlord or such successor shall automatically be released therefrom, and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant shall attorn to each such new owner. 22.2. Lease Nonrecourse to Landlord . Landlord shall in no event be personally liable under this Lease, and Tenant shall look solely to Landlord‘s interest in, or rents and profits held by a receiver with respect to, the Building, for recovery of any damages for breach of this Lease by Landlord or on any judgment in connection therewith. None of the persons or entities comprising or representing Landlord (whether partners, shareholders, officers, directors, trustees, employees, beneficiaries, agents or otherwise) shall ever be personally liable under this Lease or liable for any such damages or judgment and Tenant shall have no right to effect any levy of execution against any assets of such persons or entities on account of any such liability or judgment. Any lien obtained by Tenant to enforce any such judgment, and any levy of execution thereon, shall be subject and subordinate to all encumbrances as specified in Article 21 above. 23. Estoppel Certificate . 23.1. Procedure and Content . From time to time, and within ten (10) days after written notice by Landlord, Tenant shall execute, acknowledge, and deliver to Landlord a certificate as specified by Landlord certifying: (i) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, as modified, and identifying each modification); (ii) the Commencement Date and Expiration Date; (iii) that Tenant has accepted the Premises (or the reasons -35-

Tenant has not accepted the Premises), and if Landlord has agreed to make any alterations or improvements to the Premises, that Landlord has properly completed such alterations or improvements (or the reasons why Landlord has not done so); (iv) the amount of the Base Rent and current Escalation Rent, if any, and the date to which such Rent has been paid; (v) that Tenant has not committed any event of default, except as to any events of default specified in the certificate, and whether there are any existing defenses against the enforcement of Tenant‘s obligations under this Lease; (vi) that no default of Landlord is claimed by Tenant, except as to any defaults specified in the certificate; and (vii) such other matters as may reasonably be requested by Landlord. 23.2. Effect of Certificate . Any such certificate may be relied upon by any prospective purchaser of any part or interest in the Building or encumbrancer (as defined in Section 21.1 ) and, at Landlord‘s request, Tenant shall deliver such certificate to Landlord and/or to any such entity and shall agree to such notice and cure provisions and such other matters as such entity may reasonably require. In addition, at Landlord‘s request, Tenant shall provide to Landlord for delivery to any such entity such information, including financial information, that may reasonably be requested by any such entity. Any such certificate shall constitute a waiver by Tenant of any claims Tenant may have in contravention to the information contained in such certificate and Tenant shall be estopped from asserting any such claim. If Tenant fails or refuses to give a certificate hereunder within the time period herein specified, Landlord shall have the right to treat such failure or refusal as a default by Tenant. 23.3 Landlord‘s Estoppel Certificate . If Tenant is required by an unaffiliated third party to produce an estoppel certificate, Landlord shall, within thirty (30) days after Tenant‘s request, execute and deliver to Tenant an estoppel certificate in favor of Tenant and such other persons as Tenant shall reasonably request, setting forth the following: (a) the Commencement Date and the Expiration Date; (b) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended (except by such writing as shall be stated); (c) that all conditions under this Lease to be performed by Tenant have, to Landlord‘s knowledge, been satisfied, or, in the alternative, those claimed by Landlord to be unsatisfied; (d) that, to Landlord‘s knowledge, no defenses or offsets exist against the enforcement of this Lease by Landlord, or in the alternative, those claimed by Landlord; (e) that the amount of advance Rent, if any (or none if such is the case), has been paid by Tenant; (f) the date to which Rent has been paid; and (g) such other information as Tenant may reasonably request. 24. No Light, Air, or View Easement . Nothing contained in this Lease shall be deemed, either expressly or by implication, to create any easement for light and air or access to any view. Any diminution or shutting off of light, air or view to or from the Premises by any structure which now exists or which may hereafter be erected, whether by Landlord or any other person, shall in no way affect this Lease or Tenant‘s obligations hereunder, entitle Tenant to any reduction of Rent, or impose any liability on Landlord. 25. Holding Over . No holding over by Tenant shall operate to extend the Term. If Tenant remains in possession of the Premises after expiration or termination of this Lease, unless otherwise agreed by Landlord in writing, then (i) Tenant shall become a tenant at sufferance upon all the applicable terms and conditions of this Lease, except that Base Rent shall be increased to equal 150% of the Base Rent then in effect; (ii) Tenant shall indemnify, defend, protect and hold harmless Landlord, and any tenant to whom Landlord has leased all or part of the Premises, from any and all liability, loss, damages, costs or expense (including loss of Rent to Landlord or additional rent payable by such tenant and reasonable attorneys‘ fees) suffered or incurred by either Landlord or such tenant resulting from Tenant‘s failure timely to vacate the Premises; and (iii) such holding over by Tenant shall constitute a default by Tenant. -36-

26. Security Deposit . 26.1 Initial Security Deposit . If so specified in the Basic Lease Information, Tenant shall deposit with Landlord, in cash, the Security Deposit on or before a date three (3) days after the full execution of this Lease by Landlord and Tenant. At Tenant‘s option, the Security Deposit may be in the form of an unconditional, clean, irrevocable, standby letter of credit (―L-C‖). The Security Deposit shall be held by Landlord as security for the performance by Tenant of all its obligations under this Lease. If Tenant fails to pay any Rent due hereunder, or otherwise commits a default with respect to any provision of this Lease, Landlord may use, apply or retain all or any portion of the Security Deposit for the payment of any such Rent or for the payment of any other amounts expended or incurred by Landlord by reason of Tenant‘s default, or to compensate Landlord for any loss or damage which Landlord may incur thereby (and in this regard Tenant hereby waives the provisions of California Civil Code Section 1950.7(c) and any similar or successor statute providing that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant, or to clean the Premises). Exercise by Landlord of its rights hereunder shall not constitute a waiver of, or relieve Tenant from any liability for, any default. If Landlord so uses or applies all or any portion of the Security Deposit, Tenant shall, within ten (10) days after demand by Landlord, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its then appropriate amount as set forth in this Article 26. If Tenant performs all of Tenant‘s obligations hereunder, the Security Deposit, or so much thereof as has not theretofore been applied by Landlord, shall be returned, without interest, to Tenant (or, at Landlord‘s option, to the last assignee, if any, of Tenant‘s interest under this Lease, or to such person as Landlord and Tenant otherwise agree) within thirty (30) days after the later of (i) the date of expiration or earlier termination of this Lease, or (ii) vacation of the Premises by Tenant if the Premises has been left in the condition specified by this Lease. Landlord‘s receipt and retention of the Security Deposit shall not create any trust or fiduciary relationship between Landlord and Tenant and Landlord need not keep the Security Deposit separate from its general accounts. Upon termination of the original Landlord‘s (or any successor owner‘s) interest in the Premises, the original Landlord (or such successor) shall be released from further liability with respect to the Security Deposit upon the original Landlord‘s (or such successor‘s) compliance with California Civil Code Section 1950.7(d), or successor statute. 26.2 Release Provisions . If Tenant completes an initial public offering of stock in Tenant in which the gross proceeds exceeds $100,000,000.00 (an ―IPO‖), then on the later of the date five days after the date of such IPO or a date eighteen (18) months after the Commencement Date, the Security Deposit shall be reduced by 20%; provided, however, that if the IPO results in gross proceeds of less than $100,000,000.00 but more than $90,000,000.00, then if Tenant subsequently completes a secondary public offering of stock in Tenant (the ―Secondary Offering‖) in which the aggregate gross proceeds cumulated with the IPO exceeds $100,000,000.00, then on the later of the date five days after the date of such Secondary Offering or a date eighteen (18) months after the Commencement Date, the Security Deposit shall be reduced by 20%. The date on which a 20% portion of the Security Deposit is released pursuant to the foregoing sentence shall be referred to as the ―Initial Release Date‖. Thereafter, but only if Tenant has received a 20% reduction pursuant to the first sentence of this Section 26.2, the Security Deposit shall be reduced, at the following times and in the following amounts, upon Tenant‘s satisfaction of the following requirements: (i) on each anniversary of the Initial Release Date, the Security Deposit shall be reduced by an amount equal to ten percent (10%) of the original amount of the Security Deposit if Tenant has achieved profitable operations during the preceding twelve (12) month period and Tenant during such twelve (12) month period has achieved a coverage ratio in which its after tax cash flow (adding back depreciation and amortization) equals 4 or more times all fixed debt service and lease payments, including rent under this Lease, all as reasonably determined by Landlord; and (ii) on a one time basis, if on the date twelve (12) months after the Initial Release Date Tenant has equaled or exceeded its targeted annual profit objectives for the previous twelve (12) month period (which are targeted to be $50,000,000.00), as reasonably determined by Landlord, then the -37-

Security Deposit shall be reduced by an amount equal to twenty percent (20%) of the original amount of the Security Deposit. Notwithstanding any of the foregoing to the contrary, the reduction of the amount of the Security Deposit pursuant to this Section 26.2 shall be subject to the following: (A) if Tenant is in default under any term of this Lease on any date on which Tenant would otherwise be entitled to a reduction, then the Security Deposit shall not be reduced on such date, and (B) if the Security Deposit is not reduced pursuant to clause (A) hereof, the Security Deposit may be reduced by the scheduled amount at such time that such default is cured. If the Security Deposit is in the form of cash, Landlord shall pay to Tenant the excess amount of the Security Deposit within fifteen (15) days after the applicable reduction date or if the Security Deposit is in the form of an L-C, then Tenant may, not less than fifteen (15) days after the applicable reduction date, replace the L-C with an L-C (in the form and on terms satisfying the provisions of this Section 26) in an amount equal to the reduced amount of the Security Deposit. Tenant shall promptly deliver to Landlord any books, records, audited financial statements or other materials reasonably requested by Landlord to determine whether Tenant has satisfied any of the provisions of this Section 26.2. The Security Deposit shall not be reduced pursuant to this Section 26.2 if Tenant fails to deliver to Landlord any of the documents requested by Landlord. 26.3 Letter of Credit Provisions . If at any time Tenant elects to deposit an L-C as the Security Deposit, the L-C shall be issued by a bank reasonably acceptable to Landlord, shall be issued for a term of at least twelve (12) months, shall be unconditional, clean and irrevocable, and shall be in a form and with such content reasonably acceptable to Landlord. The L-C shall be payable on sight with the bearer‘s draft. The L-C shall state that it shall be payable against sight drafts presented by Landlord, accompanied by Landlord‘s statement that said drawing is in accordance with the terms and conditions of this Lease; no other document or certification from Landlord shall be required to negotiate the L-C. Landlord may designate any bank as Landlord‘s advising bank for collection purposes and any sight drafts for the collection of the L-C may be presented by the advising bank on Landlord‘s behalf. Tenant shall either replace the expiring L-C with an L-C in an amount equal to the original L-C or renew the expiring L-C, in any event no later than thirty (30) days prior to the expiration of the term of the L-C then in effect. If Tenant fails to deposit a replacement L-C or renew the expiring L-C, Landlord shall have the right to draw upon the expiring L-C for the full amount thereof and hold the same as the Security Deposit; provided, however, that if Tenant provides a replacement L-C that meets the requirements of this Article 26 , then Landlord shall return to Tenant promptly in cash that amount of the L-C that had been drawn upon by Landlord. The fee for the maintenance of the L-C shall be at Tenant‘s sole cost and expense. The L-C shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. The L-C shall be transferable to any of the following parties: (i) any secured or unsecured lender of Landlord, (ii) any assignee, successor, transferee or other purchaser of all or any portion of the Building, or any interest in the Building, (iii) any partner, shareholder, member or other direct or indirect beneficial owner in Landlord (to the extent of their interest in the Lease). Further, in the event of any sale, assignment or transfer by the Landlord of its interest in the Premises or the Lease, Landlord shall have the right to assign or transfer the L-C to its grantee, assignee or transferee and in the event of any sale, assignment or transfer; the landlord so assigning or transferring the L-C shall have no liability to the Tenant for the return of the L-C, and Tenant shall look solely to such grantee, assignee or transferee for such return. The use, application or retention of the L-C, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the L-C, and such use, application or retention shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. 27. Waiver . Failure of Landlord or Tenant to declare a default by the other upon occurrence thereof, or delay in taking any action in connection therewith, shall not waive such default, but the non-defaulting party shall have the right to declare such default at any time after its occurrence. To be effective, a waiver -38-

of any provision of this Lease, or any default, shall be in writing and signed by the waiving party. Any waiver hereunder shall not be deemed a waiver of subsequent performance of any such provision or subsequent defaults. The subsequent acceptance of Rent hereunder, or endorsement of any check by Landlord, shall not be deemed to constitute an accord and satisfaction or a waiver of any preceding default by Tenant, except as to the particular Rent so accepted, regardless of Landlord‘s knowledge of the preceding default at the time of acceptance of the Rent. No course of conduct between Landlord and Tenant, and no acceptance of the keys to or possession of the Premises by Landlord before the Expiration Date shall constitute a waiver of any provision of this Lease or of any default, or operate as a surrender of this Lease. 28. Notices and Consents; Tenant‘s Agent for Service . All notices, approvals, consents, demands and other communications from one party to the other given pursuant to this Lease shall be in writing and shall be made by personal delivery, by facsimile, use of a reputable overnight courier service or by deposit in the United States mail, certified, registered or Express, postage prepaid and return receipt requested. Notices shall be addressed if to Landlord, to Landlord‘s Address, and if to Tenant, to Tenant‘s Address. Landlord and Tenant may each change their respective Addresses from time to time by giving written notice to the other of such change in accordance with the terms of this Article 28 , at least ten (10) days before such change is to be effected. Any notice given in accordance with this Article 28 shall be deemed to have been given (i) on the date of personal delivery or (ii) on the earlier of the date of delivery or attempted delivery (as shown by the return receipt or other delivery record) if sent by courier service or mailed. 29. Authority . Tenant, and each of the persons executing this Lease on behalf of Tenant, represent and warrant that (i) Tenant is a duly formed, authorized and existing corporation, partnership or trust (as the case may be), (ii) Tenant is qualified to do business in California, (iii) Tenant has the full right and authority to enter into this Lease and to perform all of Tenant‘s obligations hereunder, and (iv) each person signing on behalf of Tenant is authorized to do so. Tenant shall deliver to Landlord, upon Landlord‘s request, such reasonable written assurances authorizing Tenant‘s execution and delivery of this Lease. Landlord, and each of the persons executing this Lease on behalf of Landlord, represent and warrant that (i) Landlord is a duly formed, authorized and existing corporation, partnership or trust (as the case may be), (ii) Landlord is qualified to do business in California, (iii) Landlord has the full right and authority to enter into this Lease and to perform all of Landlord‘s obligations hereunder, and (iv) each person signing on behalf of Landlord is authorized to do so. Landlord shall deliver to Tenant, upon Tenant‘s request, such reasonable written assurances authorizing Landlord‘s execution and delivery of this Lease. 30. Automobile Parking . There shall be no parking provided to Tenant in the Building or at any other location except as set forth in this Article 30 . Pursuant to the terms of the lease between the owner of the Annex and TMG/One Market, L.P. for the Annex (the ―Annex Master Lease‖), Landlord currently has the right to use a certain number of parking spaces located at the 75 Howard Street garage (as such number of spaces increase or decrease, the ―Landlord Parking Rights‖). For as long as Landlord maintains the Landlord Parking Rights, then Landlord shall provide to Tenant, at market rate costs to be paid by Tenant to Landlord, a number of spaces at 75 Howard Street (or a substitute location provided by the master landlord under the Annex Master Lease) equal to Tenant‘s Percentage Share of the Landlord Parking Rights, which shall initially be 3 spaces. 31. Tenant to Furnish Financial Statements . In order to induce Landlord to enter into this Lease, Tenant agrees that it shall promptly deliver to Landlord, from time to time, upon Landlord‘s written request, financial statements (including a balance sheet and statement of income and expenses on an annualized basis) reflecting Tenant‘s then current financial condition; provided, however, that so long as Tenant is a company publicly traded on The New York Stock Exchange or NASDAQ, then Tenant shall no longer be obligated to provide to Landlord the financial statements required pursuant to this Section 31. Such statements shall -39-

be delivered to Landlord within fifteen (15) days after Tenant‘s receipt of Landlord‘s request. Tenant represents and warrants that all financial statements, records, and information furnished by Tenant to Landlord in connection with this Lease are and shall be true, correct and complete in all respects. 32. Tenant‘s Signs . Without Landlord‘s prior consent, which Landlord may withhold in its sole discretion, Tenant shall not place on the Premises or on the Building any exterior signs nor any interior signs that are visible from the exterior of the Premises or Building; provided, however, that so long as the Premises under this Lease contains the First Floor Portion, Tenant shall have the right, at Tenant‘s sole cost and expense, to place 2 signs (not exceeding 14 feet and 8.5 inches in length by 1 foot and 6 5/8 inches in width, each) in exterior locations reasonably designated in writing by Landlord, which shall be substantially at the corner of Market and Spear Streets. Except as set forth in the previous sentence, Tenant shall pay all costs and expenses relating to any such sign approved by Landlord, including without limitation, the cost of the installation and maintenance of the sign. On the date of expiration or earlier termination of this Lease, Tenant, at its sole cost and expense, shall remove all signs and repair any damage caused by such removal. 33. Miscellaneous . 33.1. No Joint Venture . This Lease does not create any partnership or joint venture or similar relationship between Landlord and Tenant. 33.2. Successors and Assigns . Subject to the provisions of Article 17 regarding assignment, all of the provisions, terms, covenants and conditions contained in this Lease shall bind, and inure to the benefit of, the parties and their respective successors and assigns. 33.3. Construction and Interpretation . The words ―Landlord‖ and ―Tenant‖ include the plural as well as the singular. If there is more than one person comprising Tenant or Landlord, the obligations under this Lease imposed on Tenant or Landlord (as applicable) are joint and several. References to a party or parties refers to Landlord or Tenant, or both, as the context may require. The captions preceding the Articles, Sections and subsections of this Lease are inserted solely for convenience of reference and shall have no effect upon, and shall be disregarded in connection with, the construction and interpretation of this Lease. Use in this Lease of the words ―including‖, ―such as‖, or words of similar import when following a general matter, shall not be construed to limit such matter to the enumerated items or matters whether or not language of nonlimitation (such as ―without limitation‖) is used with reference thereto. All provisions of this Lease have been negotiated at arm‘s length between the parties and after advice by counsel and other representatives chosen by each party and the parties are fully informed with respect thereto. Therefore, this Lease shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof, or by reason of the status of the parties as Landlord or Tenant, and the provisions of this Lease and the Exhibits hereto shall be construed as a whole according to their common meaning in order to effectuate the intent of the parties under the terms of this Lease. 33.4. Severability . If any provision of this Lease, or the application thereof to any person or circumstance, is determined to be illegal, invalid or unenforceable, the remainder of this Lease, or its application to persons or circumstances other than those as to which it is illegal, invalid or unenforceable, shall not be affected thereby and shall remain in full force and effect, unless enforcement of this Lease as so invalidated would be unreasonable or grossly inequitable under the circumstances, or would frustrate the purposes of this Lease. 33.5. Entire Agreement; Amendments . This Lease, together with the Exhibits hereto and any Addenda identified on the Basic Lease Information, contains all the representations and the entire -40-

agreement between the parties with respect to the subject matter hereof and any prior negotiations, correspondence, memoranda, agreements, representations or warranties are replaced in total by this Lease, the Exhibits hereto and such Addenda. Neither Landlord nor Landlord‘s agents have made any warranties or representations with respect to the Premises or any other portion of the Building, except as expressly set forth in this Lease. This Lease may be modified or amended only by an agreement in writing signed by both parties. 33.6. Governing Law . This Lease shall be governed by and construed pursuant to the laws of the State of California. 33.7. Litigation Expenses . If either party brings any action or proceeding against the other (including any cross-complaint, counterclaim or third party claim) to enforce or interpret this Lease or otherwise arising out of this Lease, the prevailing party in such action or proceeding shall be entitled to its costs and expenses of suit, including reasonable attorneys‘ fees and accountants‘ fees. 33.8. Standards of Performance and Approvals . Unless otherwise provided in this Lease, (1) each party shall act in a reasonable manner in exercising or undertaking its rights, duties and obligations under this Lease and (ii) whenever approval, consent or satisfaction (collectively, an ―approval‖) is required of a party pursuant to this Lease or an Exhibit hereto, such approval shall not be unreasonably withheld or delayed. Unless provision is made for a specific time period, approval (or disapproval) shall be given within thirty (30) days after receipt of the request for approval. Nothing contained in this Lease shall, however, limit the right of a party to act or exercise its business judgment in a subjective manner with respect to any matter as to which it has been (A) specifically granted such right, (B) granted the right to act in its sole discretion or sole judgment, or (C) granted the right to make a subjective judgment hereunder, whether ―objectively‖ reasonable under the circumstances and any such exercise shall not be deemed inconsistent with any covenant of good faith and fair dealing implied by law to be part of this Lease. The parties have set forth in this Lease their entire understanding with respect to the terms, covenants, conditions and standards pursuant to which their obligations are to be judged and their performance measured, including the provisions of Article 17 with respect to assignments and sublettings. 33.9. Brokers . Landlord shall pay to Landlord‘s Broker and Tenant‘s Broker, if any as specified in the Basic Lease Information of this Lease, a commission in connection with such Brokers‘ negotiation of this Lease pursuant to a separate agreement or agreements between Landlord and such Brokers. Other than such Brokers, Landlord and Tenant each represent and warrant to the other that no broker, agent, or finder has procured or was involved in the negotiation of this Lease and no such broker, agent or finder is or may be entitled to a commission or compensation in connection with this Lease. Landlord and Tenant shall each indemnify, defend, protect and hold the other harmless from and against any and all liability, loss, damages, claims, costs and expenses (including reasonable attorneys‘ fees) resulting from claims that may be asserted against the indemnified party in breach of the foregoing covenant and warranty and representation. 33.10. Memorandum of Lease . Tenant shall, upon request of Landlord, execute, acknowledge and deliver a short form memorandum of this Lease (and any amendment hereto) in form suitable for recording. In no event shall this Lease be recorded by Tenant. Tenant shall have the right to record the memorandum and, if Tenant elects to do so, Tenant shall pay all recording fees and transfer taxes in connection therewith. In addition, Landlord shall have the right to record the memorandum and, if Landlord elects to do so, Landlord shall pay all recording fees and transfer taxes in connection therewith. Upon termination or expiration of the Lease, Tenant shall promptly execute and record a quit claim deed or other instrument required to remove such memorandum from the records of the San Francisco County Recorder‘s office. -41-

33.11. Quiet Enjoyment . Upon paying the Rent and performing all its obligations under this Lease, Tenant may peacefully and quietly enjoy the Premises during the Term as against all persons or entities claiming by or through Landlord, subject, however, to the provisions of this Lease and any encumbrances as specified in Article 21 . 33.12. Surrender of Premises . Upon the Expiration Date or earlier termination of this Lease, Tenant shall quietly and peacefully surrender the Premises to Landlord in the condition specified in Article 9 above. On or before the Expiration Date or earlier termination of this Lease, Tenant shall remove all of its personal property from the Premises and repair at its cost and expense all damage to the Premises or Building caused by such removal. All personal property of Tenant not removed hereunder shall be deemed, at Landlord‘s option, to be abandoned by Tenant and Landlord may store such property in Tenant‘s name at Tenant‘s expense and/or dispose of the same in any manner permitted by law. 33.13. Building Directory . Landlord shall install a computerized touch screen Building directory for purposes of identifying the name, divisions and/or principal employees of tenants in the Building. Tenant shall be entitled to a reasonable number of entries in the directory commensurate with Tenant‘s Percentage Share. 33.14. Name of Building; Address . Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises. Tenant shall, in connection with all correspondence, mail or deliveries made to or from the Premises, use the official Building address specified from time to time by Landlord. 33.15. Exhibits . The Exhibits specified in the Basic Lease Information are by this reference made a part hereof. 33.16 Final Lease . As a material covenant of this Lease, Landlord shall deliver to Tenant and its counsel via e-mail or computer disk the final form of this Lease and all documents executed in connection therewith within five (5) days of the Lease Date. -42-

33.17. Time of the Essence . Time is of the essence of this Lease and of the performance of each of the provisions contained in this Lease. IN WITNESS WHEREOF, the parties have executed this Lease as of the Lease Date. LANDLORD : TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member /s/ Illegible SVP

By: Its:

CROSSMARKET, LLC A Nevada limited liability company By: Martin/Crossman, LLC A California limited liability company Its: managing member By: /s/ Michael A. Covarrubias Michael A. Covarrubias Managing Member TENANT : SALESFORCE.COM, INC., a Delaware Corporation By: /s/ Andrew Hyde Andrew Hyde Chief Financial Officer -43-

EXHIBIT A [GRAPHIC] THE LANDMARK @ ONE MARKET THIRD FLOOR -1-

EXHIBIT A [GRAPHIC] -2-

[GRAPHIC] -3-

[GRAPHIC] EXHIBIT A THE LANDMARK @ONE MARKET FOURTH FLOOR -4-

EXHIBIT A STORAGE SPACE [GRAPHIC] PAGE 1 OF 2

[GRAPHIC] PAGE 2 OF 2

EXHIBIT B LEGAL DESCRIPTION A piece or parcel of land situate, lying and being in the City and County of San Francisco. State of California, more particularly described as follows: Beginning at a point in the southwesterly line of Steuart Street that is distant North 44° 51‘ 51‖ West 334.33 feet, from the northwesterly line of Mission Street; thence South 45° 08‘ 09‖ West being parallel with and distant 334.33 feet northwesterly, measured at right angles, from said northwesterly line of Mission Street 32 feet 4-1/2 inches; thence North 44° 51‘ 51‖ West 6 feet 1-1/2 inches; thence South 45° 08‘ 09‖ West 16 feet 4 inches; thence North 44° 51‘ 51‖ West 112 feet 5-1/8 inches; thence South 45° 08‘ 09‖ West 177 feet 7-1/2 inches; thence South 44° 51‘ 51‖ East 112 feet 5-1/8 inches, then South 45° 08‘ 09‖ West 16 feet 3-1/2 inches; thence South 44° 51‘ 51‖ East 6 feet 1-1/2 inches to a point in said line that is parallel with and distant 334.33 feet northwesterly, measured at right angles, from said northwesterly line of Mission Street; thence South 45° 08‘ 09‖ West along said parallel line, 32 feet 4-1/2 inches to a point in the northeasterly line of Spear Street; thence North 44° 51‘ 51‖ West along said northeasterly line 216 feet to a point in the southeasterly line of Market Street; thence North 45° 08‘ 09‖ East along said southeasterly line, 275 feet to a point in said southwesterly line of Steuart Street; thence South 44° 51‘ 51‖ East along last said line 216 feet to the point of beginning, containing an area of 38143 square feet, more or less. Lot 006, Block 3713

EXHIBIT C TENANT IMPROVEMENT AGREEMENT THIS TENANT IMPROVEMENT AGREEMENT (―Agreement‖) is made and entered into by and between Landlord and Tenant as of the date of the Lease. This Agreement shall be deemed a part of the Lease to which it is attached. Capitalized terms which are used in this Agreement and defined in the Lease shall have the meaning given in the Lease. 1. General . 1.1. The Parties‘ Respective Obligations . At Landlord‘s sole cost and expense, in a good and workman like manner and in compliance with all workplans approved by the city, Landlord shall construct and deliver the Premises in ―shell‖ condition which shall include only the work described on Schedule 1 attached to this Agreement (the ―Landlord‘s Work‖). The Landlord‘s Work shall not include the construction of a staircase between the floors of the Premises, but, to the extent required by laws applicable as of the Possession Date, and to the extent that the Mezzanine or the First Floor Portion has not been deleted from the Premises, the Landlord‘s Work shall include two stairways and an elevator connecting the First Floor Portion of the Premises and the Mezzanine. In all other respects, Tenant acknowledges that it shall lease the Premises in their ―as is‖ condition, subject to completion of any punchlist items with respect thereto, and Landlord shall have no obligation to make any other improvements or to perform any other work in the Premises except as otherwise expressly set forth herein or in the Lease. Tenant shall be responsible for performing all other work required to prepare the Premises for Tenant‘s occupancy pursuant to the Lease and as otherwise may be required to comply with applicable law. The work which is to be performed by Tenant pursuant to the Lease and this Agreement is referred to as the ―Tenant‘s Work‖. Tenant‘s Work shall be performed at Tenant‘s sole cost and expense, subject to the Construction Allowance described below. Tenant acknowledges that the Tenant‘s Work in the Fourth Floor Portion shall utilize an open work environment similar to the space configured by Scient in the Building, and shall utilize the same exterior wall finishes and mechanical and lighting specifications as Scient. 1.2. Payment of Construction Costs . In the manner provided in this Section 1.2 , Landlord shall pay to Tenant a ―Construction Allowance‖ equal to the sum of: (i) Fifty Thousand Dollars, plus (ii) Thirty-Seven and 50/100s Dollars ($37.50) multiplied by the Rentable Area of the Premises (excluding the Storage Space). Tenant shall have the right to exercise any of its remedies at law if Landlord fails to disburse the Construction Allowance to Tenant in accordance with the provisions of this Lease. Tenant shall not be entitled to a credit for any unused portion of the Construction Allowance in the form of rent abatement or otherwise. Before commencement of any portion of Tenant‘s Work, Tenant shall pay to Landlord or Landlord‘s lender an amount reasonably determined by Landlord to be the costs of constructing and purchasing all elements of the Tenant‘s Work, minus the amount of the Construction Allowance (the ―Tenant Deposit‖). If permitted by Landlord‘s lender, the Tenant‘s Deposit shall be deposited in a non-interest bearing account. Monthly during the construction of the Tenant‘s Work, Landlord shall disburse to Tenant, or at Landlord‘s option directly to Tenant‘s contractors or materialmen, a portion of the Construction Allowance and a portion of the Tenant Deposit (in the ratios which the Construction Allowance and the Tenant Deposit bear to each other) to pay 90% of all hard and soft costs of construction incurred during such month in connection with the Tenant‘s Work. Landlord obligation to make such disbursement shall be subject to Landlord‘s receipt of the following: (i) copies of paid invoices and conditional lien waivers in connection with all such work, (ii) a certification by Tenant‘s architect that all such work has been performed -46-

in accordance with plans and specifications approved by Landlord, and (iii) such other information that may be reasonably requested by Landlord or Landlord‘s lender. Upon substantial completion of Tenant‘s Work, Tenant shall submit to Landlord a written notice indicating that Tenant has completed Tenant‘s Work, which notice shall be accompanied by all of the following (collectively, ―Tenant‘s Completion Notice‖): (i) copies of paid invoices and unconditional lien waivers from Tenant‘s general contractor and all subcontractors and material suppliers, showing that full payment has been received for the construction of all aspects of Tenant‘s Work; (ii) certification from Tenant‘s architect that to the best of its knowledge all of Tenant‘s Work has been completed substantially in accordance with the plans and specifications therefor approved by Landlord and all local governmental and quasi-governmental authorities with jurisdiction; and (iii) a copy of the building permit or job card for Tenant‘s Work, showing that Tenant‘s Work has been finally approved by the appropriate building inspector, plus any other evidence reasonably required by Landlord indicating that all legal requirements for Tenant‘s occupancy of the Premises have been satisfied. Landlord shall pay any properly payable withheld portion of the Construction Allowance and the Tenant Deposit to Tenant within thirty (30) days after the date of Landlord‘s receipt of Tenant‘s Completion Notice (including all of the material specified above). 2. Approval of Plans for Tenant‘s Work . 2.1. Notification of Architect . Within ninety (90) days after execution of the Lease, Tenant shall notify Landlord in writing of the name and address of the licensed architect which Tenant desires to engage for the preparation of plans for Tenant‘s Work. Tenant‘s architect shall be subject to Landlord‘s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall retain such architect‘s administrative services throughout the performance of Tenant‘s Work. Designers who are not licensed architects will not be acceptable, unless such designers work in conjunction with a licensed architect of record. 2.2. Submittal of Plans . 2.2.1. Tenant‘s Preliminary Plans . On or before sixty (60) days after execution of this Lease, Tenant shall deliver to Landlord, for Landlord‘s review and approval, ―Tenant‘s Preliminary Plans‖ which shall include the following: (i) interior elevations; (ii) floor plans; (iii) architectural finish schedule; (iv) reflected ceiling plans; (v) electrical, mechanical and plumbing plans; and (vi) outline specifications. Within ten (10) business days after Landlord‘s receipt of Tenant‘s Preliminary Plans, Landlord shall either approve or disapprove Tenant‘s Preliminary Plans, which approval shall not be unreasonably withheld. Failure by Landlord to respond within such ten (10) day period shall be conclusively deemed approval. If Landlord disapproves Tenant‘s Preliminary Plans, then Landlord shall state in reasonable detail the changes which Landlord requires to be made thereto. 2.2.2. Tenant‘s Final Plans . Within one hundred twenty (120) days after Landlord‘s approval of Tenant‘s Preliminary Plans, Tenant shall deliver to Landlord, for Landlord‘s review and approval, complete plans, specifications and working drawings which incorporate and are consistent with Tenant‘s Preliminary Plans, as previously approved by Landlord, and which show in detail the intended design, construction and finishing of all portions of Tenant‘s Work, in sufficient detail for construction (―Tenant‘s Final Plans‖). Within ten (10) business days after Landlord‘s receipt of Tenant‘s Final Plans, Landlord shall either approve or disapprove Tenant‘s Final Plans, which approval shall not be unreasonably withheld. Failure by Landlord to respond within such ten (10) day period shall be conclusively -47-

deemed approval. If Landlord disapproves Tenant‘s Final Plans, then Landlord shall state in reasonable detail the changes which Landlord requires to be made thereto. 2.2.3. Tenant shall be entitled to prepare separate and distinct Tenant‘s Preliminary Plans for the Third Floor Portion, the Fourth Floor Portion and the First Floor Portion. If Tenant submits separate plans, Landlord shall respond to each set of plans in the manner and in the time periods described in Sections 2.2.1 and 2.2.2 as if each set of plans were Tenant‘s Preliminary Plans and Tenant‘s Final Plans. Because of the uncertainty as to whether the First Floor Portion or the Mezzanine will be included in the Premises, Landlord consents to the bifurcation of Tenant‘s Work at Tenant‘s election in the manner described herein. 2.3. Landlord‘s Approval . Landlord‘s approval of any of Tenant‘s plans, signs or materials samples shall not be valid unless such approval is in writing and signed by Landlord, or otherwise deemed approved in accordance with the provisions of Sections 2.2.1 and or 2.2.2 of this Agreement. Landlord‘s approval of any of Tenant‘s plans, including any preliminary draft or version thereof, shall not be deemed to be a representation as to their completeness, adequacy for Tenant‘s intended use of the Premises or compliance with applicable law. 3. Standard of Construction . Tenant‘s Work shall comply with all applicable laws, codes, rules and regulations of all governmental and quasi-governmental authorities with jurisdiction. Only new and firstclass materials shall be used in the construction of Tenant‘s Work. Tenant shall not change in any material respect any portion of Tenant‘s Work from the description thereof contained in Tenant‘s Final Plans, as approved by Landlord, unless Tenant first obtains Landlord‘s written approval, which approval shall not be unreasonably withheld or delayed and shall be conclusively deemed granted if specific objections thereto are not made within five (5) business days of notice thereof. 4. Prior to Commencement of Tenant‘s Work . 4.1. Approval of Contractors . Tenant‘s general contractor and primary subcontractors shall be subject to Landlord‘s prior written approval (which approval shall not be unreasonably withheld, delayed or conditioned, including Landlord‘s reasonable approval of the contractor‘s bonding capability and Landlord‘s lender‘s review and approval of the contractor‘s bonding capability), and Tenant shall submit to Landlord, no later than thirty (30) days after execution of this Lease, by notice given in the manner specified in the Lease, the following information: (i) the name and address of the general contractor and (as of a date 60 days before the commencement of the Tenant‘s Work) all subcontractors which Tenant proposes to engage for the performance of Tenant‘s Work; (ii) a fully completed Contractor‘s Qualification Statement (AIA Document A305) for Tenant‘s proposed general contractor and each of Tenant‘s proposed primary subcontractors; (iii) the construction cost breakdown and total cost for all portions of Tenant‘s Work; (iv) the actual commencement date of construction and the estimated date of completion of Tenant‘s Work, including fixturization; (v) evidence of insurance as required by Section 6 ; and (vi) Tenant‘s contractor‘s performance and/or labor and materials bonds, if required by Landlord‘s lender. Landlord hereby preapproves Plant Construction Company, Turner Construction and BCCI. All contractors engaged by Tenant shall employ only union labor and shall be bondable, licensed contractors, possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord‘s construction manager and other contractors on the job. -48-

4.2. Landlord‘s Approval of Sufficiency of Funds . Prior to commencing any portion of Tenant‘s Work, Tenant shall furnish to Landlord, for Landlord‘s review and approval, funding commitments or evidence of other financing arrangements that provide for payment of Tenant‘s funding obligation. Such evidence shall be in a form reasonably satisfactory to Landlord and shall satisfy the provisions of Section 1.2 of this Agreement. 4.3. Notice of Nonresponsibility . Prior to the commencement of construction, Landlord shall have the right to post in a conspicuous location on the Premises, as well as to record in the San Francisco County Recorder‘s office, a Notice of Nonresponsibility. 5. Commencement and Performance of Tenant‘s Work . 5.1. Possession Date . 5.1.1. Initial Work . Landlord shall deliver the Third Floor Portion, the Fourth Floor Portion and the Storage Space to Tenant on the Initial Possession Date. The term ―Initial Possession Date‖ shall mean June 23, 2000. On or before July 23, 2000, Tenant shall conduct a walk-through inspection of the Third Floor Portion and the Fourth Floor Portion with Landlord and complete a punch-list of items needing additional work. 5.1.2. Completion All Work . Upon Landlord‘s reasonable determination that all of the Landlord‘s Work for all portions of the Premises has been substantially completed to the extent reasonably necessary for the commencement of the Tenant‘s Work, and provided that the completion of the remainder of the Landlord‘s Work shall not unreasonably delay or unreasonably interfere with the performance of Tenant‘s Work, as confirmed in a certificate by Landlord‘s architect, Landlord shall deliver the remainder of the Premises to Tenant (the ―Possession Date‖). In no event shall the Possession Date occur prior to the delivery of the following two notices: (a) either the Office Permits Notice or the First Floor Notice and (b) either the Mezzanine Acceptance Notice or the Mezzanine Notice. Tenant shall commence Tenant‘s Work promptly following the Possession Date. Tenant shall diligently proceed with Tenant‘s Work and shall complete Tenant‘s Work as soon as practicable. Within thirty (30) days after completion of Landlord‘s Work, Tenant shall conduct a walk-through inspection of the Building with Landlord and complete a punch-list of items needing additional work. Landlord shall provide Tenant with status reports regarding the Landlord‘s Work every thirty days following the Lease Date. Landlord shall use reasonable efforts to provide Tenant at least thirty (30) days notice before the anticipated Possession Date. 5.1.3. Early Occupancy . To the extent that (i) Tenant desires to take occupancy of all or any portion of the First Floor Portion in advance of the Possession Date for the purpose of commencing all or any portion of the Tenant‘s Work, and (ii) Landlord determines in its sole discretion that Tenant‘s early occupancy shall not delay the completion of the improvements to the First Floor Portion, then Landlord shall deliver the First Floor Portion to Tenant in advance of the Possession Date on a date mutually agreed upon by Landlord and Tenant. 5.2. Coordination of Tenant‘s Work . Tenant‘s contractors shall perform Tenant‘s Work in a manner and at times that do not unreasonably interfere with the ongoing construction or business operations in the Building, the completion of the Landlord‘s Work or the performance of other tenant improvement work in the Building. Tenant and its contractors shall not do anything that would jeopardize the labor relations of others in the Building. Any delays in the completion of Tenant‘s Work, and any damage to any work caused by Tenant‘s contractors, shall be at Tenant‘s cost and expense. -49-

5.3. Staging Areas . Storage of Tenant‘s contractors‘ construction materials, tools and equipment shall be confined within portions of the Premises designated by Landlord and in any other areas designated for such purposes by Landlord. If such materials, tools and equipment are assigned space or spaces outside the Premises, they shall be moved to such other space as Landlord may direct from time to time in order to avoid interference or delays with other work or the ongoing construction or business operations in the Building. In no event shall any materials or debris be stored in the common areas of the Building or in the premises of other tenants. Tenant‘s contractors shall not run pipes or conduits over or through any other tenant‘s space, or the common areas of the Building, except as directed by Landlord. 5.4. Supervision of Contractors . Tenant‘s Work shall be performed in accordance with such reasonable rules and regulations as Landlord shall promulgate from time to time. Tenant acknowledges that other construction work may be in progress at the Building and that conflicts between Tenant‘s Work and such other work shall be subject to final resolution by Landlord‘s representatives. Tenant shall be fully responsible for, and shall indemnify, defend and protect Landlord with respect to, the operations and activities of Tenant‘s general contractor and all subcontractors employed by such general contractor, and all other individuals or contractors employed by Tenant in the completion of Tenant‘s Work. All such contractors and/or individuals shall repair any damage which they may cause to any work in the Premises or the Building, and Tenant shall reimburse Landlord for any and all expenses reasonably and actually incurred by Landlord by reason of faulty work performed by Tenant‘s contractor or subcontractors, damage to other work in the Building caused by Tenant‘s contractor or contractors, and delays caused by such work as the result of inadequate clean-up. In addition, Tenant shall pay to Landlord, on demand, an amount equal to $150,000.00 as a supervision fee; provided, however, that the supervision fee shall be reduced to $50,000.00 if Tenant‘s general contractor is Plant Construction. 5.5. Changes to Tenant‘s Work . Tenant shall obtain Landlord‘s written approval (which shall not be unreasonably withheld) prior to performing any work that deviates in any material respect from Tenant‘s Final Plans (for this purpose, a change that costs less than $10,000.00 and does not adversely affect the structure or electrical or mechanical systems of the Building shall be deemed non-material), as previously approved by Landlord, or making any material modifications to Landlord‘s building shell and/or utilities or other work not explicitly shown on Tenant‘s Final Plans, as previously approved in writing by Landlord. 5.6 Separate Contractors . If Tenant‘s general contractor is not the same as Landlord‘s general contractor, then the following provisions shall apply: (i) all of Tenant‘s Work shall be sequenced in a manner reasonably approved by Landlord, (ii) Tenant shall take no actions or omissions that would in any way unreasonably delay Landlord in the completion of Landlord‘s Work or the completion of any other tenant improvements in the Building, and (iii) Tenant shall use mechanical, electrical, plumbing and fire sprinkler subcontractors who are listed on Landlord‘s list of pre-qualified subcontractors. 6. Insurance Required of Tenant and Tenant‘s Contractors . 6.1. Workers‘ Compensation and Liability Insurance . Tenant‘s general contractor and all subcontractors shall carry, at a minimum, the following coverages, with the following limits of liability: (a) Workers‘ Compensation . Workers‘ Compensation, as required by state law, plus Employer‘s Liability Insurance, with a limit of not less than five hundred thousand dollars ($500,000.00), and any other insurance required by any employee benefit statute or other similar statute. (b) Liability . Commercial General Liability Insurance (including Contractor‘s Protective Liability) with a minimum combined single limit of liability of not less than Five Million Dollars -50-

($5,000,000.00) provided that the insurance limits applicable to subcontractors shall be Two Million Dollars ($2,000,000.00). Such insurance shall provide for explosion, collapse and underground coverage. All such insurance shall provide coverage against any and all claims for bodily injury, including death resulting therefrom, and damage to or destruction of property of any kind whatsoever and to whomsoever belonging and arising from such contractor‘s operations, whether such operations are performed by Tenant‘s general contractor, subcontractors or any of their subcontractors, or by anyone directly or indirectly employed by any of them. 6.2. Tenant‘s Liability Insurance . At all times during the performance of Tenant‘s Work, Tenant shall obtain and maintain the liability insurance required to be maintained pursuant to the Lease. If required in order to provide such coverage, such policy shall be endorsed to insure against any loss or damage arising out of the performance of Tenant‘s Work. 6.3. Tenant‘s Builder‘s Risk Insurance . Tenant shall obtain an ―All Physical Loss‖ Builder‘s Risk Insurance policy covering Tenant‘s Work. The policy shall name Landlord and Tenant as named insureds. The amount of insurance to be provided shall be one hundred percent (100%) of the replacement cost of Tenant‘s Work. 6.4. Additional Insureds . Except as otherwise required by the express terms of this Agreement, all such insurance policies required under this Agreement shall include Landlord, Landlord‘s lenders and Landlord‘s agents as additional insureds, except Workers‘ Compensation Insurance, which shall contain an endorsement waiving all rights of subrogation against Landlord and its agents. All of Tenant‘s insurance in which Landlord is required to be an additional insured shall provide that such insurance coverage shall not be reduced or canceled except upon thirty (30) days‘ prior written notice to Landlord. Tenant shall provide Landlord with certificates of insurance prior to the commencement of Tenant‘s Work. Such certificates shall indicate that such insurance complies with the requirements of this Section 6 , including the requirement that such insurance coverage shall not be reduced or canceled except upon thirty (30) days‘ prior written notice to Landlord. 6.5. Bonds; Liens . Upon completion of Tenant‘s Work, Tenant shall deliver to Landlord unconditional lien waivers from Tenant‘s general contractor and all subcontractors and suppliers. Tenant shall keep the Premises free and clear of all claims and liens and shall indemnify, defend and protect Landlord against, and hold Landlord harmless from, any and all such claims and liens including, but not be limited to, attorneys‘ fees and costs. 7. As-Built Plans . Upon completion of Tenant‘s Work, Tenant shall submit to Landlord two (2) complete sets of as-built plans (one (1) of which shall be reproducible) and specifications describing all portions of Tenant‘s Work. 8. Inspection . Landlord, and its agents, architects and contractors, shall have the right, but not the obligation, to inspect the Tenant‘s Work at any reasonable time during the construction thereof provided such rights are exercised in a manner intended not to impede the performance of Tenant‘s Work. If Landlord discovers faulty construction or any deviation from the Tenant‘s Final Plans approved by Landlord, then Tenant, at its cost and expense, shall cause its contractors or subcontractors to make corrections promptly; provided, however, that neither the privilege herein granted to Landlord to make such inspections, nor the making of such inspection by Landlord to require conformance by Tenant to the terms and conditions of this Agreement, shall constitute a representation or warranty by Landlord that the Tenant‘s Work have been constructed in accordance with applicable law or any other standard. -51-

IN WITNESS WHEREOF, Landlord and Tenant have each caused their duly authorized representatives to execute this Agreement on their respective behalf as of the day and year first above written. LANDLORD : TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member /s/ Illegible SVP

By: Its:

CROSSMARKET, LLC A Nevada limited liability company By: Martin/Crossman, LLC A California limited liability company Its: managing member By: /s/ Michael A. Covarrubias Michael A. Covarrubias Managing Member TENANT : SALESFORCE.COM, INC., a Delaware Corporation By: /s/ Andrew Hyde Andrew Hyde Chief Financial Officer -52-

SCHEDULE 1 TO TENANT IMPROVEMENT AGREEMENT LANDLORD’S BASE BUILDING IMPROVEMENTS LANDLORD’S WORK STANDARD BASE BUILDING IMPROVEMENTS The following Base Building Improvements shall be completed by TMG/One Market LP, at its sole expense. BASE BUILDING: 1. A) Architectural Systems: Main Building Lobby: 1) 2) 3) B) Finished main entrance lobby consistent with other Class ―A‖ office buildings in downtown San Francisco; Main Building directory; Handicap accessible path of travel, fully compliant with current codes or as may be approved by appropriate governmental authorities.

Passenger and Service Elevators: 1) 2) 3) 4) Four (4) Mitsubishi elevators serving Floors 1 – 10 and Two (2) Mitsubishi elevator serving Floors 1 - 11. All cabs shall be complete with finished interiors consistent with other Class A buildings in San Francisco; One (1) freight elevator with extended cab height and 6,000 lb. capacity; Handicap accessible elevator controls and other code required items; Within each elevator lobbies: handicap accessible controls, signage, floor indicators and other code required items.

C)

Exit Stairs: Three (3) exit stairs and stair shafts per floor finished to Building Standard.

D)

Building Enclosure: 1) 2) Water tight roof and exterior walls; Completed exterior wall and window refurbishment.

E)

Security System: 1) 2) Base Building perimeter security system, consisting of card readers at all entrance doors, stairwell doors and service areas. Card readers at stairwell doors to be provided by Tenant. Provide adequate keys and /or access cards to the Tenant

F)

Storage Area: 1) Lighted and demised. -53-

2.

Structural System: A) B) Structural loading capacity for live and dead loads consistent with other comparable Class A Buildings in San Francisco; Seismic code compliance for the Base Building structural system.

3.

Mechanical System: A) B) C) D) E) Fully functioning Base Building cooling system capable of providing conditioned air, during normal working hours and under normal office occupancy loads of 20 cfm per person based on 133 sq. ft. per person; Central mechanical system with primary vertical distribution with stub outs to each floor for tenant connection and distribution; Central Direct Digital Controls (DDC) for Energy Management System for the Base. Building mechanical system. DDC links to VAV controls in the Leased Premises would be installed by Tenant but shall be excluded from the Base Building Work; Code required dampers and fire protection for all penetrations at rated, vertical shafts. Capability to provide 24-hour HVAC

4.

Plumbing System: A) B) C) Domestic tepid water service for Tenant‘s requirements; Adequate water pressure; Accessible wet stack for connections to Tenant‘s plumbing requirements.

5.

Fire Protection System: Base Fire Protection System with primary riser and all required components as approved by SF Building Department.

6.

Electrical System: Vertical bus and panel board riser supplying electrical power sufficient to operate an average of approximately Five (5) watts per rentable square foot for general electrical use by Tenant including lighting. Additional capacity is available for up to a total of 8.3 watts per floor, including HVAC, at Tenant‘s sole cost and expense. A) Emergency Life/ Safety Generator for elevator, lighting and smoke control systems; -54-

7.

Fire Life Safety System: A) System to include coverage in all required building areas: 1) 2) 3) 4) 5) 6) 7) Fireman‘s control panel Alarm system and pull stations Elevator recall Annunciation system Emergency lighting and strobes as required in public areas Smoke detection All other items as required by local codes or as may be approved by appropriate governmental authorities.

FLOORS 1. Clear Height Twelve foot six inches, slab to slab. 2. Passenger and Service Elevator Lobbies A) B) C) D) E) F) G) 3. Handicap accessible call buttons and audible signals; Handicap approved floor indicator lights; Handicap approved signage; Rated doors as required for smoke control; Pre-finished elevator doors and frames on lobby side; Fire life safety devices: Strobes, speakers and smoke detectors; Elevator lobby partitions: Gypsum board supplied as required and fire taped.

Toilet Rooms: A) B) C) Men‘s and Women‘s restrooms on each floor finished to building standard consistent with other Class A buildings in San Francisco and fully compliant with current ADA and Title 24 accessibility codes; Mechanical supply and exhaust system; Fire protection, life safety devices complete with strobes, speakers and smoke detectors.

1.

Base Building Partitions: A) Core Walls: Delivered with gypsum board, fire taped; -55-

B) C) 2.

Interior Side of Exterior Walls: Exposed brick in a consistent ―as-is‖ condition. Windows: Prepared and primed, new building standard hardware, reasonably smooth operation, new temporary inside guide stops pending installation of window trim moldings as part of Tenant‘s Work. No window casement is provided.

Floors:

Concrete floors for the Leased Premises, reasonably smooth, ready to accept carpet with minor preparation. All original construction devices (fasteners, nails, clips, etc.) shall be removed or cut off from concrete under slab areas. 3. Mechanical System: A) B) C) 4. Primary Variable Air Volume (VAV) cooling system with risers stubbed out to each floor of the Leased Premises, but exclusive of horizontal distribution (ductwork) and control equipment within the Leased Premises; Hot water stubbed out to each floor for tenant‘s perimeter heating needs supplied from a heat exchanger, in the basement, converting heat from steam. Condenser water loop stubbed out to each floor for Tenant‘s special requirements.

Plumbing System: A) B) Drinking fountain: minimum one per floor and handicap accessible; Wet columns with stub outs on each wing and within the east structural tube for Tenant‘s use.

5.

Fire Protection System: Base Fire Protection primary riser only as approved by SF Building Department.

6.

Electrical:

Separate telephone and electrical rooms on each floor of the Leased Premises, with a vertical chase between floors. The following equipment shall be provided: (A) (B) (C) One (1) 227/480v, 3p, 4w, 200 amp, 42 ckt, main lug only panel with 42-20 amp lp-circuit breakers. Panel is fed from one 200-amp bus tap switch, One (1) 112.5kva 480/120-208, 3p, 4w, transformer. The transformer is fed by a 200 amp fused bus tap switch with 125 amp fuses, The transformer feeds the following panel: one (1) 400 amp 120/208 volt 3p, 4w, panel with one (1) 350 amp circuit breaker and two (2) 200 amp sub feed circuit breakers and 36 - 20 amp lp circuit breakers. -56-

7.

Multi-Tenant Floors: A) B) For multi-tenant floors, Landlord will provide completely finished common areas, including, but not limited to, the elevator lobby and multi-tenant corridors, finished to Building Standard; Landlord will provide tenant demising partitions, which will be full height, slab-to-slab complying with prevailing building codes or as may be approved by appropriate governmental authorities. -57-

EXHIBIT D RULES AND REGULATIONS 1. 2. 3. No sidewalks, entrance or passages shall be obstructed or encumbered by Tenant or used for any purpose other than ingress and egress to and from the Premises. All curtains, blinds, shades, drapes, screens and other similar fixtures in the Premises must be of a uniform quality, type, design, color, material and general appearance approved by Landlord. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the outside or inside of the Premises except inside the Building, without the prior written consent of Landlord. In the event of the violation of the foregoing by Tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to Tenant. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at the expense of Tenant. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building without the prior written consent of Landlord. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. Tenant shall not make, or permit to be made, any unseemly or disturbing noises which disturb or interfere with the occupants of neighboring buildings or premises or those having business with them. Tenant shall not throw anything out of the doors, windows or skylights. Neither Tenant nor any of Tenant‘s agents, servants, employees, contractors, visitors or licensees shall at any time bring or keep upon the Premises any inflammable, combustible or explosive fluid, chemical or substance. Tenant must, upon the termination of the tenancy, restore to Landlord all keys of offices and toilet rooms, either furnished to, or otherwise procured by Tenant, and in the event of the loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof. Tenant shall not occupy or permit any portion of Premises to be occupied as an office that is (a) for a physician‘s or dentist‘s office, a dance or music studio, a school, a beauty salon or barber shop, the business of photographic or multilith or multigraph reproductions or offset printing (not precluding using any part of the Premises for photographic, multilith or multigraph reproductions or off-set printing solely in connection with Tenant‘s own business and/or activities), an outside news or cigar stand, or as a radio or television or recording studio, theater or exhibition-hall, for manufacturing, for the sale of merchandise, goods or property of any kind at auction, or for lodging, sleeping or for any immoral purpose including but not limited to any use (i) for a banking, trust company, depository, guarantee, or safe deposit business, (ii) as a savings bank, or as savings and loan association, or as a loan company, (iii) for the sale of travelers checks, money orders, drafts, foreign exchange or letters of credit or for the receipt of money for transmission, (iv) as a stock broker‘s or dealer‘s office or for the underwriting of securities, or (v) a -58-

4. 5. 6.

7. 8. 9.

government office or foreign embassy or consulate, or (vi) tourist or travel bureau, or (b) a use which would be prohibited by any other portion of this lease (including but not limited to any other Rules and Regulations) or in violation of law. Tenant shall not engage or pay any employees on the Premises, except those actually working for Tenant on the Premises nor shall Tenant advertise for laborers giving an address at the Premises. 10. Landlord shall have the right to prohibit any advertising or business conducted by Tenant referring to the Building which, in Landlord‘s reasonable opinion, tends to impair the reputation of the Building and upon notice from Landlord, Tenant shall refrain from or discontinue such advertising. If the Premises is or becomes infested with vermin as a result of the use or any misuse or neglect of demised premise by Tenant, its agents, servants, employees, contractors, visitors, or licensees, exterminated from time to time to the satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord. No air conditioning unit or system or other apparatus shall be installed or used by Tenant without the written consent of Landlord. Tenant, Tenant‘s agents, servants, employees, contractors, licensees or visitors shall not park any vehicles in any driveways, service entrances, or areas posted as No Parking. Tenant shall not use the name of The Landmark @ One Market for any purpose other than as the address of the business to be conducted by Tenant in the Premises, nor in its advertising, stationery or in any other manner without the prior written permission of Landlord. Landlord expressly reserves the right at any time to change said name without in any manner being liable to Tenant therefor. -59-

11.

12. 13. 14.

EXHIBIT E CONFIRMATION OF LEASE TERM LANDLORD: TENANT: LEASE DATE: June PREMISES:

, 2000 .

Pursuant to Section 3 of the above referenced Lease, the Commencement Date as defined in Section 3 shall be LANDLORD : TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member

By: Its: CROSSMARKET, LLC A Nevada limited liability company By: Martin/Crossman, LLC A California limited liability company Its: managing member By: Michael A. Covarrubias Managing Member TENANT : SALESFORCE.COM, INC., a Delaware Corporation By: Andrew Hyde Chief Financial Officer -60-

EXHIBIT F JANITORIAL SPECIFICATIONS BUILDING STANDARD JANITORIAL AND CLEANING SERVICES The following building standard janitorial and cleaning services shall be done by Landlord Monday through Friday. It is understood that no services of the character provided for in this Exhibit F shall be provided on Saturdays, Sundays or days recognized as Holidays pursuant to this Lease, unless specifically requested and the cost for such service shall be borne by tenant. This cleaning specification may be changed or altered by Landlord from time-to-time to facilitate conformity with the latest methods of maintenance and cleaning technology generally recognized as acceptable for first class office buildings in San Francisco, California, and Landlord reserves the right to alter the level of such services from time-to-time as determined by Landlord to be appropriate for a firstclass office building. If Tenant requires a higher level of services to suit its particular needs, the cost of such additional service shall be borne by Tenant. However, in no event will the level or quality of the services be diminished by such changes. Office Areas Empty all waste receptacles and remove waste paper and rubbish from the Premises nightly. Vacuum nightly all rugs and carpeted areas in the Premises, lobbies and corridors. Nightly damp wipe all glass furniture tops. Nightly remove finger marks and smudges from vertical surfaces, including doors, door frames, glass, around light switches, private entrance glass and partitions. Sweep all private stairways nightly, vacuum nightly if carpeted. Police all stairwells throughout the Project daily and keep in clean clear condition. Nightly damp mop spillage in non-carpeted office and public areas. Nightly feather dust all telephones, desks and other furniture tops that are free of files, computers or personal property. Washrooms (Including Private Washrooms) Mop, rinse and dry floors nightly. Scrub floors as necessary. Clean all mirrors, bright work and enameled surfaces nightly. Wash and disinfect all basins, urinals and bowls nightly using nonabrasive cleaners to remove stains and nightly clean undersides of rim of urinals and bowls. Wash both sides of all toilet seats with soap, water and disinfectant nightly. Nightly damp wipe and wash with disinfectant when necessary, partitions, tile walls and outside surface of dispensers and receptacles. Empty and sanitize receptacles and sanitary disposals nightly; thoroughly clean and wash at least once per week. Fill toilet tissue, soap, towel and sanitary napkin dispensers nightly. Clean flush meter, piping toilet seat hinges and other metal work nightly. Wash and polish walls, partitions, tile walls and enamel surfaces from trim to floor monthly. Vacuum all louvers, ventilating grilles and dust light fixtures weekly. -61-

NOTE: It is the intention to keep washrooms thoroughly cleaned and not to use a disinfectant to kill odor. If a disinfectant is necessary, an odorless product will be used. Floors Ceramic tile, marble and terrazzo floors to be swept nightly and washed, scrubbed and buffed as needed. Vinyl, rubber or other composition floors and bases to be swept nightly using dust down preparation; such floors in public areas on multi-tenancy floors to be waxed and buffed monthly. Tile floors in office areas will be waxed and buffed monthly. Floors re-waxed and old wax removed as necessary. Carpeted areas and rugs to be vacuum cleaned nightly. All floor areas to be spot cleaned nightly. Glass Clean all perimeter glass every six (6) months outside and every six (6) months inside. Any additional cleaning to be at Tenant‘s expense. Clean glass lobby and tenant lobby entrance doors and adjacent glass panels nightly. Clean partition glass and interior glass doors quarterly. Clean exterior of ground floor glass as needed. High Dusting (Quarterly) Dust and wipe clean closet shelving when empty and carpet sweep and dry mop floors in closets if such are empty. Dust clean all vertical surfaces such as walls, partitions, doors, door bucks and other surfaces above shoulder height. Damp dust ceiling air-conditioning diffusers, wall grilles, registers and other ventilating louvers. Dust the exterior surfaces of lighting fixtures, including glass and plastic enclosures and aluminum louvers. Day Service At least once, but not more than twice during the day, check men‘s washrooms for toilet tissue replacement. At least once, but not more than twice during the day, check women‘s washrooms for toilet tissue and sanitary napkin replacement. Supply toilet tissue, soup and towels in men‘s and women‘s washrooms and sanitary napkins in women‘s washrooms. As needed, vacuuming of elevator cabs will be performed. General Wipe all interior metal window frames, mullions, and other unpainted interior metal surfaces of the perimeter walls of the building each time the interior of the windows is washed. Keep slop sink rooms in a clean, neat and orderly condition at all times. Wipe clean all metal hardware fixtures nightly and polish bright work as necessary. Dust and/or wash all directory boards as required and remove fingerprints and smudges nightly. Maintain building lobby, corridors and other public areas in a clean condition. -62-

EXHIBIT F-1 BUILDING HOLIDAYS Below is a list of current Holidays on which the Building is officially closed. However, tenants are permitted into the Building at any time with a proper Building Access Card. • • • • • • • • New Year‘s Day Martin Luther King Day President‘s Day Memorial Day Independence Day Labor Day Thanksgiving Day and the Day After Thanksgiving Christmas Day -63-

EXHIBIT F-2 DESCRIPTION OF SECURITY SERVICES Landlord will provide on-site monitoring of the access and Fire Life Safety System to the Building twenty-four (24) hours per day seven (7) days per week. On-site security personnel will respond to emergencies and conduct daily security and Fire Life Safety Patrols within the Building. Security personnel shall be on duty 24 hours/day seven days/week during the Term. Landlord will install and maintain throughout the public access areas a card access system that will allow Tenant and Landlord the ability to limit after hour access to the Building, the elevators and tenant floors. -64-

June 23, 2000 VIA HAND DELIVERY Salesforce.com, Inc. 101 Spear Street #203, San Francisco, CA 94105 Attn.: Andrew Hyde Re: One Market

Dear Andy: I am writing this letter in connection with that certain lease (the ―Lease‖) dated June 23, 2000 between Salesforce.com, Inc. (―Tenant‖) and TMG/One Market L.P. and Crossmarket, LLC (collectively, ―Landlord‖). Terms defined in the Lease shall have the same meanings when used in this letter. Pursuant to Section 2.4 of the Lease, Landlord and Tenant have certain specific rights to terminate the Lease with respect to the Fourth Floor Portion if Landlord fails to obtain Master Landlord‘s consent to the Annex Lease. Sections 2.4 and 2.5 of the Lease also contain certain provisions that describe formulas for the reduction of the Base Rent and Security Deposit upon the occurrence of certain events. Landlord and Tenant hereby agree that if the Lease is terminated with respect to the Fourth Floor Portion pursuant to Section 2.4, then the rental adjustment provisions in Sections 2.4 and 2.5 of the Lease shall be adjusted to reflect the following: (i) the Preliminary Base Rent for any portion of the Premises located on the First Floor Portion shall be $54.00/square foot, (ii) the Initial Base Rent for any portion of the Premises located on the First Floor Portion shall be $56.00/square foot, (iii) the Middle Base Rent for any portion of the Premises located on the First Floor Portion shall be $59.00/square foot, and (iv) the Final Base Rent for any portion of the Premises located on the First Floor Portion shall be $60.00/square foot. In addition, the Security Deposit shall be reduced as set forth in the Lease utilizing the revised rent structure for the First Floor Portion. Landlord and Tenant hereby agree that this letter shall not modify the Lease in any way with respect to a termination of the Lease as to the Fourth Floor Portion pursuant to Section 2.2 of the Lease. Landlord and Tenant also hereby agree that this letter shall not modify in any way the rent adjustment formulas set forth in Sections 2.2 or 2.6 of the Lease.

This letter shall automatically terminate on the date that Landlord obtains Master Landlord‘s approval of the Annex Lease, so long as such approval is obtained before this Lease is terminated with respect to the Fourth Floor Portion. Upon any such termination of this letter, the following shall be applicable: (i) this letter shall not constitute an amendment of the Lease, (ii) the terms and provisions of this letter shall be null and void, and (iii) neither Landlord nor Tenant shall refer to this letter as an amendment or modification of the Lease. Landlord shall disclose the terms of this letter to Union Bank before Union Bank executes the SNDA. Failure of Union Bank to consent to the terms of this letter shall be grounds for Tenant to terminate the Lease in accordance with the first sentence of Section 2.4. If the foregoing is acceptable to you, please execute the enclosed copy of this letter. Very truly yours, TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member By: /s/ [ILLEGIBLE] Its: SVP CROSSMARKET, LLC A Nevada limited liability company By: Martin/Crossman, LLC A California limited liability company Its: managing member By: /s/ Michael A. Covarrubias Michael A. Covarrubias Managing Member

The foregoing is hereby agree to And accepted as of June 23, 2000. SALESFORCE.COM, INC., a Delaware Corporation By: /s/ Andrew Hyde Andrew Hyde Chief Financial Officer

FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE (―Amendment‖) is entered into this 13th day of November, 2000, by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (―Landlord‖) and SALESFORCE.COM, INC., a Delaware corporation (―Tenant‖), in the following factual context. RECITALS This Amendment is based upon the following facts, understandings and intentions of the parties. A. Tenant and Landlord entered into that certain Lease dated as of June 23, 2000 (the ―Lease‖) of certain premises located in the building commonly known as The Landmark @ One Market, California, more particularly described in the Lease. CROSSMARKET, LLC, a Nevada limited liability company has conveyed its entire interest in the Property to Landlord. B. The parties acknowledge that the Office Permits Notice, as defined in the Lease, has been delivered and accepted. The parties also acknowledge that neither Landlord nor Tenant has any continuing right to terminate the Lease pursuant to the provisions of Section 2.4 of the Lease. C. Landlord and Tenant now desire to amend the Lease to delete the Mezzanine and to modify certain other provisions of the Lease. NOW, therefore, in consideration of the mutual covenants and promises set forth in this Amendment and other valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: 1. Definitions . Terms defined in the Lease shall have the same meanings when used in this Amendment. 2. Description of Premises . The description of the ―Premises‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: 54,022 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,513 square feet of Rentable Area, the ―Third Floor Portion‖), on the Cityside portion of the Fourth (4 ) Floor of the Building (13,562 square feet of Rentable Area, the ―Fourth Floor Portion‖) and on the First (1st) Floor of the Building (11,947 square feet of Rentable Area, the ―First Floor Portion‖), as shown on the Floor Plans attached as Exhibit A . The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A , located in the basement of the Building containing approximately 3,500 square feet (the ―Storage Space‖). The entire Building contains 356,021 square feet of Rentable Area.
th

3. Base Rent . The description of the ―Base Rent‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place:
Period of Term Amount

Initial Commencement Date to Secondary Commencement Date -1-

$151,387.93/month (―Start Rent‖)

Secondary Commencement Date to Commencement Date Commencement Date to Second anniversary of Commencement Date Second anniversary of Commencement Date to Fourth anniversary of Commencement Date Fourth anniversary of Commencement Date to Seventh anniversary of Commencement Date Seventh anniversary of Commencement Date to End of Initial Term Extended Term:

$229,306.60/month

$3,797,086.00/year (―Preliminary Base Rent‖)

$3,946,086.00/year (―Initial Base Rent‖)

$4,100,591.20/year (―Middle Base Rent‖)

$4,182,962.20/year (―Final Base Rent‖) The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease.

4. Tenant‘s Share . The description of the ―Tenant‘s Percentage Share‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: ―15.179% (Excludes Storage Space)‖. 5. Commencement Date . The definition of ―Commencement Date‖ and ―Initial Commencement Date‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: The Commencement Date shall be one hundred five (105) days after the Possession Date. The term ―Initial Commencement Date‖ shall mean October 28, 2000. The term ―Secondary Commencement Date‖ shall mean November 27, 2000. 6. Exhibit A . The Plan of the Fourth Floor Portion included in Exhibit A attached to the Lease is hereby deleted in its entirety and the plan attached to this Amendment as Exhibit A is hereby substituted in its place. 7. Rentable Area . The definition of Rentable Area set forth in the Lease is hereby amended to provide that the number ―15,947‖ set forth in such definition is hereby changed to ―11,947‖. 8. Section 2.2 . The third sentence of Section 2.2 of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: The Deletion Amendment shall provide the following: (i) the definition of the Premises shall -2-

be modified to exclude the Fourth Floor Portion, (ii) Tenant‘s Percentage Share shall be decreased to reflect the deletion of the Fourth Floor Portion from the Premises, (iii) the Initial Base Rent shall be reduced by $979,722.00 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $759,472.00), (iv) the Middle Base Rent shall be reduced by $1,001,512.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $800,158.00), (v) the Final Base Rent shall be reduced by $1,023,886.20 (provided, however, that if the provisions of Section 2.6 previously resulted in a reduction of Base Rent, then the Initial Base Rent shall only be reduced by $813,720.00), and (vi) the then current amount of the Security Deposit shall be proportionately reduced to reflect the reduction in the aggregate Base Rent under this Lease and the Annex Lease in proportion to the then current aggregate Base Rent under this Lease and the Annex Lease. 9. Premises . The first paragraph of Section 2.5 of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: Use Change . Landlord and Tenant acknowledge that the First Floor Portion may not currently be used for office purposes. Landlord shall use reasonable efforts to obtain all approvals necessary to permit the use of the First Floor Portion for office purposes, at Landlord‘s sole cost and expense (the ―Office Permits‖). Landlord shall promptly notify Tenant upon its receipt of all Office Permits (―Office Permits Notice‖). The parties acknowledge that the Office Permits Notice was properly and timely delivered. 10. Mezzanine and Office Permits . Sections 2.5.1 and 2.5.2 of the Lease are hereby deleted in their entirety. The following clause in Section 7.6.2 of the Lease is hereby deleted in its entirety: ―provided further, however, that Landlord shall be responsible for compliance with the requirements of the ADA with respect to the initial construction of an elevator and stairways in the First Floor Portion of the Premises as part of Landlord‘s Work‖. The last sentence of Section 2.2.3 of the Work Letter is hereby deleted in its entirety. The second sentence of Section 5.1.2 of the Work Letter is hereby deleted in its entirety. 11. Construction . The first sentence of Section 1.2 of the Work Letter is hereby deleted in its entirety and the following is hereby substituted in its place: In the manner provided in this Section 1.2 , Landlord shall pay to Tenant a ―Construction Allowance‖ equal to Three Million Four Hundred Thirty-Five Thousand Eight Hundred Twenty-Five Dollars ($3,435,825.00). 12. Representations and Warranties of Tenant . As a material inducement to Landlord to enter into this Amendment, Tenant represents and warrants to Landlord that, as of the date of this Amendment: 12.1. No Defaults . The Lease is in full force and effect. There are no defaults by Landlord or Tenant under the Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord or Tenant under the Lease. Tenant has no defenses or rights of offset under the Lease. 12.2. Authority . Tenant has full right, power and authority to enter into this Amendment, and has obtained all necessary consents and resolutions from its members required under the documents governing its affairs in order to consummate this transaction, and the persons executing this Amendment have been duly authorized to do so. The Amendment and the Lease are binding obligations of Tenant, enforceable in accordance with their terms. -3-

12.3 No Assignments. Tenant is the sole lawful tenant under the Lease, and Tenant has not sublet, assigned or otherwise transferred any of the right, title or interest of Tenant under the Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Lease or the Premises, or the right to occupy or use all or any part of the Premises. 13. Representations and Warranties of Landlord . As a material inducement to Tenant to enter into this Amendment, Landlord represents and warrants to Tenant that, as of the date of this Amendment: 13.1. No Defaults . The Lease is in full force and effect. There are no defaults by Landlord or Tenant under the Lease, and no circumstance has occurred which, but for the expiration of an applicable grace period, would constitute an event of default by Landlord or Tenant under the Lease. Tenant has no defenses or rights of offset under the Lease. 13.2. Authority . Landlord has full right, power and authority to enter into this Amendment, and has obtained all necessary consents and resolutions from its members required under the documents governing its affairs in order to consummate this transaction, and the persons executing this Amendment have been duly authorized to do so. The Amendment and the Lease are binding obligations of Landlord, enforceable in accordance with their terms. 14. Amendment to Lease . This Amendment is and shall constitute an amendment to the Lease and shall be effective as of the date of this Amendment. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. 15. Construction . Section 1.1 of the Work Letter is hereby amended to delete the following language from the last sentence of Section 1.1: ―, and shall utilize the same exterior wall finishes and mechanical and lighting specifications as Scient.‖ 16. Letter of Credit . Landlord hereby agrees that Landlord shall pay any actual transfer fee payable by Tenant to its lender arising out of any required assignment of the L-C as a result of the financing of the Building with Credit Suisse First Boston Mortgage Capital LLC. IN WITNESS WHEREOF, the parties hereto have executed this Amendment the day and year first above written. LANDLORD: TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member -4-

By: Its: TENANT:

/s/ [ILLEGIBLE] SVP

SALESFORCE.COM, INC., a Delaware Corporation By: /s/ Andrew Hyde Andrew Hyde Chief Financial Officer -5-

EXHIBIT A FLOOR PLANS -6-

Exhibit A Page 1 of 5 1 Amendment
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[GRAPHIC APPEARS HERE]

Exhibit A Page 2 of 5 1 Amendment
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[GRAPHIC APPEARS HERE]

Exhibit A Page 3 of 5 1 Amendment
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[GRAPHIC APPEARS HERE]

Exhibit A STORAGE SPACE Page 4 of 5 1 Amendment
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[GRAPHIC APPEARS HERE]

Exhibit A Page 5 of 5 1 Amendment
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[GRAPHIC APPEARS HERE]

CONFIRMATION OF LEASE TERM LANDLORD: TENANT: LEASE DATE: PREMISES: TMG/ONE MARKET, L.P., A California limited partnership Salesforce.com A Delaware corporation June 23, 2000 54,092 square feet of Rentable Area located on the Bayside portion of the 3 Floor of the Building (28,583 square feet of Rentable Area, the ―Third Floor Portion‖), on the Cityside portion of the Fourth (4 ) Floor of the Building (13,562 square feet of Rentable Area, the ―Fourth Floor Portion‖) and on the First (1 ) Floor of the Building (11,947 square feet of Rentable Area, the ―First Floor Portion‖). The Premises shall also include storage space located in the basement of the Building containing approximately 3,500 square feet (the ―Storage Space‖).
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Pursuant to Section 5 of the First Amendment to Lease dated November 13, 2000, the Commencement Date as defined in Section 5 shall be one hundred five 105 days after the Possession Date. The Possession date is January 15, 2001. The Commencement Date shall be May 1, 2001. LANDLORD: TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited Liability Company It‘s General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member By: /s/ [ILLEGIBLE] Its: SVP TENANT: Salesforce.com A Delaware corporation By: Its: By: Its: /s/ [ILLEGIBLE] CFO

SECOND AMENDMENT TO LEASE THIS SECOND AMENDMENT TO LEASE (―Amendment‖) is entered into this 17 day of April, 2001, by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (―Landlord‖) and SALESFORCE.COM, INC., a Delaware corporation (―Tenant‖), in the following factual context.
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RECITALS This Amendment is based upon the following facts, understandings and intentions of the parties. A. Tenant and Landlord entered into that certain Lease dated as of June 23, 2000, as amended by that certain First Amendment to Lease dated November 13, 2000 (collectively, the ―Lease‖) of certain premises located in the building commonly known as The Landmark @ One Market, California, more particularly described in the Lease. CROSSMARKET, LLC, a Nevada limited liability company has conveyed its entire interest in the Property to Landlord. B. Landlord and Tenant now desire to amend the Lease to reflect the increase in the Rentable Area of the Premises on the third floor of the Building. The Construction Allowance shall automatically be adjusted to reflect the increase in the Rentable Area of the Premises. NOW, therefore, in consideration of the mutual covenants and promises set forth in this Amendment and other valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: 1. Definitions . Terms defined in the Lease shall have the same meanings when used in this Amendment. 2. Description of Premises . The description of the ―Premises‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: 54,092 square feet of Rentable Area located on the Bayside portion of the 3rd Floor of the Building (28,583 square feet of Rentable Area, the ―Third Floor Portion‖), on the Cityside portion of the Fourth (4 ) Floor of the Building (13,562 square feet of Rentable Area, the ―Fourth Floor Portion‖) and on the First (1st) Floor of the Building (11,947 square feet of Rentable Area, the ―First Floor Portion‖), as shown on the Floor Plans attached as Exhibit A . The Premises shall also include the storage area outlined on the Floor Plan attached as Exhibit A , located in the basement of the Building containing approximately 3,500 square feet (the ―Storage Space‖). The entire Building contains 356,021 square feet of Rentable Area.
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3. Tenant‘s Share . The description of the ―Tenant‘s Percentage Share‖ set forth in the Basic Lease Information of the Lease is hereby deleted in its entirety and the following is hereby substituted in its place: ―15.19% (Excludes Storage Space)‖. 4. Rent . In connection with this Amendment, notwithstanding any provision of the Lease to the contrary, the Base Rent payable by Tenant as set forth in the Lease shall be increased in the following amounts during the following periods: (i) during the period from the Commencement Date until the fourth anniversary of the Commencement Date, $398.80/month, (ii) during the period from the fourth anniversary of the Commencement Date until the eighth anniversary of the Commencement Date, $416.92/month, and (iii) during the remainder of the Initial Term, $435.05/month. -1-

5. Exhibit A . Exhibit A attached to the Lease is hereby modified to substitute the 3 Floor plan attached to this Amendment as Exhibit A in place of the 3 Floor plan attached to the Lease.
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6. Amendment to Lease . This Amendment is and shall constitute an amendment to the Lease and shall be effective as of the date of this Amendment. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. This Amendment shall not be effective until it has been executed by Landlord‘s lender, as provided below. IN WITNESS WHEREOF, the parties hereto have executed this Amendment the day and year first above written. LANDLORD: TMG/ONE MARKET, L.P., A Delaware limited partnership By: Martin/One Market LLC, A California limited liability company Its General Partner By: The Martin Group of Companies, Inc., A California corporation Its Managing Member /s/ [ILLEGIBLE] SVP

By: Its: TENANT:

SALESFORCE.COM, INC., a Delaware Corporation By: /s/ Andrew Hyde Andrew Hyde Chief Financial Officer The foregoing is hereby approved This 17 day of April, 2001
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Credit Suisse First Boston Mortgage Capital LLC, a Delaware limited liability company By: Its: -2-

[GRAPHIC APPEARS HERE]

THIRD AMENDMENT TO OFFICE LEASE THIS THIRD AMENDMENT TO OFFICE LEASE (the ―Third Amendment to Lease‖) is made and entered into as of August 27, 2003 (the ―Effective Date‖) by and between TMG/ONE MARKET, L.P., a Delaware limited partnership (―Landlord‖) and SALESFORCE.COM, INC., a Delaware corporation (―Tenant‖). RECITALS A. Landlord and Tenant entered into that certain Lease dated as of June 23, 2000 (the ―Original Lease‖), as amended by that certain First Amendment to Lease, dated November 13, 2000 (the ―First Amendment to Lease‖) and that certain Second Amendment to Lease, dated April 17, 2001 (the ―Second Amendment to Lease‖) covering certain premises located in the building commonly known as The Landmark @ One Market, San Francisco, California, as more particularly described in the Lease (as defined below). CROSSMARKET, LLC, a Nevada limited liability company, which was a party to the Original Lease has conveyed its entire interest in the Property and the Lease to Landlord. B. The Original Lease, as amended by the First Amendment to Lease and the Second Amendment to Lease, is referred to herein as the ―Lease‖. Terms defined in the Lease shall have the same meanings when used in this Third Amendment to Lease. C. Landlord and Tenant now desire to amend the Lease to eliminate a portion of the first floor space that has been a part of the Premises (the ―Surrendered First Floor Space‖) from the description of the Premises. The Surrendered First Floor Space contains 7,191 square feet of Rentable Area on the ground floor of the Building and is more particularly described in Exhibit A-l attached hereto. NOW, THEREFORE, for good and valuable consideration, including the mutual covenants contained in the Lease and in this Third Amendment to Lease, Landlord and Tenant hereby agree as follows: 1. Surrender of First Floor Portion. As of the Effective Date, the Surrendered First Floor Space shall be deemed surrendered by Tenant to Landlord, the Lease shall be terminated with respect to the Surrendered First Floor Space, and the ―Premises‖ as defined in the Lease shall be deemed to exclude the Surrendered First Floor Space. Landlord acknowledges that the Surrendered First Floor Space has been delivered to Landlord by Tenant as of the Effective Date in its ―as is‖ condition and is accepted by Landlord in such condition, notwithstanding anything in the Lease to the contrary. 2. Revised Description of the Premises; Replacement of Exhibit A to the Lease. As of the Effective Date, Exhibit A to the Lease is hereby deleted and replaced with the 5 pages of floor plans attached as Exhibit A-2 to this Third Amendment to Lease.

3. Basic Lease Information . The Basic Lease Information that is a part of the Lease is hereby deleted and replaced with the Amended and Restated Basic Lease Information attached as Exhibit B to this Third Amendment to Lease (the ―Amended and Restated BLI‖). Among other things, the Amended and Restated BLI confirms that, as of the Effective Date, (a) the Premises shall contain a total of 46,901 square feet of Rentable Area in the Building, of which only 4,756 square feet of Rentable Area shall comprise the First Floor Portion; (b) Base Rent shall be as set forth in Schedule 1 to the Amended and Restated BLI, and (c) Tenant‘s Percentage Share shall remain at 15.19% (excluding storage space) through February 14, 2004 and, as of February 15, 2004, shall be reduced to 13.174% (excluding storage space). 4. Costs for Releasing Surrendered First Floor Space . (a) Section 1.2 of the Work Letter attached to the Lease provides for a Construction Allowance (the ―Allowance‖) payable by Landlord on terms and conditions set forth therein. The balance of such Allowance, as of the date of this Third Amendment to Lease, is Seven Hundred Fifty-Eight Thousand Eight Hundred Fifty-One and 61/100 Dollars ($758,851.61). In consideration of Landlord‘s willingness to enter into this Third Amendment to Lease and Landlord‘s releasing of a portion of the Surrendered First Floor Space (the ―BofA Space‖) to Bank of America, N.A., Tenant acknowledges and agrees that the Allowance is hereby reduced by Four Hundred Fifty Six Thousand Seven Hundred Fifty-Nine and 18/100s Dollars ($456,759.18), which amount shall be used by Landlord for costs associated with the releasing of the BofA Space. Accordingly, Landlord and Tenant acknowledge that the remaining Allowance is now Three Hundred Two Thousand Ninety and 43/100 Dollars ($302,092.43). (b) If, any funds remain in the Allowance following (i) the releasing and improvement of the remainder of the First Floor Portion of the Premises for occupancy by third party tenants (or the occupancy by Tenant of such space and the improvement of such space for Tenant‘s use), and (ii) the payment of all costs associated with such releasing and/or occupancy and improvement, including legal, architectural, engineering, hard and soft constructions costs, tenant improvement allowances, leasing commissions and other similar and customary costs, then such remaining funds shall be credited to Tenant‘s Rent obligations under the Lease. 5. Additional Amendments to Lease. The definition ―Scient Lease‖, Sections 2.2, and 2.4 of the Lease are hereby deleted in their entirety. 6. Tenant‘s Signs . Section 32 of the Lease is hereby amended and restated in its entirety as follows: 32. Tenant‘s Signs. Without Landlord‘s prior written consent, which Landlord may withhold in its sole discretion, Tenant shall not place on the Premises or on the Building any exterior signs nor any interior signs that are visible from the exterior of the Premises or the Building. Notwithstanding the foregoing, Tenant shall be permitted to maintain its signage existing as of the Effective Date of the Third Amendment to Lease (or signage that Landlord determines, in its sole discretion, is substantially similar thereto), on all exterior windows of the First Floor Portion of the Premises as it exists after the Effective Date of the Third Amendment to Lease for so long as such space is 2

unoccupied. Tenant shall pay all costs and expenses relating to any such signs approved by Landlord or for which no approval is required, including, without limitation, the cost of the installation and maintenance of such signs. On the date of expiration or earlier termination of this Lease (or, if applicable, the elimination of the applicable portion of the Ground Floor Portion from the Premises), Tenant, at its sole cost and expense, shall remove all signs and repair any and all damage caused by the installation or removal of such sign. 7. Access for Landlord‘s Contractor; Landlord‘s Indemnity . In connection with Landlord‘s construction of improvements in the Surrendered First Floor Space and until such time as such improvements are substantially completed, (a) Tenant agrees that Landlord‘s contractors and subcontractors shall have access to the remaining First Floor Portion of the Premises as reasonably necessary to perform such contractors‘ and subcontractors‘ work in the Surrendered First Floor Space, and (b) Landlord shall indemnify, defend, protect and hold Tenant harmless of and from loss, liens, liability, claims, causes of action, damage, injury, cost or expense arising out of or in connection with injury to or death of persons or damage to property occurring or resulting directly or indirectly from acts, neglect or omissions of Landlord‘s contractors or subcontractors in or about the remaining First Floor Portion of Premises, except to the extent such injury, death or damage is due to Tenant‘s gross negligence or willful misconduct. 8. No Further Amendment . Except as amended by this Third Amendment to Lease, the Lease shall continue in full force and effect and in accordance with all of its terms. This Third Amendment to Lease and the Lease shall be construed as a whole in order to effectuate the intent of the parties to amend the Lease in the manner specified in this Third Amendment to Lease. All provisions of the Lease affected by this Third Amendment to Lease shall be deemed amended regardless of whether so specified in this Third Amendment to Lease. Subject to the foregoing, if any provision of the Lease conflicts, with the terms of this Third Amendment to Lease, then the provisions of this Third Amendment to Lease shall control. 9. Governing Law . This Third Amendment to Lease shall be construed in accordance with and governed by the laws of the State of California. 10. Partial Invalidity . If any one or more of the provisions contained in this Third Amendment to Lease shall be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not be affected in any way thereby. 11. Effective Date of Amendment . The effective date of this Third Amendment to Lease and each and every provision herein is the Effective Date first written above unless otherwise stated herein. 12. Representations and Warranties . (a) As a material inducement to Landlord to enter into this Third Amendment to Lease, Tenant represents and warrants to Landlord that, as of the date of this Third Amendment to Lease: (i) The Lease is in full force and effect. 3

(ii) Tenant is the sole lawful tenant under the Lease, and Tenant has not sublet, assigned, conveyed, encumbered or otherwise transferred any of the right, title or interest of Tenant under the Lease or arising from its use or occupancy of the Premises, and no other person, partnership, corporation or other entity has any right, title or interest in the Lease or the Premises, or the right to occupy or use all or any part of the Premises. (iii) Tenant is a duly formed and existing entity qualified to do business in the State of California. Tenant has full right and authority to execute and deliver this Third Amendment to Lease and each person signing on behalf of Tenant is authorized to do so and no consent of any party is required on behalf of Tenant for this Third Amendment to Lease to be in full force and effect. (b) As a material inducement to Tenant to enter into this Third Amendment to Lease, Landlord represents and warrants to Tenant that, as of the date of this Third Amendment to Lease: Landlord is a duly formed and existing entity qualified to do business in the State of California; Landlord has full right and authority to execute and deliver this Third Amendment to Lease and each person signing on behalf of Landlord is authorized to do so and no consent of any party is required on behalf of Landlord for this Third Amendment to Lease to be in full force and effect, excluding the lender holding a security interest in the Building. [SIGNATURES ON NEXT PAGE] 4

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Lease as of the date first written above. LANDLORD: TMG/ONE MARKET, L.P., a Delaware limited partnership By: MARTIN/ONE MARKET, LLC, a California limited liability company Its: General Partner By: TMG ONE MARKET MANAGER, INC., a California corporation Its: Managing Member By: Name: Its: TENANT: SALESFORCE.COM, INC., a Delaware corporation /s/ David Schellhase By: Its: David Schellhase VP and General Counsel 5 /s/ Cathy Greenwold Cathy Greenwold EVP

EXHIBIT A-1 Description of Surrendered First Floor Space (1 page-to be attached) 6

EXHIBIT A-2 Description of Premises as of Effective Date of Third Amendment to Lease (5 pages following this cover sheet) 7

EXHIBIT B Amended and Restated Basic Lease Information OFFICE LEASE THE LANDMARK @ ONE MARKET San Francisco, California BASIC LEASE INFORMATION Lease Date: Landlord: Tenant: Premises: June 23, 2000 TMG/ONE MARKET, L.P., a Delaware limited partnership SALESFORCE.COM, INC., a Delaware corporation 46,901 square feet of Rentable Area located in the Building, as follows: 28,583 square feet of Rentable Area on the Bayside portion of the 3 floor of the Building (the ―Third Floor Portion‖); 13,562 square feet of Rentable Area on the Cityside portion of the Fourth (4 ) Floor of the Building (the ―Fourth Floor Portion‖); 4,756 square feet of Rentable Area on the First (1st) Floor of the Building (the ―First Floor Portion‖), as shown on the first three (3) pages of the five (5) pages of Floor Plans attached as Exhibit A-2 to the Third Amendment to Lease (the ―Floor Plans‖), which five (5) pages, as of the Effective Date of the Third Amendment, constitute Exhibit A to the Lease. The Premises shall also include the storage area outlined on the last two pages of the Floor Plans located in the basement of the Building containing approximately 3,500 square feet (the ―Storage Space‖). The entire Building contains 360,021 square feet of Rentable Area.
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Term:

Commencing on the Initial Possession Date (as defined in Section 5.1 of Exhibit C attached to this Lease) and continuing until May 1, 2011, which is ten (10) years from the Commencement Date (the ―Initial Term‖), and one (1) option to extend the Term for a single period of five (5) years thereafter (the ―Extended Term‖). June 23, 2000 January 15, 2001 May 1, 2001 The date that is ten (10) years after the Commencement Date, or the last day of the Extended Term, if the Extended Term is properly exercised. 8

Anticipated Possession Date: Possession Date: Commencement Date: Expiration Date:

Base Rent:

Initial Term : Commencing on the Effective Date of the Third Amendment to Lease and continuing through the Initial Term, the Base Rent shall be as set forth in Schedule 1 to this Third Amendment to Lease. Extended Term : The fair market rent for the Premises (including Storage Space) as of the first day of the Extended Term, as determined in accordance with Section 3.2 of the Lease

Base Year: Tenant‘s Percentage Share: Permitted Use: Security Deposit: Building Directory Spaces: Tenant‘s Address:

The 2000 calendar year. Until February 14, 2004: 15.19% (excluding Storage Space); From and after February 15, 2004: 13.174% (excluding Storage Space) General office use; and retail use with respect to the First Floor Portion only. $3,500,000.00 See Section 33.13 below Salesforce.com, Inc. The Landmark @ One Market San Francisco, CA 94105 c/o TMG Partners 100 Bush Street, Suite 2600 San Francisco, CA 94104 9

Landlord‘s Address:

Brokers: Landlord‘s Broker: Tenant‘s Broker: Exhibits and Addenda: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit F-1: Exhibit F-2: Floor Plan(s) of Premises (five pages) Legal Description of Land Work Letter Rules and Regulations of the Building Confirmation of Lease Term Janitorial Specifications Holidays Security CB Richard Ellis, Inc. BT Commercial Real Estate

The Basic Lease Information is incorporated into and made a part of the Lease. Each reference in the Lease to any Basic Lease Information shall mean the applicable information set forth above. In the event of any conflict between an item in the Basic Lease Information and the Lease, the Lease shall control. 10

Schedule 1 to the Amended Restated Basic Lease Information September 1 2003 October 1 2003 November 1 2003 December 1 2003 January 1 2004 February 1 2004 March 1 2004 April 1 2004 Third Anniversary May 1 2004 - April 30, 2005 Fourth Anniversary May 1 2005 - April 30, 2006 Fifth Anniversary May 1 2006 - April 30, 2007 Sixth Anniversary May 1 2007 - April 30, 2008 Seventh Anniversary May 1 2008 - April 30, 2009 Eighth Anniversary May 1 2009 - April 30, 2010 Ninth Anniversary May 1 2010 - April 30, 2011 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 329,239.30 329,239.30 329,239.30 329,239.30 329,239.30 315,846.32 302,453.35 302,453.35 3,629,440.14 3,784,162.78 3,784,162.78 3,784,162.78 3,858,059.75 3,826,075.97 3,826,075.97 per year per year per year per year per year per year per year (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Initial Base Rent‖) (―Middle Base Rent‖) (―Middle Base Rent‖) (―Middle Base Rent‖) (―Final Base Rent‖) (―Final Base Rent‖) (―Final Base Rent‖)

EXHIBIT 10.7 SUBLEASE AGREEMENT THIS SUBLEASE AGREEMENT (―Sublease‖) is made and entered into by Sublandlord and Subtenant as of August 5, 2003. For valuable consideration, the receipt and adequacy of which are hereby acknowledged, Sublandlord and Subtenant agree as follows: ARTICLE 1 — BASIC SUBLEASE INFORMATION 1.1 Definitions . In addition to the terms that are defined elsewhere in this Sublease, the following defined terms are used in this Sublease: (a) (b) Sublandlord: Vignette Corporation, a Delaware corporation. Sublandlord‘s Address for Notices and Rent Payments: 1601 S. MoPac Expressway Austin, TX 78746 Attn: Real Estate Manager All Rent and any other amounts owed by Subtenant to Sublandlord under this Sublease shall be sent to the following address: (c) (d) Subtenant: Salesforce.com, a Delaware corporation. Subtenant‘s Address: Landmark @ One Market One Market Street, 3rd Floor San Francisco, CA 94105-5106 Project: The land and building located at Landmark @ One Market, One Market Street, San Francisco, California. The term ―Project expressly excludes the ―Annex‖ (as defined in the Master Lease). Premises: The premises leased by Sublandlord pursuant to the Master Lease (defined below), containing 74,716 square feet of space on the 7 and 8 floors of the Building.
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(e) (f) (g) (h) (i)

Building: The Building located on the Project. Subleased Premises. The entire 7 floor of the Building containing 37,488 rentable square feet, as shown on Exhibit A attached hereto.
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Tenant‘s Percentage Share: 10.353% (determined by dividing the Rentable Area of the Subleased Premises by the Rentable Area of the Building and multiplying the resulting quotient by 100 and rounding to the 3rd decimal place). 1

(j) (k) (l)

Security Deposit: $193,688.00. At Subtenant‘s option, the Security Deposit may be in the form of an unconditional, clean, irrevocable standby letter of credit, acceptable to Sublandlord in Sublandlord‘s reasonable discretion. Term: Approximately 34-1/2 months, beginning on the Commencement Date and expiring on the Expiration Date. Delivery Date: the first business day following the later of (i) the effective date of Master Landlord‘s written consent to this Sublease, and (ii) Sublandlord‘s substantial completion of its obligations (excluding punch-list items) set forth in Section 3.1(a) below.

(m) Commencement Date: the later of (i) August 1, 2003 and (ii) 15 days after the Delivery Date. (n) (o) (p) (q) Expiration Date: June 13, 2006. Monthly Rent: $96,844.00 per month ($31.00 per square foot per year), beginning on the date which is 90 days after the Commencement Date and ending on the Expiration Date. Parking Spaces: Subtenant shall not be entitled to the use of any parking spaces in connection with this Sublease. Brokers: (1) (2) (r) Sublandlord‘s Broker: Cushman & Wakefield of Colorado, Inc. Subtenant‘s Broker: Jones Lang LaSalle

Master Lease: Office Lease dated April 23, 2001, between TMG\One Market, L.P., a Delaware limited partnership, as Landlord, and Epicentric, Inc., predecessor-in-interest to Sublandlord, as Tenant, a true and correct copy of which is attached hereto as Exhibit B. Additional Rent: All other amounts due and payable by Subtenant under this Sublease other than Monthly Rent. Rent: The Monthly Rent and Additional Rent. Base Year: 2004.

(s) (t) (u)

If any other provision of this Sublease contradicts any definition of this Article, the other provision will prevail. Any capitalized term which is not defined in this Sublease shall have the meaning for such term set forth in the Master Lease. 2

1.2 Exhibits . The following exhibits are attached to this Sublease and are made part of this Sublease: EXHIBIT A—The Subleased Premises EXHIBIT B—Master Lease EXHIBIT C—Master Sublease EXHIBIT D—Furniture ARTICLE 2 — AGREEMENT 2.1 Agreement . Sublandlord subleases the Subleased Premises to Subtenant, and Subtenant subleases the Subleased Premises from Sublandlord, according to the terms of