UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2024
OR
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
Commission File Number: 001-32224
Salesforce, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 94-3320693
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
Salesforce Tower
415 Mission Street, 3rd Fl
San Francisco, California 94105
(Address of principal executive offices)
Telephone Number: (415) 901-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share CRM New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer ☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
As of May 24, 2024, there were approximately 969 million shares of the Registrant’s Common Stock outstanding.
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INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Balance Sheets as of April 30, 2024 and January 31, 2024
3
Condensed Consolidated Statements of Operations for the three months ended April 30, 2024 and 2023
4
Condensed Consolidated Statements of Comprehensive Income for the three months ended April 30, 2024 and 2023
5
Condensed Consolidated Statements of Stockholders' Equity for the three months ended April 30, 2024 and 2023
6
Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2024 and 2023
7
Notes to Condensed Consolidated Financial Statements
9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
40
Item 4.
Controls and Procedures
43
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
44
Item 1A.
Risk Factors
44
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
68
Item 3.
Defaults Upon Senior Securities
68
Item 4.
Mine Safety Disclosures
68
Item 5.
Other Information
68
Item 6.
Exhibits
68
Signatures
70
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Salesforce, Inc.
Condensed Consolidated Balance Sheets
(in millions)
April 30, 2024 January 31, 2024
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 9,958 $ 8,472
Marketable securities 7,712 5,722
Accounts receivable, net 4,273 11,414
Costs capitalized to obtain revenue contracts, net 1,865 1,905
Prepaid expenses and other current assets 1,796 1,561
Total current assets 25,604 29,074
Property and equipment, net 3,506 3,689
Operating lease right-of-use assets, net 2,255 2,366
Noncurrent costs capitalized to obtain revenue contracts, net 2,286 2,515
Strategic investments 4,978 4,848
Goodwill 48,940 48,620
Intangible assets acquired through business combinations, net 4,869 5,278
Deferred tax assets and other assets, net 3,742 3,433
Total assets $ 96,180 $ 99,823
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities $ 5,520 $ 6,111
Operating lease liabilities, current 568 518
Unearned revenue 16,061 19,003
Debt, current
1,000 999
Total current liabilities
23,149 26,631
Noncurrent debt 8,429 8,427
Noncurrent operating lease liabilities 2,519 2,644
Other noncurrent liabilities 2,400 2,475
Total liabilities
36,497 40,177
Stockholders’ equity:
Common stock 1 1
Treasury stock, at cost (13,860) (11,692)
Additional paid-in capital 60,946 59,841
Accumulated other comprehensive loss (270) (225)
Retained earnings 12,866 11,721
Total stockholders’ equity 59,683 59,646
Total liabilities and stockholders’ equity
$ 96,180 $ 99,823
See accompanying Notes.
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Salesforce, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
1
Three Months Ended April 30,
2024 2023
Revenues:
Subscription and support $ 8,585 $ 7,642
Professional services and other 548 605
Total revenues
9,133 8,247
Cost of revenues (1)(2):
Subscription and support 1,560 1,510
Professional services and other 602 615
Total cost of revenues
2,162 2,125
Gross profit
6,971 6,122
Operating expenses (1)(2):
Research and development 1,368 1,207
Sales and marketing 3,239 3,154
General and administrative 647 638
Restructuring 8 711
Total operating expenses 5,262 5,710
Income from operations
1,709 412
Gains (losses) on strategic investments, net 37 (141)
Other income 121 55
Income before provision for income taxes 1,867 326
Provision for income taxes (334) (127)
Net income $ 1,533 $ 199
Basic net income per share
$ 1.58 $ 0.20
Diluted net income per share $ 1.56 $ 0.20
Shares used in computing basic net income per share 970 980
Shares used in computing diluted net income per share 985 988
(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:
Three Months Ended April 30,
2024 2023
Cost of revenues $ 238 $ 248
Sales and marketing 223 223
(2) Amounts include stock-based compensation expense, as follows:
Three Months Ended April 30,
2024 2023
Cost of revenues
$ 119 $ 103
Research and development 260 241
Sales and marketing 290 263
General and administrative 81 73
Restructuring 0 16
See accompanying Notes.
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Salesforce, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
1 Three Months Ended April 30,
2024 2023
Net income
$ 1,533 $ 199
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation and other gains (losses) (23) 6
Unrealized gains (losses) on marketable securities and privately held debt securities (30) 16
Other comprehensive income (loss), before tax (53) 22
Tax effect 8 (3)
Other comprehensive income (loss), net (45) 19
Comprehensive income
$ 1,488 $ 218
See accompanying Notes.
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Salesforce, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions)
(unaudited)
Three Months Ended April 30, 2024
Common Stock Treasury Stock
Additional
Paid-in
Capital
Accumulated Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders’
Equity Shares Amount Shares Amount
Balance at January 31, 2024
1,035 $ 1 (64) $ (11,692) $ 59,841 $ (225) $ 11,721 $ 59,646
Common stock issued 7 0 0 0 352 0 0 352
Common stock repurchased 0 0 (7) (2,168) 0 0 0 (2,168)
Stock-based compensation 0 0 0 0 753 0 0 753
Other comprehensive loss, net of tax 0 0 0 0 0 (45) 0 (45)
Cash dividends declared 0 0 0 0 0 0 (388) (388)
Net income
0 0 0 0 0 0 1,533 1,533
Balance at April 30, 2024 1,042 $ 1 (71) $ (13,860) $ 60,946 $ (270) $ 12,866 $ 59,683
Three Months Ended April 30, 2023
Common Stock Treasury Stock
Additional
Paid-in
Capital
Accumulated Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders’
EquityShares Amount Shares Amount
Balance at January 31, 2023
1,009 $ 1 (28) $ (4,000) $ 55,047 $ (274) $ 7,585 $ 58,359
Common stock issued 7 0 0 0 283 0 0 283
Common stock repurchased 0 0 (11) (2,144) 0 0 0 (2,144)
Stock-based compensation 0 0 0 0 696 0 0 696
Other comprehensive income, net of tax 0 0 0 0 0 19 0 19
Net income 0 0 0 0 0 0 199 199
Balance at April 30, 2023 1,016 $ 1 (39) $ (6,144) $ 56,026 $ (255) $ 7,784 $ 57,412
See accompanying Notes.
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Salesforce, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
1
Three Months Ended April 30,
2024 2023
Operating activities:
Net income $ 1,533 $ 199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (1) 879 1,254
Amortization of costs capitalized to obtain revenue contracts, net 517 470
Stock-based compensation expense 750 696
(Gains) losses on strategic investments, net (37) 141
Changes in assets and liabilities, net of business combinations:
Accounts receivable, net 7,162 6,123
Costs capitalized to obtain revenue contracts, net (248) (275)
Prepaid expenses and other current assets and other assets (514) (291)
Accounts payable and accrued expenses and other liabilities (755) (1,403)
Operating lease liabilities (85) (168)
Unearned revenue (2,955) (2,255)
Net cash provided by operating activities
6,247 4,491
Investing activities:
Business combinations, net of cash acquired (338) 0
Purchases of strategic investments (203) (105)
Sales of strategic investments 53 9
Purchases of marketable securities (3,252) (368)
Sales of marketable securities 616 269
Maturities of marketable securities 636 785
Capital expenditures (163) (243)
Net cash provided by (used in) investing activities
(2,651) 347
Financing activities:
Repurchases of common stock (2,133) (2,054)
Proceeds from employee stock plans 533 449
Principal payments on financing obligations (120) (110)
Repayments of debt 0 (1,001)
Payments of dividends (388) 0
Net cash used in financing activities
(2,108) (2,716)
Effect of exchange rate changes
(2) 17
Net increase in cash and cash equivalents 1,486 2,139
Cash and cash equivalents, beginning of period 8,472 7,016
Cash and cash equivalents, end of period
$ 9,958 $ 9,155
(1) Includes amortization of intangible assets acquired through business combinations, depreciation of fixed assets and amortization and impairment of right-
of-use assets.
See accompanying Notes.
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Salesforce, Inc.
Condensed Consolidated Statements of Cash Flows
Supplemental Cash Flow Disclosure
(in millions)
Three Months Ended April 30,
2024 2023
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest $ 28 $ 46
Income taxes, net of tax refunds $ 94 $ 122
See accompanying Notes.
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Salesforce, Inc.
Notes to Condensed Consolidated Financial Statements
1. Summary of Business and Significant Accounting Policies
Description of Business
Salesforce, Inc. (the “Company”) is a global leader in customer relationship management technology that brings companies and customers together. With
the Customer 360 platform, the Company delivers a single source of truth, connecting customer data with integrated artificial intelligence across systems, apps
and devices to help companies sell, service, market and conduct commerce from anywhere. Since its founding in 1999, the Company has pioneered innovations
in cloud, mobile, social, analytics and artificial intelligence, enabling companies of every size and industry to transform their businesses in the all-digital, work-
from-anywhere era.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2025, for example, refer to the fiscal year ending January 31, 2025.
Basis of Presentation
The accompanying condensed consolidated balance sheet as of April 30, 2024 and the condensed consolidated statements of operations, comprehensive
income, statements of stockholders' equity and statements of cash flows for the three months ended April 30, 2024 and 2023, respectively, are unaudited.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial
information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the
opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation
of the Company’s balance sheet as of April 30, 2024 and its results of operations, including its comprehensive income, stockholders' equity and cash flows for
the three months ended April 30, 2024 and 2023. All adjustments are of a normal recurring nature. The results for the three months ended April 30, 2024 are not
necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2025.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related
notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2024, filed with the Securities and Exchange Commission
(the “SEC”) on March 6, 2024.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the Company’s
condensed consolidated financial statements and notes thereto.
Significant estimates and assumptions made by management include the determination of:
• the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;
• the valuation of privately-held strategic investments;
• the fair value of assets acquired and liabilities assumed for business combinations;
• the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions;
• the useful lives of intangible assets; and
• the fair value of certain stock awards issued.
Actual results could differ materially from these estimates. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable, which forms the basis for making judgments about the carrying values of assets and liabilities as well as income and
expenses to be recognized.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
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Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial
information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. Over the
past few years, the Company has completed a number of acquisitions which have allowed the Company to expand its offerings, presence and reach in various
market segments of the enterprise cloud computing market. While the Company has offerings in multiple enterprise cloud computing market segments,
including as a result of the Company's acquisitions, and operates in multiple countries, the Company’s business operates in one operating segment because
most of the Company's service offerings operate on the Customer 360 Platform and are deployed in a nearly identical manner, and the Company’s CODM
evaluates the Company’s financial information and resources, and assesses the performance of these resources, on a consolidated basis.
Concentrations of Credit Risk, Significant Customers and Investments
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable
securities and accounts receivable. The Company monitors and manages the overall exposure of its cash balances to individual financial institutions on an
ongoing basis. The Company’s marketable securities portfolio consists primarily of investment-grade securities and the Company’s policies limit the amount of
credit exposure to any one issuer. The Company does not require collateral for accounts receivable. The Company maintains an allowance for its doubtful
accounts receivable for estimated credit losses. This allowance is based upon historical loss patterns, the number of days that billings are past due, an
evaluation of the potential risk of loss associated with delinquent accounts and current market conditions and reasonable and supportable forecasts of future
economic conditions to inform adjustments to historical loss patterns. The Company records the allowance against bad debt expense through the condensed
consolidated statements of operations, included in general and administrative expense, up to the amount of revenues recognized to date. Any incremental
allowance is recorded as an offset to unearned revenue on the condensed consolidated balance sheets. Receivables are written off and charged against the
recorded allowance when the Company has exhausted collection efforts without success.
No single customer accounted for ten percent or more of accounts receivable as of April 30, 2024 and January 31, 2024. No single customer accounted
for ten percent or more of total revenue during the three months ended April 30, 2024 and 2023. As of April 30, 2024 and January 31, 2024, assets located
outside the Americas were 14 percent and 16 percent of total assets, respectively. As of April 30, 2024 and January 31, 2024, assets located in the United States
were 84 percent and 82 percent of total assets, respectively.
The Company is also exposed to concentrations of risk in its strategic investment portfolio, including within specific industries, as the Company
primarily invests in enterprise cloud companies, technology startups and system integrators. As of April 30, 2024, the Company held two investments, both
privately held, with carrying values that were individually greater than five percent of its total strategic investments portfolio and represented approximately 15
percent of the portfolio in the aggregate. As of January 31, 2024, the Company held two investments, both privately held, with carrying values that were
individually greater than five percent of its strategic investments portfolio and represented approximately 16 percent of the portfolio in the aggregate.
Revenue Recognition
The Company derives its revenues from two sources: (1) subscription and support revenues and (2) professional services and other revenues.
Subscription and support revenues include subscription fees from customers accessing the Company’s enterprise cloud computing services (collectively,
“Cloud Services”), software license revenues from the sales of term software licenses and support revenues from the sales of support and updates beyond the
basic subscription or software license sales. Professional services and other revenues include professional and advisory services for process mapping, project
management and implementation services and training services.
Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company
expects to receive in exchange for those products or services. If the consideration promised in a contract includes a variable amount, for example, overage fees,
contingent fees or service level penalties, the Company includes an estimate of the amount it expects to receive for the total transaction price if it is probable
that a significant reversal of cumulative revenue recognized will not occur.
The Company determines the amount of revenue to be recognized through the application of the following steps:
• identification of the contract, or contracts, with a customer;
• identification of the performance obligations in the contract;
• determination of the transaction price;
• allocation of the transaction price to the performance obligations in the contract; and
• recognition of revenue when or as the Company satisfies the performance obligations.
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Subscription and Support Revenues
Subscription and support revenues are comprised of fees that provide customers with access to Cloud Services, software licenses and related support and
updates during the term of the arrangement.
Cloud Services allow customers to use the Company's multi-tenant software without taking possession of the software. Revenue is generally recognized
ratably over the contract term. Substantially all of the Company’s subscription service arrangements are noncancellable and do not contain refund-type
provisions.
Subscription and support revenues also include revenues associated with term software licenses that provide the customer with a right to use the software
as it exists when made available. Revenues from term software licenses are generally recognized at the point in time when the software is made available to the
customer. Revenue from software support and updates is recognized as the support and updates are provided, which is generally ratably over the contract term.
The Company typically invoices its customers annually and its payment terms provide that customers pay within 30 days of invoice. Amounts that have
been invoiced are recorded in accounts receivable and in unearned revenue or revenue, depending on whether transfer of control to customers has occurred.
Professional Services and Other Revenues
The Company’s professional services contracts are either on a time and materials, fixed price or subscription basis. These revenues are recognized as the
services are rendered for time and materials contracts, on a proportional performance basis for fixed price contracts or ratably over the contract term for
subscription professional services contracts. Other revenues consist primarily of training revenues recognized as such services are performed.
Significant Judgments - Contracts with Multiple Performance Obligations
The Company enters into contracts with its customers that may include promises to transfer multiple performance obligations such as Cloud Services,
software licenses, support and updates and professional services. A performance obligation is a promise in a contract with a customer to transfer products or
services that are concluded to be distinct. Determining whether products and services are distinct performance obligations that should be accounted for
separately or combined as one unit of accounting may require significant judgment.
Cloud Services, software licenses and support and updates services are generally concluded to be distinct because such offerings are often sold
separately. In determining whether professional services are distinct, the Company considers the following factors for each professional services agreement:
availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in
comparison to the subscription start date and the contractual dependence of the service on the customer’s satisfaction with the professional services work. To
date, the Company has concluded that professional services included in contracts with multiple performance obligations are distinct.
The Company allocates the transaction price to each performance obligation on a relative SSP basis. The SSP is the price at which the Company would
sell a promised product or service separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation.
The Company determines SSP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration
include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where
services are sold, price lists, the Company's go-to-market strategy, historical and current sales and contract prices. In instances where the Company does not
sell or price a product or service separately, the Company maximizes the use of observable inputs by using information that may include market conditions. As
the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.
In certain cases, the Company is able to establish SSP based on observable prices of products or services sold or priced separately in comparable
circumstances to similar customers. The Company uses a single amount to estimate SSP when indicated by the distribution of its observable prices.
Alternatively, the Company uses a range of amounts to estimate SSP when the pricing practices or distribution of the observable prices are highly
variable. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by
customer size and geography.
Costs Capitalized to Obtain Revenue Contracts
The Company capitalizes incremental costs of obtaining revenue contracts related to noncancellable Cloud Services subscription, ongoing Cloud
Services support and license support and updates. For contracts with term software licenses where revenue is recognized upfront when the software is made
available to the customer, costs allocable to those licenses are expensed as they are incurred. Capitalized amounts consist primarily of sales commissions paid
to the Company’s direct sales force. Capitalized amounts also include (1) amounts paid to employees other than the direct sales force who earn incentive
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payouts under annual compensation plans that are tied to the value of contracts acquired, (2) commissions paid to employees upon renewals of subscription and
support contracts, (3) the associated payroll taxes and fringe benefit costs associated with the payments to the Company’s employees and (4) to a lesser extent,
success fees paid to partners in emerging markets where the Company has a limited presence.
Costs capitalized related to new revenue contracts are amortized on a straight-line basis over four years, which is longer than the typical initial contract
period, but reflects the estimated average period of benefit, including expected contract renewals. In arriving at this average period of benefit, the Company
evaluates both qualitative and quantitative factors which included the estimated life cycles of its offerings and its customer attrition. Additionally, the Company
amortizes capitalized costs for renewals and success fees paid to partners over two years.
The capitalized amounts are recoverable through future revenue streams under all noncancellable customer contracts. The Company periodically
evaluates whether there have been any changes in its business, the market conditions in which it operates or other events which would indicate that its
amortization period should be changed or if there are potential indicators of impairment.
Amortization of capitalized costs to obtain revenue contracts is included in sales and marketing expense in the accompanying condensed consolidated
statements of operations. There were no impairments of costs to obtain revenue contracts for the three months ended April 30, 2024 and 2023.
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 are stated at fair value.
Marketable Securities
The Company considers all of its marketable debt securities as available for use in current operations, including those with maturity dates beyond one
year, and therefore classifies these securities within current assets on the condensed consolidated balance sheets. Securities are classified as available for sale
and are carried at fair value, with the change in unrealized gains and losses, net of tax, reported as a separate component on the condensed consolidated
statements of comprehensive income until realized. Fair value is determined based on quoted market rates when observable or utilizing data points that are
observable, such as quoted prices, interest rates and yield curves. Securities with an amortized cost basis in excess of estimated fair value are assessed to
determine what amount of the excess, if any, is caused by expected credit losses. Expected credit losses on securities are recognized in other income (expense)
on the condensed consolidated statements of operations and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive
income in stockholders' equity. For the purposes of computing realized and unrealized gains and losses, 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 investment income within other income (expense) on
the condensed consolidated statements of operations.
Strategic Investments
The Company holds strategic investments in privately held debt and equity securities and publicly held equity securities in which the Company does not
have a controlling interest.
Privately held equity securities where the Company lacks a controlling financial interest but does exercise significant influence are accounted for under
the equity method. Privately held equity securities not accounted for under the equity method are recorded at cost and adjusted only for observable transactions
for same or similar investments of the same issuer or impairment events (referred to as the measurement alternative). All gains and losses on privately held
equity securities, realized and unrealized, are recorded through gains (losses) on strategic investments, net on the condensed consolidated statements of
operations. Privately held debt securities are recorded at fair value with changes in fair value recorded through accumulated other comprehensive loss on the
condensed consolidated balance sheet. Other privately held investments not classified as debt or equity securities are recorded at cost and adjusted for
impairment events, with any associated gains and losses recorded through gains (losses) on strategic investments, net on the consolidated statements of
operations.
Valuations of privately held securities are inherently complex and require judgment due to the lack of readily available market data. In determining the
estimated fair value of its strategic investments in privately held companies, the Company utilizes the most recent data available to the Company. The
Company assesses its privately held strategic investments quarterly for impairment. The Company’s impairment analysis encompasses an assessment of both
qualitative and quantitative factors, including the investee's financial metrics, market acceptance of the investee's product or technology and the rate at which
the investee is using its cash. If the investment is considered impaired, the Company estimates the fair value of the investment and recognizes any resulting
impairment through the condensed consolidated statements of operations.
Publicly held equity securities are measured at fair value with changes recorded through gains (losses) on strategic investments, net on the condensed
consolidated statements of operations.
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The Company may enter into strategic investments or other investments that are considered variable interest entities (“VIEs”). If the Company is a
primary beneficiary of a VIE, it is required to consolidate the entity. To determine if the Company is the primary beneficiary of a VIE, the Company evaluates
whether it has (1) the power to direct the activities that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the
right to receive benefits from the VIE that could potentially be significant to the VIE. The assessment of whether the Company is the primary beneficiary of its
VIE investments requires significant assumptions and judgments. VIEs that are not consolidated are accounted for under the measurement alternative, equity
method, amortized cost, or other appropriate methodology based on the nature of the interest held. The Company did not consolidate any VIEs as of April 30,
2024 and April 30, 2023.
Fair Value Measurement
The Company measures its cash and cash equivalents, marketable securities, publicly held equity securities and foreign currency derivative contracts at
fair value. In addition, the Company measures certain of its strategic investments, including its privately held debt and equity securities, at fair value on a
nonrecurring basis when there has been an observable price change in a same or similar security or an impairment event. The additional disclosures regarding
the Company’s fair value measurements are included in Note 4 “Fair Value Measurement.”
Derivative Financial Instruments
The Company enters into foreign currency derivative contracts with financial institutions to reduce foreign exchange risk associated with intercompany
transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. The Company uses forward
currency derivative contracts, which are not designated as hedging instruments, to minimize the Company’s exposure to balances primarily denominated in the
Euro, British Pound Sterling, Canadian Dollar, Australian Dollar, Brazilian Real and Japanese Yen. The Company’s derivative financial instruments program is
not designated for trading or speculative purposes. The Company generally enters into master netting arrangements with the financial institutions with which it
contracts for such derivatives, which permit net settlement of transactions with the same counterparty, thereby reducing risk of credit-related losses from a
financial institutions' nonperformance. While the contract or notional amount is often used to express the volume of foreign currency derivative contracts, the
amounts potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under the agreements exceed the
obligations of the Company to the counterparties. The notional amount of outstanding foreign currency derivative contracts as of April 30, 2024 and January
31, 2024 was $9.1 billion and $8.6 billion, respectively.
Outstanding foreign currency derivative contracts are recorded at fair value on the condensed consolidated balance sheets. Unrealized gains or losses due
to changes in the fair value of these derivative contracts, as well as realized gains or losses from their net settlement, are recognized as other income (expense)
consistent with the offsetting gains or losses resulting from the remeasurement or settlement of the underlying foreign currency denominated receivables and
payables.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives
of those assets as follows:
Buildings and building improvements 10 to 40 years
Computers, equipment and software 3 to 5 years
Furniture and fixtures 5 years
Leasehold improvements Shorter of the estimated lease term or 10 years
The Company estimates the useful lives of property and equipment upon initial recognition and periodically evaluates the useful lives and whether events
or changes in circumstances warrant a revision to the useful lives.
When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from their respective accounts and
any loss on such retirement is reflected in operating expenses.
Leases
The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are included in operating
lease right-of-use (“ROU”) assets and current and noncurrent operating lease liabilities on the Company’s condensed consolidated balance sheets. Assets (also
referred to as ROU assets) and liabilities recognized from finance leases are included in property and equipment, accrued expenses and other liabilities and
other noncurrent liabilities, respectively, on the Company’s condensed consolidated balance sheets. ROU assets represent the Company's right to use an
underlying asset for the lease term. The corresponding lease liabilities represent its obligation to make lease payments arising from the lease. The Company
does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less for any asset classes.
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Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement, net of any future
tenant incentives. The Company has lease agreements which contain both lease and non-lease components, which it has elected to combine for all asset classes.
As such, minimum lease payments include fixed payments for non-lease components within a lease agreement but exclude variable lease payments not
dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to
period. The Company’s lease terms may include options to extend or terminate the lease. Periods beyond the noncancellable term of the lease are included in
the measurement of the lease liability only when it is reasonably certain that the Company will exercise the associated extension option or waive the
termination option. The Company reassesses the lease term if and when a significant event or change in circumstances occurs within the control of the
Company. As most of the Company’s leases do not provide an implicit rate, the net present value of future minimum lease payments is determined using the
Company’s incremental borrowing rate. The Company's incremental borrowing rate is an estimate of the interest rate the Company would have to pay to
borrow on a collateralized basis with similar terms and payments, in the economic environment where the leased asset is located.
The lease ROU asset is recognized based on the lease liability, adjusted for any rent payments or initial direct costs incurred or tenant incentives received
prior to commencement.
Lease expense for operating leases, which includes amortization expense of ROU assets, is recognized on a straight-line basis over the lease term.
Amortization expense of finance lease ROU assets is recognized on a straight-line basis over the lease term and interest expense for finance lease liabilities is
recognized based on the incremental borrowing rate. Expense for variable lease payments are recognized as incurred.
On the lease commencement date, the Company also establishes assets and liabilities for the present value of estimated future costs to retire long-lived
assets at the termination or expiration of a lease. Such assets are included in property and equipment, net and are amortized over the lease term.
The Company has entered into subleases or has made decisions and taken actions to exit and sublease certain unoccupied leased office space. Similar to
other long-lived assets discussed below, management tests ROU assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. For leased assets, such circumstances would include the decision to leave a leased facility prior to the end of the
minimum lease term or subleases for which estimated cash flows do not fully cover the costs of the associated lease.
Intangible Assets Acquired through Business Combinations
Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible
assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.
Impairment Assessment
The Company evaluates intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market
conditions or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the
carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for
recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.
The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more
often if and when circumstances indicate that goodwill may not be recoverable.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the
acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year
from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with
the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially
recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates
and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the
measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed,
whichever comes first, any subsequent adjustments are recorded to the Company’s condensed consolidated statements of operations.
In the event the Company acquires an entity with which the Company has a preexisting relationship, the Company will generally recognize a gain or loss
to settle that relationship as of the acquisition date within operating income on the condensed
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consolidated statements of operations. In the event that the Company acquires an entity in which the Company previously held a strategic investment, the
difference between the fair value of the shares as of the date of the acquisition and the carrying value of the strategic investment is recorded as a gain or loss
and recorded within net gains (losses) on strategic investments in the condensed consolidated statements of operations.
Restructuring
The Company generally recognizes employee severance costs when payments are probable and amounts are estimable or when notification occurs,
depending on the region an employee works. Costs related to contracts without future benefit or contract termination are recognized at the earlier of the
contract termination or the cease-use dates. Other exit-related costs are recognized as incurred.
Stock-Based Compensation Expense
Stock-based compensation expense is measured based on grant date at fair value using the grant date closing stock price for restricted stock units and
restricted stock awards and using the Black-Scholes option pricing model for stock options. The Company recognizes stock-based compensation expense
related to restricted stock units, restricted stock awards, and stock options and restricted stock awards on a straight-line basis, net of estimated forfeitures, over
the requisite service period of the awards, which is generally the vesting term of four years. The estimated forfeiture rate applied is based on historical
forfeiture rates.
The Company grants performance share awards to executive officers and other members of senior management, which may include a market condition, a
performance condition, or both. Stock-based compensation expense related to awards with a market condition are measured at fair value using a Monte Carlo
simulation model and the expense related to these awards is recognized on a graded-vesting basis, net of estimated forfeitures, over the requisite service period
of the awards, which is generally the vesting term. Stock-based compensation expense related to awards with a performance condition are measured based on
the grant date closing stock price and the expense related to these awards is recognized based on the requisite service period elapsed, as well as the probability
of achievement and estimated attainment of the performance condition as of the end of our reporting period.
Stock-based compensation expense related to the Company’s Amended and Restated 2004 Employee Stock Purchase Plan (“ESPP” or “2004 Employee
Stock Purchase Plan”) is measured based on grant date at fair value using the Black-Scholes option pricing model. The Company recognizes stock-based
compensation expense related to shares issued pursuant to the 2004 Employee Stock Purchase Plan on a straight-line basis over the offering period, which is 12
months. The ESPP allows employees to purchase shares of the Company's common stock at a 15 percent discount from the lower of the Company’s stock price
on (i) the first day of the offering period or on (ii) the last day of the purchase period. The ESPP also allows employees to reduce their percentage election once
during a six-month purchase period (December 15 and June 15 of each fiscal year), but not to increase that election until the next one-year offering period. The
ESPP includes a reset provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date.
The Company, at times, grants unvested restricted shares to employee stockholders of certain acquired companies in lieu of cash consideration. These
awards are generally subject to continued post-acquisition employment. Therefore, the Company accounts for them as post-acquisition stock-based
compensation expense. The Company recognizes stock-based compensation expense equal to the grant date fair value of the restricted stock awards, based on
the closing stock price on grant date, on a straight-line basis over the requisite service period of the awards, which is generally four years.
Income Taxes
The Company uses the asset and 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 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 laws is recognized in the condensed consolidated
statements of operations in the period that includes the enactment date.
The Company’s tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. The Company recognizes the tax benefit
of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, solely based on its
technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement
with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in the income tax provision.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized
based on the weighting of positive and negative evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable
income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable
tax law. The Company
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regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the
reversals of existing temporary differences and tax planning strategies. The Company’s judgments regarding future profitability may change due to many
factors, including future market conditions and the ability to successfully execute its business plans. Should there be a change in the ability to recover deferred
tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.
Foreign Currency Translation
The functional currency of the Company’s major foreign subsidiaries is generally the local currency. 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. Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are recorded as a separate component on the condensed consolidated statements of comprehensive income. Foreign
currency transaction gains and losses are included in other income (expense) in the condensed consolidated statements of operations for the period.
Warranties and Indemnification
The Company’s enterprise cloud computing services are typically warranted to perform in a manner consistent with general industry standards that are
reasonably applicable and materially 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 obligations and has not accrued any material
liabilities related to such obligations in the accompanying condensed consolidated financial statements.
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. The Company maintains director and officer insurance coverage
that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by
law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
New Accounting Pronouncement Pending Adoption
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim
consolidated financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after
December 15, 2024 on a retrospective basis, with early adoption permitted. The Company is evaluating the effect that ASU 2023-07 will have on its financial
statement disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”
(“ASU 2023-09”), which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate
reconciliation and modifies other income tax-related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a
retrospective or prospective basis. The Company is evaluating the effect that ASU 2023-09 will have on its financial statement disclosures.
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2. Revenues
Disaggregation of Revenue
Subscription and Support Revenue by the Company's Service Offerings
Subscription and support revenues consisted of the following (in millions):
Three Months Ended April 30,
2024 2023
Sales
$ 1,998 $ 1,810
Service 2,182 1,964
Platform and Other 1,718 1,567
Marketing and Commerce 1,282 1,170
Integration and Analytics (1) 1,405 1,131
$ 8,585 $ 7,642
(1) In the fourth quarter of fiscal 2024, the Company renamed the service offering previously referred to as Data to Integration and Analytics, which includes
Mulesoft and Tableau.
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following (in millions):
Three Months Ended April 30,
2024 2023
Americas
$ 6,062 $ 5,482
Europe 2,145 1,951
Asia Pacific 926 814
$ 9,133 $ 8,247
Revenues by geography are determined based on the region of the Company's contracting entity, which may be different than the region of the customer.
Americas revenue attributed to the United States was approximately 93 percent during the three months ended April 30, 2024 and 2023. No other country
represented more than ten percent of total revenue during the three months ended April 30, 2024 and 2023.
Contract Balances
Contract Assets
The Company records a contract asset when revenue recognized on a contract exceeds the billings. Contract assets were $828 million as of April 30,
2024 as compared to $758 million as of January 31, 2024, and are included in prepaid expenses and other current assets and deferred tax assets and other
assets, net on the condensed consolidated balance sheets.
Unearned Revenue
Unearned revenue represents amounts that have been invoiced in advance of revenue recognition and is recognized as revenue when transfer of control to
customers has occurred or services have been provided. The unearned revenue balance does not represent the total contract value of annual or multi-year,
noncancellable subscription agreements. The unearned revenue balance is influenced by several factors, including seasonality, the compounding effects of
renewals, invoice duration, invoice timing, dollar size and new business linearity within the quarter.
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The change in unearned revenue was as follows (in millions):
Three Months Ended April 30,
2024 2023
Unearned revenue, beginning of period
$ 19,003 $ 17,376
Billings and other (1) 6,108 5,937
Contribution from contract asset 70 55
Revenue recognized over time (8,571) (7,837)
Revenue recognized at a point in time (562) (410)
Unearned revenue from business combinations 13 0
Unearned revenue, end of period
$ 16,061 $ 15,121
(1) Other includes, for example, the impact of foreign currency translation.
The majority of revenue recognized for these services is from the beginning of period unearned revenue balance.
Revenue recognized over time primarily includes Cloud Services subscription and support revenue, which is generally recognized ratably over time, and
professional services and other revenue, which is generally recognized ratably or as delivered.
Revenue recognized at a point in time substantially consists of term software licenses.
Remaining Performance Obligation
Remaining performance obligation represents contracted revenue that has not yet been recognized and includes unearned revenue and unbilled amounts
that will be recognized as revenue in future periods. The transaction price allocated to the remaining performance obligation is based on SSP. Remaining
performance obligation is influenced by several factors, including seasonality, the timing of renewals, the timing of term license deliveries, average contract
terms and foreign currency exchange rates. Remaining performance obligation is also impacted by acquisitions. Unbilled portions of the remaining
performance obligation denominated in foreign currencies are revalued each period based on the period end exchange rates. Remaining performance obligation
is subject to future economic risks, including bankruptcies, regulatory changes and other market factors.
The Company excludes amounts related to performance obligations from professional services contracts that are billed and recognized on a time and
materials basis.
The majority of the Company's noncurrent remaining performance obligation is expected to be recognized in the next 13 to 36 months.
Remaining performance obligation consisted of the following (in billions):
Current Noncurrent Total
As of April 30, 2024 $ 26.4 $ 27.5 $ 53.9
As of January 31, 2024 $ 27.6 $ 29.3 $ 56.9
3. Investments
Marketable Securities
At April 30, 2024, marketable securities consisted of the following (in millions):
Amortized
Cost
Unrealized
Gains
Unrealized
Losses Fair Value
Corporate notes and obligations $ 3,751 $ 2 $ (54) $ 3,699
U.S. treasury securities 552 0 (11) 541
Mortgage-backed obligations 272 0 (10) 262
Asset-backed securities 1,655 1 (11) 1,645
Municipal securities 137 0 (3) 134
Commercial paper 1,223 0 0 1,223
Covered bonds 72 0 (3) 69
Other 140 1 (2) 139
Total marketable securities $ 7,802 $ 4 $ (94) $ 7,712
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At January 31, 2024, marketable securities consisted of the following (in millions):
Amortized
Cost
Unrealized
Gains
Unrealized
Losses Fair Value
Corporate notes and obligations
$ 3,014 $ 9 $ (45) $ 2,978
U.S. treasury securities 583 0 (8) 575
Mortgage-backed obligations 244 1 (9) 236
Asset-backed securities 1,381 5 (7) 1,379
Municipal securities 139 0 (3) 136
Commercial paper 213 0 0 213
Covered bonds 81 0 (3) 78
Other 127 1 (1) 127
Total marketable securities
$ 5,782 $ 16 $ (76) $ 5,722
The contractual maturities of the investments classified as marketable securities were as follows (in millions):
As of
April 30, 2024 January 31, 2024
Due within 1 year
$ 4,092 $ 2,523
Due in 1 year through 5 years 3,613 3,180
Due in 5 years through 10 years 7 19
$ 7,712 $ 5,722
Strategic Investments
Strategic investments by form and measurement category as of April 30, 2024 were as follows (in millions):
Measurement Category
Fair Value
Measurement
Alternative Other Total
Equity securities
$ 83 $ 4,629 $ 133 $ 4,845
Debt securities and other investments 0 0 133 133
Balance as of April 30, 2024
$ 83 $ 4,629 $ 266 $ 4,978
Strategic investments by form and measurement category as of January 31, 2024 were as follows (in millions):
Measurement Category
Fair Value
Measurement
Alternative Other Total
Equity securities
$ 80 $ 4,557 $ 130 $ 4,767
Debt securities and other investments 0 0 81 81
Balance as of January 31, 2024
$ 80 $ 4,557 $ 211 $ 4,848
The Company holds investments in, or management agreements with, VIEs which the Company does not consolidate because it is not considered the
primary beneficiary of these entities. The carrying value of VIEs within strategic investments was $436 million and $382 million, as of April 30, 2024 and
January 31, 2024, respectively.
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Gains (Losses) on Strategic Investments, Net
The components of gains and losses on strategic investments were as follows (in millions):
1 Three Months Ended April 30,
2024 2023
Unrealized gains recognized on publicly traded equity securities, net
$ 3 $ 0
Unrealized gains recognized on privately held equity securities, net 105 38
Impairments on privately held equity and debt securities (130) (177)
Unrealized losses, net (22) (139)
Realized gains (losses) on sales of securities, net 59 (2)
Gains (losses) on strategic investments, net
$ 37 $ (141)
Unrealized gains and losses recognized on privately held equity securities, net includes upward and downward adjustments from equity securities
accounted for under the measurement alternative, as well as gains and losses from private equity securities in other measurement categories. For privately held
securities accounted for under the measurement alternative, the Company recorded upward adjustments of $116 million and $46 million and impairments and
downward adjustments of $139 million and $175 million for the three months ended April 30, 2024 and 2023, respectively.
Realized gains on sales of securities, net reflects the difference between the sale proceeds and the carrying value of the security at the beginning of the
period or the purchase date, if later.
4. Fair Value Measurement
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3. Significant unobservable inputs which are supported by little or no market activity.
All of the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are classified within Level 1 or Level 2 because
these assets are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.
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The following table presents information about the Company’s assets that were measured at fair value as of April 30, 2024 and indicates the fair value
hierarchy of the valuation (in millions):
Description
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) Fair Value
Cash equivalents (1):
Time deposits $ 0 $ 1,485 $ 0 $ 1,485
Money market mutual funds 5,652 0 0 5,652
Cash equivalent securities 0 1,046 0 1,046
Marketable securities:
Corporate notes and obligations 0 3,699 0 3,699
U.S. treasury securities 0 541 0 541
Mortgage-backed obligations 0 262 0 262
Asset-backed securities 0 1,645 0 1,645
Municipal securities 0 134 0 134
Commercial paper 0 1,223 0 1,223
Covered bonds 0 69 0 69
Other 0 139 0 139
Strategic investments:
Equity securities 83 0 0 83
Total assets
$ 5,735 $ 10,243 $ 0 $ 15,978
(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets in addition to $1.8 billion of cash, as of April 30,
2024.
The following table presents information about the Company’s assets that were measured at fair value as of January 31, 2024 and indicates the fair value
hierarchy of the valuation (in millions):
Description
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs (Level
2)
Significant
Unobservable
Inputs
(Level 3) Fair Value
Cash equivalents (1):
Time deposits $ 0 $ 1,337 $ 0 $ 1,337
Money market mutual funds 4,447 0 0 4,447
Cash equivalent securities 0 493 0 493
Marketable securities:
Corporate notes and obligations 0 2,978 0 2,978
U.S. treasury securities 0 575 0 575
Mortgage-backed obligations 0 236 0 236
Asset-backed securities 0 1,379 0 1,379
Municipal securities 0 136 0 136
Commercial paper 0 213 0 213
Covered bonds 0 78 0 78
Other 0 127 0 127
Strategic investments:
Equity securities 80 0 0 80
Total assets
$ 4,527 $ 7,552 $ 0 $ 12,079
(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets in addition to $2.2 billion of cash, as of January 31,
2024.
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Strategic Investments Measured and Recorded at Fair Value on a Non-Recurring Basis
Substantially all of the Company's privately held debt and equity securities and other investments are recorded at fair value on a non-recurring basis. The
estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company deems these assets as Level 3
within the fair value measurement framework. For privately held equity investments without a readily determinable fair value, the Company applies valuation
methods based on information available, including the market approach and option pricing models (“OPM”). Observable transactions, such as the issuance of
new equity by an investee, are indicators of investee enterprise value and are used to estimate the fair value of the privately held equity investments. An OPM
may be utilized to allocate value to the various classes of securities of the investee, including classes owned by the Company. Such information, available to the
Company from investee companies, is supplemented with estimates such as volatility, expected time to liquidity and the rights and obligations of the securities
the Company holds. When indicators of impairment are observed for privately held equity securities, the Company generally uses the market approach to
estimate the fair value of its investment, giving consideration to the latest observable transactions, as well as the investee's current and projected financial
performance and other significant inputs and assumptions, including estimated time to exit, selection and analysis of guideline public companies and the rights
and obligations of the securities the Company holds. The Company's privately held debt and equity securities and other investments amounted to $4.9 billion
and $4.8 billion as of April 30, 2024 and January 31, 2024, respectively.
5. Leases and Other Commitments
Leases
The Company has leases for corporate offices, data centers and equipment under noncancellable operating and finance leases with various expiration
dates.
Total operating lease costs were $158 million and $469 million for the three months ended April 30, 2024 and 2023, respectively. Included in operating
lease costs are amounts related to restructuring charges, which are discussed in Note 9 “Restructuring.”
As of April 30, 2024, the maturities of lease liabilities under noncancellable operating and finance leases were as follows (in millions):
Operating Leases Finance Leases
Fiscal Period:
Remaining nine months of fiscal 2025 $ 489 $ 291
Fiscal 2026 587 340
Fiscal 2027 521 228
Fiscal 2028 456 53
Fiscal 2029 379 9
Thereafter 1,026 1
Total minimum lease payments 3,458 922
Less: Imputed interest (371) (46)
Total
$ 3,087 $ 876
Other Balance Sheet Accounts
Accounts payable, accrued expenses and other liabilities as of April 30, 2024 included approximately $1.5 billion of accrued compensation as compared
to $2.5 billion as of January 31, 2024.
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6. Business Combinations
In February 2024, the Company acquired all outstanding stock of Spiff, Inc. (“Spiff”), an incentive compensation management platform company. The
acquisition date fair value of the consideration transferred for Spiff was $419 million, which consisted primarily of $374 million in cash. The Company
recorded $323 million of goodwill which is primarily attributed to the assembled workforce and expanded market opportunities. The goodwill associated with
the acquisition of Spiff has no basis and is not deductible for U.S. income tax purposes. The Company also recorded approximately $52 million of intangible
assets for developed technology and customer relationships with useful lives of nine and five years, respectively. The fair values assigned to assets acquired and
liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received and certain tax
returns are finalized. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The Company
has included the financial results of Spiff, which were not material, in its condensed consolidated financial statements from the date of acquisition. The
transaction costs associated with the acquisition were also not material.
7. Intangible Assets Acquired Through Business Combinations and Goodwill
Intangible Assets Acquired Through Business Combinations
Intangible assets acquired through business combinations were as follows (in millions):
Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net
Weighted
Average
Remaining
Useful Life (Years)
January 31,
2024
Additions and
retirements, net April 30, 2024
January 31,
2024
Expense and
retirements, net April 30, 2024
January 31,
2024 April 30, 2024 April 30, 2024
Acquired developed
technology $ 4,624 $ 44 $ 4,668 $ (3,208) $ (238) $ (3,446) $ 1,416 $ 1,222 2.0
Customer
relationships 6,674 8 6,682 (2,985) (211) (3,196) 3,689 3,486 4.5
Other (1)
303 0 303 (130) (12) (142) 173 161
3.2
Total
$ 11,601 $ 52 $ 11,653 $ (6,323) $ (461) $ (6,784) $ 5,278 $ 4,869
3.9
(1) Included in Other are in-place leases, trade names, trademarks and territory rights.
Amortization of intangible assets resulting from business combinations for the three months ended April 30, 2024 and 2023 was $461 million, and
$471 million, respectively.
The expected future amortization expense for intangible assets as of April 30, 2024 was as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2025 $ 1,153
Fiscal 2026 1,372
Fiscal 2027 1,005
Fiscal 2028 628
Fiscal 2029 496
Thereafter 215
Total amortization expense
$ 4,869
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired.
The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, were as follows (in millions):
Balance as of January 31, 2024 $ 48,620
Acquisition of Spiff 323
Adjustments (1) (3)
Balance as of April 30, 2024
$ 48,940
(1) Adjustments include the effect of foreign currency translation.
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8. Debt
The components of the Company's borrowings were as follows (in millions):
Instrument Date of Issuance Maturity Date
Contractual
Interest Rate
Outstanding
Principal as of April
30, 2024
Carrying Value as of
April 30, 2024
Carrying Value as of
January 31, 2024
2024 Senior Notes July 2021 July 2024 0.625 % 1,000 1,000 999
2028 Senior Notes April 2018 April 2028 3.70 1,500 1,495 1,495
2028 Senior Sustainability Notes July 2021 July 2028 1.50 1,000 994 994
2031 Senior Notes July 2021 July 2031 1.95 1,500 1,491 1,490
2041 Senior Notes July 2021 July 2041 2.70 1,250 1,236 1,235
2051 Senior Notes July 2021 July 2051 2.90 2,000 1,978 1,978
2061 Senior Notes July 2021 July 2061 3.05 1,250 1,235 1,235
Total carrying value of debt
$ 9,500
9,429 9,426
Less current portion of debt (1,000) (999)
Total noncurrent debt
$ 8,429 $ 8,427
The Company was in compliance with all debt covenants as of April 30, 2024.
The total estimated fair value of the Company's outstanding senior unsecured notes (the “Senior Notes”) above was $7.4 billion and $7.8 billion as of
April 30, 2024 and January 31, 2024, respectively. The fair value was determined based on the closing trading price per $100 of the Senior Notes as of the last
day of trading of the first quarter of fiscal 2025 and the last day of trading of fiscal 2024, respectively, and are deemed Level 2 liabilities within the fair value
measurement framework.
The contractual future principal payments for all borrowings as of April 30, 2024 were as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2025 $ 1,000
Fiscal 2026 0
Fiscal 2027 0
Fiscal 2028 0
Fiscal 2029 2,500
Thereafter 6,000
Total principal outstanding
$ 9,500
Revolving Credit Facility
In December 2020, the Company entered into a Credit Agreement with Citibank, N.A., as administrative agent, and certain other institutional lenders (the
“Revolving Loan Credit Agreement”) that provides for a $3.0 billion unsecured revolving credit facility (“Credit Facility”) and matures in December 2025. The
Company may use the proceeds of future borrowings under the Credit Facility for general corporate purposes, which may include, without limitation, the
consideration, fees, costs and expenses related to any acquisition. The Company amended the Revolving Loan Credit Agreement in April 2022 and May 2023,
in each case to reflect certain administrative changes. There were no outstanding borrowings under the Credit Facility as of April 30, 2024.
9. Restructuring
In January 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins
and continue advancing the Company’s ongoing commitment to profitable growth. This plan included a reduction of the Company’s workforce and select real
estate exits and office space reductions within certain markets. The actions associated with the employee restructuring under the Restructuring Plan were
substantially completed in fiscal 2024 and the actions associated with the real estate portion of the Restructuring Plan are expected to be substantially complete
in fiscal 2026. In the first quarter of fiscal 2025, the Company approved an initiative focused on driving further operational efficiencies, optimizing our
management structure and increasing cost optimization efforts to realize long-term sustainable growth through a targeted workforce reduction. The actions
associated with this initiative are expected to be substantially complete in fiscal 2025.
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The following tables summarize the activities related to the Company’s restructuring initiatives for the three months ended April 30, 2024 and 2023 (in
millions):
Three Months Ended April 30, 2024
Workforce Reduction
Office Space
Reductions Total
Liability, beginning of the period $ 118 $ 2 $ 120
Charges 8 0 8
Payments (68) (2) (70)
Non-cash items
(1) 0 (1)
Liability, end of the period
$ 57 $ 0 $ 57
Three Months Ended April 30, 2023
Workforce Reduction
Office Space
Reductions Total
Liability, beginning of the period $ 607 $ 0 $ 607
Charges 344 367 711
Payments (320) 0 (320)
Non-cash items (17) (367) (384)
Liability, end of the period
$ 614 $ 0 $ 614
The liability for restructuring charges, which is related to workforce and office space reductions, is included in accounts payable, accrued expenses and
other liabilities on the condensed consolidated balance sheets. The charges reflected in the tables above related to workforce reduction included charges for
employee transition, severance payments, employee benefits and share-based compensation. The charges reflected in the tables above related to office space
reductions included exit charges associated with those reductions.
10. Stockholders’ Equity
Stock option activity for the three months ended April 30, 2024 was as follows:
Options Outstanding
Outstanding
Stock
Options
(in millions)
Weighted-
Average
Exercise Price
Aggregate
Intrinsic Value (in
millions)
Balance as of January 31, 2024 12 $ 185.77
Exercised (1) 174.62
Balance as of April 30, 2024
11 $ 190.70 $ 1,222
Vested or expected to vest
11 $ 190.10 $ 1,192
Exercisable as of April 30, 2024
7 $ 175.19 $ 874
Restricted stock activity for the three months ended April 30, 2024 was as follows:
Restricted Stock Outstanding
Outstanding
(in millions)
Weighted-Average Grant
Date Fair Value
Aggregate
Intrinsic
Value (in millions)
Balance as of January 31, 2024
28 $ 202.95
Granted - restricted stock units and awards 10 306.39
Granted - performance-based stock units 1 290.64
Canceled (1) 208.02
Vested and converted to shares (5)
197.41
Balance as of April 30, 2024
33 $ 239.08 $ 8,801
Expected to vest
27 $ 7,367
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The aggregate expected stock-based compensation expense remaining to be recognized as of April 30, 2024 was as follows (in millions):
Fiscal Period:
Remaining nine months of fiscal 2025 $ 2,483
Fiscal 2026 2,505
Fiscal 2027 1,670
Fiscal 2028 1,002
Fiscal 2029 106
Total stock-based compensation expense
$ 7,766
The aggregate expected stock-based compensation expense remaining to be recognized reflects only outstanding stock awards as of April 30, 2024 and
assumes no forfeiture activity and no changes in the expected level of attainment of performance share grants based on the Company’s financial performance
relative to certain targets.
Share Repurchase Program
In August 2022, the Board of Directors authorized a program to repurchase up to $10.0 billion of the Company’s common stock (the “Share Repurchase
Program”). In February 2023, the Board of Directors authorized an additional $10.0 billion in repurchases under the Share Repurchase Program. In February
2024, the Board of Directors authorized an additional $10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of
$30.0 billion. The Share Repurchase Program does not have a fixed expiration date and does not obligate the Company to acquire any specific number of
shares. Under the Share Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and or
open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
part of accelerated share repurchases and other methods. The timing, manner, price and amount of any repurchases are determined by the Company in its
discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. The Company accounts for treasury
stock under the cost method.
The Company repurchased the following under its Share Repurchase Program (in millions, except average price per share):
2024 2023
Shares
Average price per
share Amount Shares
Average price per
share Amount
Three months ended April 30 7 $ 293.00 $ 2,168 11 $ 188.17 $ 2,143
All repurchases were made in open market transactions. As of April 30, 2024, the Company was authorized to purchase a remaining $16.2 billion of its
common stock under the Share Repurchase Program.
Dividends
In February 2024, the Company announced a cash dividend of $0.40 per share of the Company’s outstanding common stock to stockholders of record as
of the close of business on March 14, 2024, which was paid on April 11, 2024 in the amount of approximately $388 million.
11. Income Taxes
Effective Tax Rate
The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or
loss and adjusts the provision for discrete tax items recorded in the period. For the three months ended April 30, 2024, the Company reported a tax provision of
$334 million on pretax income of $1.9 billion, which resulted in an effective tax rate of 18 percent. The Company’s effective tax rate differed from the U.S.
statutory rate of 21 percent primarily due to research and development credits and excess tax benefits from stock-based compensation.
For the three months ended April 30, 2023, the Company reported a tax provision of $127 million on pretax income of $326 million, which resulted in an
effective tax rate of 39 percent. The Company’s effective tax rate differed from the U.S. statutory rate of 21 percent primarily due to profitable jurisdictions
outside of the United States subject to tax rates greater than 21 percent and withholding taxes.
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Unrecognized Tax Benefits and Other Considerations
The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its subsidiaries are subject to income tax audits
by multiple tax jurisdictions throughout the world. Certain prior year tax returns are currently being examined by various taxing authorities in countries
including the United States, Germany, France, Israel, and India. The Company believes that it has provided adequate reserves for its income tax uncertainties in
all open tax years. As the outcome of the tax audits cannot be predicted with certainty, if any issues arising in the Company’s tax audits progress in a manner
inconsistent with management's expectations, the Company could adjust its provision for income taxes in the future. In addition, the Company anticipates it is
reasonably possible that an insignificant decrease of its unrecognized tax benefits may occur in the next 12 months, as the applicable statutes of limitations
lapse, ongoing examinations are completed, or tax positions meet the conditions of being effectively settled.
12. Net Income Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the fiscal
period. Diluted earnings per share is computed by giving effect to all potential weighted average dilutive common stock, including options and restricted stock
units. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.
A reconciliation of the denominator used in the calculation of basic and diluted earnings per share is as follows (in millions):
1
Three Months Ended April 30,
2024 2023
Numerator:
Net income $ 1,533 $ 199
Denominator:
Weighted-average shares outstanding for basic earnings per share 970 980
Effect of dilutive securities:
Employee stock awards 15 8
Weighted-average shares outstanding for diluted earnings per share 985 988
The weighted-average number of shares outstanding used in the computation of diluted earnings per share does not include the effect of the following
potentially outstanding common stock. The effects of these potentially outstanding shares were not included in the calculation of diluted earnings per share
because the effect would have been anti-dilutive (in millions):
Three Months Ended April 30,
2024 2023
Employee stock awards
5 23
13. Legal Proceedings and Claims
In the ordinary course of business, the Company is or may be involved in various legal or regulatory proceedings, claims or purported class actions
related to alleged infringement of third-party patents and other intellectual property rights, commercial, corporate and securities, labor and employment, wage
and hour and other claims. The Company has been, and may in the future be, put on notice or sued by third parties for alleged infringement of their proprietary
rights, including patent infringement.
In general, the resolution of a legal matter could prevent the Company from offering its service to others, could be material to the Company’s financial
condition or cash flows, or both, or could otherwise adversely affect the Company’s reputation and future operating results.
The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the
loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements,
legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal proceedings and other
contingencies are, however, inherently unpredictable and subject to significant uncertainties. At this time, the Company is not able to reasonably estimate the
amount or range of possible losses in excess of any amounts accrued, including losses that could arise as a result of application of non-monetary remedies, with
respect to the contingencies it faces, and the Company’s estimates may not prove to be accurate.
In management’s opinion, resolution of all current matters, including those described below, is not expected to have a material adverse impact on the
Company’s financial statements. However, depending on the nature and timing of any such
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dispute, payment or other contingency, the resolution of a matter could materially affect the Company’s current or future results of operations or cash flows, or
both, in a particular quarter.
Slack Litigation
Beginning in September 2019, seven purported class action lawsuits were filed against Slack, its directors, certain of its officers and certain investment
funds associated with certain of its directors, each alleging violations of securities laws in connection with Slack’s registration statement on Form S-1 (the
“Registration Statement”) filed with the SEC. All but one of these actions were filed in the Superior Court of California for the County of San Mateo, though
one plaintiff originally filed in the County of San Francisco before refiling in the County of San Mateo (and the original San Francisco action was dismissed).
The remaining action was filed in the U.S. District Court for the Northern District of California (the “Federal Action”). In the Federal Action, captioned Dennee
v. Slack Technologies, Inc., Case No. 3:19-CV-05857-SI, Slack and the other defendants filed a motion to dismiss the complaint in January 2020. In April
2020, the court granted in part and denied in part the motion to dismiss. In May 2020, Slack and the other defendants filed a motion to certify the court’s order
for interlocutory appeal, which the court granted. Slack and the other defendants filed a petition for permission to appeal the district court’s order to the Ninth
Circuit Court of Appeals, which was granted in July 2020. Oral argument was heard in May 2021. On September 20, 2021, the Ninth Circuit affirmed the
district court’s ruling. Slack filed a petition for rehearing with the Ninth Circuit on November 3, 2021, which was denied on May 2, 2022. Slack filed a petition
for a writ of certiorari with the U.S. Supreme Court on August 31, 2022, which was granted on December 13, 2022. On June 1, 2023, the Supreme Court issued
a unanimous decision vacating the Ninth Circuit’s decision and remanded for further proceedings. The Ninth Circuit ordered the parties to submit additional
briefing in light of the Supreme Court’s decision. That briefing has concluded, and the parties await rulings from the Ninth Circuit. The state court actions were
consolidated in November 2019, and the consolidated action is captioned In re Slack Technologies, Inc. Shareholder Litigation, Lead Case No. 19CIV05370
(the “State Court Action”). An additional state court action was filed in San Mateo County in June 2020 but was consolidated with the State Court Action in
July 2020. Slack and the other defendants filed demurrers to the complaint in the State Court Action in February 2020. In August 2020, the court sustained in
part and overruled in part the demurrers, and granted plaintiffs leave to file an amended complaint, which they filed in October 2020. Slack and the other
defendants answered the complaint in November 2020. Plaintiffs filed a motion for class certification on October 21, 2021, which remains pending. On
October 26, 2022, the court stayed the State Court Action pending resolution of Slack’s petition for a writ of certiorari in the Federal Action. The State Court
Action remains stayed pending resolution of the appellate proceedings in the Federal Action. The Federal Action and the State Court Action seek unspecified
monetary damages and other relief on behalf of investors who purchased Slack’s Class A common stock issued pursuant and/or traceable to the Registration
Statement.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact, which may consist of, among other things, trend analyses and statements regarding future events, future
financial performance, anticipated growth, and industry prospects, are forward-looking. Words such as “aims,” “anticipates,” “assumes,” “believes,”
“commitments,” “could,” “estimates,” “expects,” “forecasts,” “foresees,” “goals,” “intends,” “may,” “plans,” “predicts,” “projects,” “seeks,” “should,”
“targets” and “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking
statements are inherently uncertain and based on management’s current expectations and assumptions, which are subject to risks and uncertainties that are
difficult to predict, including those described in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on
Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may
cause actual results or outcomes to differ materially from those contained in any forward-looking statements.
In light of these and other risks and uncertainties, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur as we
expect or at all, and our actual results or outcomes may differ materially and adversely from those expressed or implied in our forward-looking statements.
Readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we undertake no obligation to revise or
update publicly any forward-looking statements for any reason.
Overview
Salesforce is a global leader in customer relationship management (“CRM”) technology that brings companies and customers together in the digital age.
Founded in 1999, we enable companies of every size and industry to take advantage of powerful technologies to connect to their customers in a whole new way
and help them transform their businesses around the customer in this digital-first world.
Our Customer 360 platform unites sales, service, marketing, commerce and IT teams by connecting customer data across systems, apps and devices to
create a complete view of customers. With this single source of customer truth, teams can be more responsive, productive and efficient, deliver intelligent,
personalized experiences across every channel and increase productivity. With Slack, we provide a digital headquarters where companies, employees,
governments and stakeholders can create success from anywhere. We continue to invest for growth, including investing in generative AI across all products,
which we believe will change how our customers help their customers, and continuously look to expand our leadership role in the cloud computing industry.
We continue to focus on several key growth levers, including driving multiple service offering adoption, increasing our penetration with enterprise and
international customers and expanding our industry-specific reach with more vertical software solutions. These growth levers often require a more
sophisticated go-to-market approach and, as a result, we may incur additional costs upfront to obtain new customers and expand our relationships with existing
customers, including additional sales and marketing expenses specific to subscription and support revenue. As a result, we have seen that customers with many
of these characteristics drive higher annual revenues and have lower attrition rates than our company average.
In addition to our focus on top line growth levers, we are also focused on reducing our operating expenses to improve our operating margin. For example,
in January 2023, we announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins and continue
advancing our ongoing commitment to profitable growth which included a reduction of our workforce by approximately ten percent and office space reductions
within certain markets. The employee actions associated with the Restructuring Plan were substantially completed in fiscal 2024 and the real estate actions
associated with the Restructuring Plan are expected to be fully complete in fiscal 2026. In addition to the Restructuring Plan, we continued to evaluate and
operationalize future programs to drive further operational efficiencies, optimize our management structure and increase cost optimization efforts to realize
long-term sustainable growth, including a targeted workforce reduction that was initiated in the first quarter of fiscal 2025 and is expected to be substantially
complete in fiscal 2025. We have started to see improvements in our operating expenses across all operating categories, with the most opportunity in sales and
marketing expense and general and administrative expenses. Over the long term, we expect to see additional operating expense improvements, which could
include various restructuring initiatives to drive operational efficiencies.
Highlights from First Quarter of Fiscal 2025
• Revenue: For the three months ended April 30, 2024, revenue was $9.1 billion, an increase of 11 percent year-over-year.
• Income from Operations: For the three months ended April 30, 2024, income from operations was $1.7 billion as compared to $0.4 billion from a
year ago. Operating margin, which represents income from operations as a percentage
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of total revenue, increased to approximately 19 percent for the three months ended April 30, 2024 compared to approximately five percent for the
same period in the prior year.
• Earnings per Share: For the three months ended April 30, 2024, diluted earnings per share was $1.56 as compared to diluted earnings per share of
$0.20 from a year ago.
• Cash: Cash provided by operations for the three months ended April 30, 2024 was $6.2 billion, an increase of 39 percent year-over-year. Total cash,
cash equivalents and marketable securities as of April 30, 2024 was $17.7 billion.
• Remaining Performance Obligation: Total remaining performance obligation, which represents all future revenue under contract yet to be
recognized, as of April 30, 2024 was approximately $53.9 billion, an increase of 15 percent year-over-year. Current remaining performance obligation
as of April 30, 2024 was approximately $26.4 billion, an increase of 10 percent year-over-year.
• Share Repurchase Program: During the three months ended April 30, 2024, we repurchased approximately 7 million shares of our common stock
for approximately $2.2 billion.
• Dividend Program: During the three months ended April 30, 2024, we paid approximately $388 million in dividends.
We continue to see the impact of macroeconomic factors and the more measured buying behavior of our customers on our business and our customers’
businesses in ways that are difficult to isolate and quantify. In the first quarter of fiscal 2025, we continued to experience elongated sales cycles, additional deal
approval layers and deal compression. Slower growth in new and renewal business, particularly if sustained, impacts our remaining performance obligation,
revenues and our ability to meet financial guidance and long-term targets.
In addition, the expanding global scope of our business and the heightened volatility of global markets expose us to the risk of fluctuations in foreign
currency markets. Foreign currency fluctuations minimally impacted revenues in the three months ended April 30, 2024 compared to the three months ended
April 30, 2023 and our current remaining performance obligation was minimally impacted as of April 30, 2024 compared to what we would have reported as of
April 30, 2023 using constant currency rates. During fiscal 2024 and the first quarter of fiscal 2025, the United States Dollar strengthened significantly against
certain foreign currencies in the markets in which we operate, particularly against the Euro, British Pound Sterling and Japanese Yen. The impact of foreign
currency fluctuations could impact our near-term results and ability to accurately predict our future results and earnings. The impact of these fluctuations can
also be compounded by the seasonality of our business in which our fourth quarter has historically been our strongest quarter for new business and renewals.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2025, for example, refer to the fiscal year ending January 31, 2025.
Operating Segments
We operate as one segment. See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements
for further discussion.
Sources of Revenues
We derive our revenues from two sources: (1) subscription and support revenues and (2) professional services and other revenues. Subscription and
support revenues accounted for approximately 94 percent of our total revenues for the three months ended April 30, 2024.
Subscription and support revenues include subscription fees from customers accessing our enterprise cloud computing services (collectively, “Cloud
Services”), software license revenues from the sales of term software licenses, and support revenues from the sale of support and updates beyond the basic
subscription fees or related to the sales of software licenses. Our Cloud Services allow customers to use our multi-tenant software without taking possession of
the software. Revenue is generally recognized ratably over the contract term. Subscription and support revenues also include revenues associated with term
software licenses that provide the customer with a right to use the software as it exists when made available. Revenues from term software licenses are
generally recognized at the point in time when the software is made available to the customer. Revenue from support and updates is recognized as such support
and updates are provided, which is generally ratably over the contract term. Changes in contract duration for multi-year term software licenses can impact the
amount of revenues recognized upfront. Revenues from term software licenses represent less than ten percent of total subscription and support revenue for the
three months ended April 30, 2024.
The revenue growth rates of each of our service offerings, as described below in “Results of Operations,” fluctuate from quarter to quarter and over time.
Additionally, we manage the total balanced product portfolio to deliver solutions to our customers and, as a result, the revenue result for each offering is not
necessarily indicative of the results to be expected for any subsequent quarter. In addition, some of our Cloud Service offerings have similar features and
functions. For example,
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customers may use our Sales, Service or Platform service offerings to record account and contact information, which are similar features across these service
offerings. Depending on a customer’s actual and projected business requirements, more than one service offering may satisfy the customer’s current and future
needs. We record revenue based on the individual products ordered by a customer, not according to the customer’s business requirements and usage.
Our growth in revenues is also impacted by attrition. Attrition represents the reduction or loss of the annualized value of our contracts with customers. We
calculate our attrition rate at a point in time on a trailing twelve-month basis as of the end of each month. As of April 30, 2024, our attrition rate, excluding
Slack self service, was approximately eight percent.
We continue to maintain a variety of customer programs and initiatives, which, along with increasing enterprise adoption, have helped keep our attrition
rate consistent as compared to the prior year. Consistent attrition rates play a role in our ability to maintain growth in our subscription and support revenues.
Seasonal Nature of Unearned Revenue, Accounts Receivable and Operating Cash Flow
Unearned revenue primarily consists of billings to customers for our subscription service. Over 90 percent of the value of our billings to customers is for
our subscription and support service. We generally invoice our customers in advance, in annual installments, and typical payment terms provide that our
customers pay us within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or in revenue
depending on whether transfer of control to customers has occurred. In general, we collect our billings in advance of the subscription service period. We
typically issue renewal invoices in advance of the renewal service period, and depending on timing, the initial invoice for the subscription and services contract
and the subsequent renewal invoice may occur in different quarters. There is a disproportionate weighting toward annual billings in the fourth quarter, primarily
as a result of large enterprise account buying patterns. Our fourth quarter has historically been our strongest quarter for new business and renewals. The year-
on-year compounding effect of this seasonality in both billing patterns and overall new and renewal business causes the value of invoices that we generate in
the fourth quarter for both new business and renewals to increase as a proportion of our total annual billings. Accordingly, because of this billing activity, our
first quarter is typically our largest collections and operating cash flow quarter. Generally, our third quarter has historically been our smallest operating cash
flow quarter. Unearned revenues, accounts receivable and operating cash flow may also be impacted by acquisitions. For example, operating cash flows may be
adversely impacted by acquisitions due to transaction costs, financing costs such as interest expense and lower operating cash flows from the acquired entity.
Remaining Performance Obligation
Our remaining performance obligation represents all future revenue under contract that has not yet been recognized as revenue and includes unearned
revenue and unbilled amounts. Our current remaining performance obligation represents future revenue under contract that is expected to be recognized as
revenue in the next 12 months.
Remaining performance obligation is not necessarily indicative of future revenue growth and is influenced by several factors, including seasonality, the
timing of renewals, average contract terms, foreign currency exchange rates and fluctuations in new business growth. Remaining performance obligation is also
impacted by acquisitions. Unbilled portions of the remaining performance obligation denominated in foreign currencies are revalued each period based on the
period end exchange rates. For multi-year subscription agreements billed annually, the associated unbilled balance and corresponding remaining performance
obligation are typically high at the beginning of the contract period, zero just prior to renewal, and increase if the agreement is renewed. Low remaining
performance obligation attributable to a particular subscription agreement is often associated with an impending renewal but may not be an indicator of the
likelihood of renewal or future revenue from such customer. Changes in contract duration or the timing of delivery of professional services can impact
remaining performance obligation as well as the allocation between current and non-current remaining performance obligation.
Cost of Revenues and Operating Expenses
Cost of Revenues
Cost of subscription and support revenues primarily consists of expenses related to delivering our service and providing support, including the costs of
data center capacity, certain fees paid to various third parties for the use of their technology, services and data, employee-related costs such as salaries and
benefits, and allocated overhead. Our cost of subscription and support revenues also includes amortization of certain acquisition-related intangible assets, such
as the amortization of the cost associated with an acquired company’s research and development efforts. Also included in the cost of subscription and support
revenues are expenses incurred supporting the free user base of Slack, including third-party hosting costs and employee-related costs, including stock-based
compensation expense, specific to customer experience and technical operations.
Cost of professional services and other revenues consists primarily of employee-related costs associated with these services, including stock-based
compensation expense, the cost of subcontractors, certain third-party fees and allocated overhead. We believe that our professional services organization
facilitates the adoption of our service offerings, helps us to
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secure larger subscription revenue contracts and supports our customers’ success. The cost of professional services may exceed revenues from professional
services in future fiscal periods.
Research and Development
Research and development expenses consist primarily of salaries and related expenses, including stock-based compensation expense for our engineering
staff associated with product development, as well as allocated overhead.
Sales and Marketing
Sales and marketing expenses make up the majority of our operating expenses and consist primarily of salaries and related expenses, including stock-
based compensation expense and commissions, for our sales and marketing staff, as well as payments to partners, marketing programs and allocated overhead.
Marketing programs consist of advertising, events, corporate communications, brand building and product marketing activities. We capitalize certain costs to
obtain customer contracts, such as commissions, and amortize these costs on a straight-line basis. As such, the timing of expense recognition for these
commissions is not consistent with the timing of the associated cash payment.
Our sales and marketing expenses include amortization of certain acquisition-related intangible assets, such as the amortization of the cost associated
with an acquired company’s trade names, customer lists and customer relationships.
General and Administrative
General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation expense, for finance and
accounting, legal, internal audit, human resources and management information systems personnel, as well as professional services fees and allocated
overhead.
We allocate overhead such as information technology infrastructure, rent, occupancy charges and certain employee benefits based on headcount. As such,
these types of expenses are reflected in each cost of revenue and operating expense category.
Restructuring
Restructuring, primarily related to the Restructuring Plan, consists of charges related to employee transition, severance payments, employee benefits and
stock-based compensation as well as exit charges associated with office space reductions. The employee actions associated with the Restructuring Plan are
substantially complete and the targeted workforce reduction initiated in the first quarter of fiscal 2025 is expected to be substantially complete in fiscal 2025.
The real estate actions associated with the Restructuring Plan are expected to be fully complete in fiscal 2026. Restructuring excludes allocated overhead.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these condensed 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 “Summary of Business and Significant Accounting Policies” to our
condensed consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity.
Accordingly, these are the policies and estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial
condition and results of operations:
• the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;
• the valuation of privately held strategic investments;
• the fair value of assets acquired and liabilities assumed for business combinations;
• the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions;
• the useful lives of intangible assets; and
• the fair value of certain stock awards issued.
These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the condensed
consolidated financial statements as soon as they become known. Actual results could differ from these estimates and any such differences may be material to
our financial statements.
Additionally, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual
Report on Form 10-K for the fiscal year ended January 31, 2024 for further discussion with respect to these policies and estimates.
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Recent Accounting Pronouncements
See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements for our discussion about new
accounting pronouncements.
Results of Operations
The following tables set forth selected data for each of the periods indicated (in millions):
1
Three Months Ended April 30,
2024 % of Total Revenues 2023 % of Total Revenues
Revenues:
Subscription and support $ 8,585 94 % $ 7,642 93 %
Professional services and other 548 6 605 7
Total revenues 9,133 100 8,247 100
Cost of revenues (1)(2):
Subscription and support 1,560 17 1,510 18
Professional services and other 602 7 615 8
Total cost of revenues
2,162 24 2,125 26
Gross profit
6,971 76 6,122 74
Operating expenses (1)(2):
Research and development 1,368 15 1,207 15
Sales and marketing 3,239 35 3,154 38
General and administrative 647 7 638 8
Restructuring 8 0 711 8
Total operating expenses
5,262 57 5,710 69
Income from operations
1,709 19 412 5
Gains (losses) on strategic investments, net 37 0 (141) (2)
Other income 121 1 55 1
Income before provision for income taxes
1,867 20 326 4
Provision for income taxes (334) (3) (127) (2)
Net income
$ 1,533 17 % $ 199 2 %
(1) Amounts related to amortization of intangible assets acquired through business combinations, as follows (in millions):
Three Months Ended April 30,
2024 % of Total Revenues 2023 % of Total Revenues
Cost of revenues
$ 238 3 % $ 248 3 %
Sales and marketing 223 2 223 3
(2) Amounts related to stock-based compensation expense, as follows (in millions):
Three Months Ended April 30,
2024 % of Total Revenues 2023 % of Total Revenues
Cost of revenues $ 119 1 % $ 103 1 %
Research and development 260 3 241 3
Sales and marketing 290 3 263 3
General and administrative 81 1 73 1
Restructuring 0 0 16 0
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The following table sets forth selected balance sheet data and other metrics for each of the periods indicated (in millions, except remaining performance
obligation, which is presented in billions):
As of
April 30, 2024 January 31, 2024
Cash, cash equivalents and marketable securities $ 17,670 $ 14,194
Unearned revenue 16,061 19,003
Remaining performance obligation 53.9 56.9
Principal due on our outstanding debt obligations (1) 9,500 9,500
(1) Amounts do not include operating or financing lease obligations.
Remaining performance obligation represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled
amounts that will be recognized as revenue in future periods.
Revenues
Three Months Ended April 30, Variance
(in millions)
2024 2023 Dollars Percent
Subscription and support
$ 8,585 $ 7,642 $ 943 12 %
Professional services and other 548 605 (57)
(9)%
Total revenues
$ 9,133 $ 8,247 $ 886
11 %
The increase in subscription and support revenues for the three months ended April 30, 2024 was primarily caused by volume-driven increases from new
business, which includes new customers, upgrades and additional subscriptions from existing customers. Pricing was not a significant driver of the increase in
revenues for the period. Revenues from term software licenses, which are recognized at a point in time, represented approximately seven percent and five
percent of total subscription and support revenues for the three months ended April 30, 2024 and 2023, respectively. Subscription and support revenues
accounted for approximately 94 percent and 93 percent of our total revenues for the three months ended April 30, 2024 and 2023, respectively.
The decrease in professional services and other revenues was due primarily to less demand for larger, multi-year transformation engagements and, in
some cases, delayed projects. These trends may continue in the near term.
Subscription and Support Revenues by Service Offering
Subscription and support revenues consisted of the following (in millions):
Three Months Ended April 30,
2024
As a % of Total
Subscription and Support
Revenues 2023
As a % of Total
Subscription and Support
Revenues Growth Rate
Sales $ 1,998 23 % $ 1,810 24 % 10 %
Service 2,182 26 1,964 26 11
Platform and Other 1,718 20 1,567 20 10
Marketing and Commerce 1,282 15 1,170 15 10
Integration and Analytics (1) 1,405 16 1,131 15 24
Total $ 8,585 100 % $ 7,642 100 %
12 %
(1) In the fourth quarter of fiscal year 2024, the Company renamed the service offering previously referred to as Data to Integration and Analytics, which
includes Mulesoft and Tableau.
Our industry vertical service offerings revenue is included in one of the above service offerings depending on the primary service purchased.
Integration and Analytics subscription and support revenues include revenues from term software licenses, which are recognized at the point in time when
the software is made available to the customer. Therefore, we expect Integration and Analytics to experience greater volatility in revenues period to period
compared to our other service offerings and recent revenue trends may not be indicative of future performance. Additionally, as we transition customers within
the Integration and Analytics offering from term software licenses to subscription based services, revenue associated with such customers will generally be
recognized ratably over the contract term, which we expect may potentially result in less revenue in the period the customer transitions but incremental
revenues over the remaining term.
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Revenues by Geography
Three Months Ended April 30,
(in millions)
2024 As a % of Total Revenues 2023 As a % of Total Revenues Growth Rate
Americas
$ 6,062 66 % $ 5,482 66 % 11 %
Europe 2,145 24 1,951 24 10
Asia Pacific 926 10 814 10 14
Total
$ 9,133 100 % $ 8,247 100 %
11 %
Revenues by geography are determined based on the region of the Salesforce contracting entity, which may be different than the region of the customer.
The increase in revenues across all regions was due primarily to the continued execution of our business and growth strategy, including increasing our
geographic reach primarily through extending our go-to-market capabilities globally. During the three months ended April 30, 2024, revenues outside of the
Americas were negatively impacted by approximately one percent by foreign currency fluctuations compared to the three months ended April 30, 2023.
Cost of Revenues
Three Months Ended April 30,
Variance
Dollars(in millions) 2024 As a % of Total Revenues 2023 As a % of Total Revenues
Subscription and support $ 1,560 17 % $ 1,510 18 % $ 50
Professional services and other 602 7 % 615 8 % (13)
Total cost of revenues $ 2,162 24 % $ 2,125 26 % $ 37
For the three months ended April 30, 2024, the increase in cost of revenues in absolute dollars was primarily due to an increase in employee-related
costs, including stock-based compensation expense. Cost of revenues as a percentage of total revenues during the three months ended April 30, 2024 decreased
by two percent from the same period a year ago due to a decrease in relative employee-related costs, including stock-based compensation expense, as well as
reduced service delivery expenses. Our cost of revenues headcount increased by one percent during the three months ended April 30, 2024.
We intend to continue to invest additional resources in our enterprise cloud computing services and data center capacity to allow us to scale with our
customers and continue to evolve our security measures. The timing of these expenses may cause our cost of revenues as a percentage of revenues to fluctuate
in the near term due to changes in demand for our service offerings.
Operating Expenses
Three Months Ended April 30,
Variance
Dollars
(in millions)
2024 As a % of Total Revenues 2023 As a % of Total Revenues
Research and development $ 1,368 15 % $ 1,207 15 % $ 161
Sales and marketing 3,239 35 3,154 38 85
General and administrative 647 7 638 8 9
Restructuring 8 0 711 8 (703)
Total operating expenses $ 5,262 57 % $ 5,710 69 % $ (448)
For the three months ended April 30, 2024, the increase in research and development expenses in absolute dollars was primarily due to an increase in
employee-related costs, including stock-based compensation expense. Research and development expenses as a percentage of total revenues during the three
months ended April 30, 2024 was consistent with the same period a year ago. Our research and development headcount increased by 16 percent during the
three months ended April 30, 2024, primarily in lower cost regions.
We expect that research and development expenses will likely remain consistent as a percentage of revenue in the near term as we continue to invest in
technology to support the development of new, and improve existing, technologies, including our AI technologies and our Data Cloud service offering, and the
integration of acquired technologies combined with our anticipated revenue growth in line with these incremental expenses.
For the three months ended April 30, 2024, the increase in sales and marketing expenses in absolute dollars was primarily due to an increase in
employee-related costs, including stock-based compensation expense. Sales and marketing expenses as a percentage of total revenues during the three months
ended April 30, 2024 decreased by three percent from the same period a
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year ago due to a decrease in relative employee-related costs, including stock-based compensation expense. Our sales and marketing headcount decreased by
one percent during the three months ended April 30, 2024.
We expect that sales and marketing expenses will likely decrease as a percentage of revenues in the near term as we continue to focus on leveraging our
self-serve and partner-led channels and increasing our sales productivity.
For the three months ended April 30, 2024, the increase in general and administrative expenses in absolute dollars was primarily due to an increase in
professional services expenses. General and administrative expenses as a percentage of total revenues during the three months ended April 30, 2024 decreased
by one percent from the same period a year ago due to a decrease in employee-related costs. Our general and administrative headcount decreased by 5 percent
during the three months ended April 30, 2024.
We expect that general and administrative expenses will likely decrease as a percentage of revenues in the near term as we continue to invest in process
efficiency initiatives.
In the three months ended April 30, 2024, approximately $8 million of costs were incurred related to our restructuring initiatives, which primarily was
related to employee transition, severance payments and employee benefits. We do not expect to incur significant additional charges in connection with our
restructuring initiatives in the near term.
Other Income and Expenses
Three Months Ended April 30,
Variance
Dollars(in millions) 2024 2023
Gains (losses) on strategic investments, net $ 37 $ (141) $ 178
Other income 121 55 66
Gains (losses) on strategic investments, net consists primarily of mark-to-market adjustments related to our publicly held equity securities, observable
price adjustments related to our privately held equity securities and other adjustments including impairments. Our strategic investment portfolio continues to be
affected by challenging market conditions for companies in which we hold private equity, debt or other investments, as well as high public equity market
volatility. For the three months ended April 30, 2024, the gain on our strategic investment portfolio was primarily driven by unrealized gains on privately held
equity investments of $105 million and realized gains on sales of securities of $59 million, partially offset by impairments of $130 million. For the three
months ended April 30, 2023, the loss on strategic investments was primarily driven by impairments on privately held equity and debt securities of $177
million, partially offset by $38 million in unrealized gains on privately held equity securities.
Other income primarily consists of interest income on our marketable securities portfolio, which is partially offset by interest expense on our debt as well
as our finance leases. Other income increased primarily due to an increase in investment income from rising interest rates.
Provision For Income Taxes
Three Months Ended April 30,
Variance
Dollars
(in millions)
2024 2023
Provision for income taxes $ (334) $ (127) $ (207)
Effective tax rate 18 % 39 %
We recorded a tax provision of $334 million on pretax income of $1.9 billion for the three months ended April 30, 2024. Our tax provision increased
from a year ago primarily due to higher pretax income. Our effective tax rate decreased from a year ago primarily due to excess tax benefits from stock based
compensation. Our effective tax rate may fluctuate due to changes in our domestic and foreign earnings, or material discrete tax items, or a combination of
these factors resulting from transactions or events, including acquisitions, changes to our operating structure and other macroeconomic factors.
Several countries have enacted legislation to implement the Organization for Economic Cooperation and Development’s 15% global minimum tax
regime effective January 1, 2024. We expect other countries to follow. We do not anticipate material changes to our income tax provision for fiscal 2025. We
continue to evaluate the impacts of legislation in the jurisdictions in which we operate. Our effective tax rate and cash tax payment could increase in future
years.
Liquidity and Capital Resources
At April 30, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $17.7 billion and accounts receivable
of $4.3 billion. Our cash equivalents and marketable securities are comprised primarily of corporate notes and obligations, U.S. treasury securities, U.S. agency
obligations, asset-backed securities, foreign government obligations, mortgage-backed obligations, covered bonds, time deposits, money market mutual funds
and municipal securities. Our credit agreement (the “Revolving Loan Credit Agreement”), which as of April 30, 2024, provides the ability to borrow up to $3.0
billion in unsecured financing (the “Credit Facility”), also serves as a source of liquidity.
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Cash from operations could continue to be affected by various risks and uncertainties, including, but not limited to, the risks detailed in Part I, Item 1A,
“Risk Factors.” We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to
contracted noncancellable subscription agreements, which are not reflected on the balance sheet, and, if necessary, our borrowing capacity under our Credit
Facility will be sufficient to meet our working capital, capital expenditure and debt maintenance needs over the next 12 months.
In the future, we may enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights.
To facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all,
impacting our ability to complete subsequent acquisitions or investments.
Cash Flows
For the three months ended April 30, 2024 and 2023 our cash flows were as follows (in millions):
1
Three Months Ended April 30,
2024 2023
Net cash provided by operating activities
$ 6,247 $ 4,491
Net cash provided by (used in) investing activities (2,651) 347
Net cash used in financing activities (2,108) (2,716)
Operating Activities
The net cash provided by operating activities during the three months ended April 30, 2024 was primarily comprised of net income of $1.5 billion,
adjusted for non-cash items, including $879 million of depreciation and amortization and $750 million of stock-based compensation expense. Cash provided by
operating activities can be significantly impacted by factors such as growth in new business, timing of cash receipts from customers, vendor payment terms and
timing of payments to vendors. Cash provided by operating activities during the three months ended April 30, 2024 was further benefited by the changes in
accounts receivable, net of $7.2 billion partially offset by the change in unearned revenue of $3.0 billion and the change in accounts payable and accrued
expenses and other liabilities of $755 million. As our business continues to grow, and assuming our expenses remain in line with or less than our revenue
growth, we expect to continue to see growth in net cash provided by operating activities.
The net cash provided by operating activities during the three months ended April 30, 2023 was comprised of net income of $199 million, adjusted for
non-cash items including $1.3 billion of depreciation and amortization and $696 million related to stock-based compensation expense. Cash provided by
operating activities can be significantly impacted by factors such as growth in new business, timing of cash receipts from customers, vendor payment terms and
timing of payments to vendors. Cash provided by operating activities during the three months ended April 30, 2023 was further benefited by the change in
accounts receivable, net of $6.1 billion due to cash collections and was partially offset by the change in unearned revenue of $2.3 billion.
Investing Activities
The net cash used in investing activities during the three months ended April 30, 2024 was primarily related to net outflows from marketable securities
activity of $2.0 billion, net outflows for the acquisition of Spiff of $338 million, net outflows from strategic investment activity of $150 million and capital
expenditures of $163 million.
The net cash provided by investing activities during the three months ended April 30, 2023 was related to net inflows of $686 million from marketable
securities activity which was partially offset by capital expenditures of $243 million and net outflows of $96 million from strategic investment activity.
Financing Activities
Net cash used in financing activities during the three months ended April 30, 2024 consisted primarily of $2.1 billion from repurchases of common stock
and $388 million related to payments of dividends, partially offset by $533 million from proceeds from equity plans.
Net cash used in financing activities during the three months ended April 30, 2023 consisted primarily of $2.1 billion from repurchases of common stock
and $1.0 billion related to the repayment of the 2023 Senior Notes, partially offset by $449 million from proceeds from equity plans.
Debt
As of April 30, 2024, we had senior unsecured debt outstanding, with maturities starting in July 2024 and extending through July 2061 with a total
carrying value of $9.4 billion, of which $1.0 billion was related to the 2024 Senior Notes due in the next 12 months. We were in compliance with all debt
covenants as of April 30, 2024.
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In December 2020, we entered into the Revolving Loan Credit Agreement, which provides for a $3.0 billion unsecured revolving Credit Facility that
matures in December 2025. There were no outstanding borrowings under the Credit Facility as of April 30, 2024. We may use the proceeds of future
borrowings under the Credit Facility for general corporate purposes, which may include, without limitation, the consideration, fees, costs and expenses related
to any acquisition. In April 2022 and May 2023, we amended the Revolving Loan Credit Agreement to reflect certain immaterial administrative changes.
We do not have any special purpose entities and we do not engage in off-balance sheet financing arrangements.
Share Repurchase Program
In August 2022, the Board authorized a program to repurchase up to $10.0 billion of our common stock (the “Share Repurchase Program”). The Share
Repurchase Program does not have a fixed expiration date and does not obligate us to acquire any specific number of shares. In February 2023, the Board
authorized an additional $10.0 billion in repurchases under the Share Repurchase Program. In February 2024, the Board of Directors authorized an additional
$10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of $30.0 billion.
We repurchased the following under the Share Repurchase Program (in millions, except average price per share):
2024 2023
Shares
Average price per
share Amount Shares
Average price per
share Amount
Three months ended April 30 7 $ 293.00 $ 2,168 11 $ 188.17 $ 2,143
All repurchases were made in open market transactions. As of April 30, 2024, we were authorized to purchase a remaining $16.2 billion of the
Company’s common stock under the Share Repurchase Program. Subsequent to April 30, 2024, we have paid approximately $0.6 billion through May 24, 2024
for additional shares under the Share Repurchase Program.
The Inflation Reduction Act introduced a new one percent excise tax imposed on certain stock repurchases made after December 31, 2022. The excise
tax is assessed on an annual fiscal year basis and generally paid in the subsequent fiscal year. However, we expect the timing of the fiscal 2024 payment to be
determined by the anticipated final regulations. The excise tax may apply to our stock repurchases this fiscal year and could be impacted by factors including
the Company’s share price. In the event of an excise tax for fiscal 2025, next fiscal year's financing cash flow could be impacted.
Dividends
On February 28, 2024, we announced a quarterly dividend policy and the declaration of our first-ever cash dividend. In April 2024, we paid a cash
dividend of $0.40 per share of our outstanding common stock to stockholders of record as of the close of business on March 14, 2024, totaling approximately
$388 million.
The declaration and payment of future cash dividends is subject to our Board continuing to determine that the declaration of dividends is in the best
interests of the Company and its stockholders, after giving consideration to continued capital availability, general economic and market conditions, and
applicable laws and agreements.
Contractual Obligations
Our principal commitments consist of obligations under leases for office space, co-location data center facilities and our development and test data
center, as well as leases for computer equipment, software, furniture and fixtures. As of April 30, 2024, the future noncancellable minimum payments under
these commitments were approximately $4.4 billion, with payments of $780 million due in the next nine months and $3.6 billion due thereafter. We generally
expect to satisfy these commitments with cash on hand and cash provided by operating activities.
During the three months ended April 30, 2024 and in future years, we have made, and expect to continue to make, additional investments in our
infrastructure to scale our operations to increase productivity and enhance our security measures. We plan to upgrade or replace various internal systems to
scale with our overall growth. While we continue to make investments in our infrastructure, including offices, information technology and data centers, as well
as investments with infrastructure service providers, to provide capacity for the growth of our business, our strategy may continue to change related to these
investments and we may slow the pace of our investments.
Other Future Obligations
As of April 30, 2024, we expect approximately $180 million to $200 million in future cash payments related to our restructuring initiatives, primarily
related to workforce costs such as severance payments. We generally expect to satisfy these commitments with cash on hand and cash provided by operating
activities. Additionally, as we have utilized the majority of our net operating loss and tax credits carryforward, we expect an increase in cash taxes.
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Environmental, Social and Governance
We believe that business is the greatest platform for change. By focusing on environmental, social and governance (“ESG”) excellence, Salesforce strives
to be a leading example of an ethical, resilient company delivering value to stakeholders now and in the future. We aim to maintain our public commitments
with the highest standards of integrity and transparency and enable compliance with global ESG regulations.
Guided by our values, we work to earn the trust of our stakeholders. Transparency is key to trust, which is why we have published an annual ESG report
for over ten years to keep our stakeholders informed and to hold ourselves accountable to our ESG strategy, as well as our key programs, goals, commitments
and metrics. Our ESG disclosures are also informed by relevant topics identified through ESG relevancy assessments and third-party ESG reporting
organizations, frameworks and standards, such as the Sustainability Accounting Standards Board (“SASB”) Standards and the Task Force on Climate-Related
Financial Disclosures (“TCFD”). Read more about these initiatives and view our Stakeholder Impact Report at https://salesforce.com/stakeholder-impact-
report. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by
reference into this report.
While we believe that our ESG goals align with our long-term growth strategy and financial and operational priorities, they are aspirational and may
change, and there is no guarantee or promise that they will be met.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, including changes in foreign currency exchange rates, interest rates and equity investment risks. This exposure
has increased due to recent financial market movements and changes to our expectations of near-term possible movements caused by the impact of the
macroeconomic environment as discussed in more detail below.
Foreign Currency Exchange Risk
We primarily conduct our business in the following locations: the United States, Europe, Canada, Latin America, Asia Pacific and Japan. The expanding
global scope of our business exposes us to the risk of fluctuations in foreign currency markets, including emerging markets. This exposure is the result of
selling in multiple currencies, operating in countries where the functional currency is the local currency and growth in our international investments, including
data center expansion, costs associated with third-party infrastructure providers and additional headcount in foreign countries. Specifically, our results of
operations and cash flows are subject to fluctuations in the following currencies: the Euro, British Pound Sterling, Japanese Yen, Canadian Dollar, Australian
Dollar and Brazilian Real against the United States Dollar (“USD”). These exposures may change over time as business practices evolve and economic
conditions change. Changes in foreign currency exchange rates could have an adverse impact on our financial results and cash flows.
Foreign Currency Transaction Risk
Our foreign currency exposures typically arise from selling annual and multi-year subscriptions in multiple currencies, customer accounts receivable,
intercompany transfer pricing arrangements and other intercompany transactions. Our foreign currency management objective is to minimize the effect of
fluctuations in foreign exchange rates on selected assets or liabilities without exposing us to additional risk associated with transactions that could be regarded
as speculative.
We pursue our objective by utilizing foreign currency forward contracts to offset foreign exchange risk. Our foreign currency forward contracts are
generally short-term in duration. We neither use these foreign currency forward contracts for trading purposes nor do we currently designate these forward
contracts as hedging instruments under the relevant accounting and financial reporting guidelines. Accordingly, we record the fair values of these contracts as
of the end of our reporting period to our condensed consolidated balance sheets with changes in fair values recorded to our condensed consolidated statements
of operations. Given the short duration of the forward contracts, the amount recorded is not significant. Our ultimate realized gain or loss with respect to
foreign currency exposures will generally depend on the size and type of cross-currency transactions that we enter into, the currency exchange rates associated
with these exposures and changes in those rates, the net realized gain or loss on our foreign currency forward contracts and other factors.
Foreign Currency Translation Risk
Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses and cash flows that we report for our foreign
subsidiaries upon the translation of these amounts into USD. Total revenue during the three months ended April 30, 2024, was minimally impacted by
fluctuations in foreign currencies compared to the three months ended April 30, 2023. In addition, fluctuations in USD against international currencies
minimally impacted our current remaining performance obligation as of April 30, 2024 compared to what we would have reported as of April 30, 2023 using
constant currency rates.
Interest Rate Sensitivity
As of April 30, 2024, we had cash, cash equivalents and marketable securities totaling $17.7 billion. This amount was invested primarily in money market
funds, time deposits, corporate notes and bonds, government securities and other debt securities with credit ratings of at least BBB or better. The cash, cash
equivalents and marketable securities are held for general corporate purposes, including share repurchases, dividend payments, acquisitions of, or investments
in, complementary businesses, services or technologies, working capital and capital expenditures. Our investments are made for capital preservation purposes.
We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed-rate securities may have
their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if
we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our debt securities as “available for
sale,” no gains or losses are recognized in our condensed consolidated statement of operations due to changes in interest rates. Gains or losses recognized in
our condensed consolidated statement of operations are limited to those related to either the sale of securities prior to maturity or expected credit losses.
Our fixed-income portfolio is also subject to interest rate risk. An immediate increase or decrease in interest rates of 100 basis points at April 30, 2024
could result in a $80 million market value reduction or increase of the same amount. This estimate is based on a sensitivity model that measures market value
changes when changes in interest rates occur. Fluctuations
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in the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive
income, net, and are realized only if we sell the underlying securities.
At January 31, 2024, we had cash, cash equivalents and marketable securities totaling $14.2 billion. Changes in interest rates of 100 basis points would
have resulted in market value changes of $65 million.
Market Risk and Market Interest Risk
We deposit our cash with multiple financial institutions.
Debt
We maintain debt obligations that are subject to market interest risk, as follows (in millions):
Instrument Maturity Date
Principal
Outstanding as of
April 30, 2024 Interest Terms Contractual Interest Rate
2024 Senior Notes July 2024 $ 1,000 Fixed 0.625%
Credit Facility December 2025 0 Floating N/A
2028 Senior Notes April 2028 1,500 Fixed 3.70
2028 Senior Sustainability Notes July 2028 1,000 Fixed 1.50
2031 Senior Notes July 2031 1,500 Fixed 1.95
2041 Senior Notes July 2041 1,250 Fixed 2.70
2051 Senior Notes July 2051 2,000 Fixed 2.90
2061 Senior Notes July 2061 1,250 Fixed 3.05
Any borrowings under our Credit Facility bear interest, at our option, at a base rate plus a spread of 0.00% to 0.125% or an adjusted benchmark rate plus
a spread of 0.50% to 1.125%, in each case with such spread being determined based on our credit rating. We are also obligated to pay an ongoing commitment
fee on undrawn amounts. As of April 30, 2024, there was no outstanding borrowing amount under the Credit Facility.
The bank counterparties to our derivative contracts potentially expose us to credit-related losses in the event of their nonperformance. To mitigate that
risk, we only contract with counterparties who meet the minimum requirements under our counterparty risk assessment process. We monitor ratings, credit
spreads and potential downgrades on at least a quarterly basis. Based on our ongoing assessment of counterparty risk, we adjust our exposure to various
counterparties. We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same
counterparty. However, we do not have any master netting arrangements in place with collateral features.
Strategic Investments
As of April 30, 2024, our strategic investment portfolio consisted of investments in over 400 companies with a combined carrying value of $5.0 billion,
including two privately held investments with carrying values that were individually greater than five percent of the total strategic investments portfolio and
represented 15 percent of the portfolio in aggregate.
The following table sets forth additional information regarding active equity investments within our strategic investment portfolio as of April 30, 2024
and excludes exited investments (in millions):
Investment Type Capital Invested Unrealized Gains (Cumulative) Unrealized Losses (Cumulative)
Carrying Value as of April 30,
2024
Publicly held equity securities $ 26 $ 57 $ 0 $ 83
Privately held equity securities 4,111 1,268 (617) 4,762
Total equity securities
$ 4,137 $ 1,325 $ (617) $ 4,845
Fluctuations in the value of our privately held equity securities are only recorded when there is an observable transaction for a same or similar security of
the same issuer, or in the event of impairment. We anticipate future volatility in our condensed consolidated statement of operations due to changes in market
prices, observable price changes and impairments of our strategic investments. The resulting gains or losses could be material depending on market conditions
and events, particularly in periods with economic uncertainty, inflation, volatile public equity markets or unsettled global market conditions.
Our investments in privately held equity securities are in various classes of equity with varying rights and preferences. The particular securities we hold,
and their rights and preferences relative to other securities within the capital structure, may impact the magnitude by which our investment value moves in
relation to movement in the total enterprise value of the company. As a result, the value of our investment in a specific company may move by more or less
than a change in that company’s overall value. Our ten largest privately held equity securities represent 38 percent of our total strategic investments
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as of April 30, 2024. If the enterprise value of the companies in which we hold those securities decreased by ten percent, the carrying value of our investment
portfolio would have declined by approximately $124 million.
We continually evaluate our investments in privately held and publicly traded companies. In certain cases, our ability to sell these investments may be
impacted by contractual obligations to hold the securities for a set period of time after a public offering.
In addition, the financial success of our investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition or
other favorable market event reflecting appreciation to the cost of our initial investment. All of our investments, particularly those in privately held companies,
are therefore subject to a risk of partial or total loss of invested capital.
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ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls
and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of
possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level, that the information we are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Management’s Report on Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial
officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and
the expected effect on us. Our technologies may be subject to an injunction if they are found to infringe the rights of a third party. In addition, many of our
subscription agreements require us to indemnify our customers for third-party intellectual property infringement claims, which could increase the cost to us of
an adverse ruling on such a claim.
The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and other lawsuits, and the disposition of such
claims and lawsuits, whether through settlement or litigation, could be time-consuming and expensive to resolve, divert our attention from executing our
business plan, result in efforts to enjoin our activities, lead to attempts by third parties to seek similar claims and, in the case of intellectual property claims,
require us to change our technology, change our business practices, pay monetary damages or enter into short- or long-term royalty or licensing agreements.
For more information regarding legal proceedings see Note 13 “Legal Proceedings and Claims” to the condensed consolidated financial statements in
Item 1 of Part I.
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ITEM 1A. RISK FACTORS
The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem
immaterial also may affect our business, financial condition, results of operations, cash flows, other key metrics and the trading price of our common stock.
Risk Factor Summary
Operational and Execution Risks
• Any breaches in our security measures or those of our third-party data center hosting facilities, cloud computing platform providers or third-party
service partners, or the underlying infrastructure of the Internet that cause unauthorized access to a customer’s data, our data or our IT systems, or the
blockage or disablement of authorized access to our services.
• Any defects or disruptions in our services that diminish demand for our services.
• Any interruptions or delays in services from third parties, including data center hosting facilities, cloud computing platform providers and other
hardware and software vendors, or from our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements.
• An inability to realize the expected business or financial benefits of company and technology acquisitions.
• Strain on our personnel resources and infrastructure from supporting our existing and growing customer base or an inability to scale our operations
and increase productivity.
• Customer attrition, or our inability to accurately predict subscription renewals and upgrade rates.
• Disruptions caused by periodic changes to our sales organization.
• Dependency of our services on the development and maintenance of the infrastructure of the Internet by third parties.
• Exposure to risks inherent in international operations from sales to customers outside the United States.
• A more time-consuming and expensive sales cycle, pricing pressure and implementation and configuration challenges as we target more of our sales
efforts at larger enterprise customers.
• Any loss of key members of our management team or development and operations personnel, or inability to attract and retain employees necessary to
support our operations and growth.
• Any failure in the delivery of high-quality professional and technical support services related to our online applications.
Strategic and Industry Risks
• An inability to compete effectively in the intensely competitive markets in which we participate.
• Any failure to expand our services and to develop and integrate our existing services in order to keep pace with technological developments.
• An inability to maintain and enhance our brands.
• Partial or complete loss of invested capital, or significant changes in the fair value, of our strategic investment portfolio.
• Any discontinuance by third-party developers and providers in embracing our technology delivery model and enterprise cloud computing services, or
customers asking us for warranties for third-party applications, integrations, data and content.
• Social and ethical issues, including the use or capabilities of AI in our offerings.
• Risks related to our aspirations and disclosures related to ESG matters.
Legal and Regulatory Risks
• Privacy concerns and laws as well as evolving regulation of cloud computing, increased restriction of cross-border data transfers and other regulatory
developments.
• Evolving industry-specific regulations, requirements, interpretive positions or standards.
• Lawsuits against us by third parties for various claims, including alleged infringement of proprietary rights.
• Any failure to obtain registration or protection of our intellectual property rights.
• Risks related to government contracts and related procurement regulations.
• Governmental sanctions and export and import controls that could impair our ability to compete in international markets and may subject us to
liability.
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Financial Risks
• Downturns or upturns in new business, which may not be immediately reflected in our operating results because we generally recognize revenue from
subscriptions for our services over the term of the subscription.
• Significant fluctuations in our rate of anticipated growth and any failure to balance our expenses with our revenue forecasts.
• Unanticipated changes in our effective tax rate and additional tax liabilities and global tax developments.
• Fluctuations in currency exchange rates, particularly the U.S. Dollar versus local currencies.
• Our debt service obligations, lease commitments and other contractual obligations.
• Accounting pronouncements and changes in other financial and non-financial reporting standards.
Risks Related to Owning Our Common Stock
• Fluctuations in our quarterly results.
• Volatility in the market price of our common stock and associated litigation.
• Provisions in our certificate of incorporation and bylaws and Delaware law that might discourage, delay or prevent a change of control of the
Company or changes in our management.
General Risks
• Volatile and significantly weakened global economic conditions.
• The occurrence of natural disasters and other events beyond our control.
• The long-term impact of climate change on our business.
Operational and Execution Risks
If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers or third-party service partners,
or the underlying infrastructure of the Internet are breached, and unauthorized access is obtained to a customer’s data, our data or our IT systems, or
authorized access is blocked or disabled, our services may be perceived as not being secure, customers may curtail or stop using our services, and we may
incur significant reputational harm, legal exposure and liabilities, or a negative financial impact.
Our services involve the storage and transmission of our customers’ and our customers’ customers’ proprietary and other sensitive data, including
financial, health and other personal information. Our services and underlying infrastructure may in the future be materially breached or compromised as a result
of the following:
• third-party attempts to fraudulently induce our employees, partners or customers to disclose sensitive information such as usernames, passwords or
other information to gain access to our customers’ data or IT systems, or our data or our IT systems;
• efforts by individuals or groups of hackers and sophisticated organizations, such as criminal organizations, state-sponsored organizations or nation-
states, to launch coordinated attacks, including ransomware, destructive malware and distributed denial-of-service attacks;
• third-party attempts to abuse our marketing, advertising, messaging or social products and functionalities to impersonate persons or organizations and
disseminate information that is false, misleading or malicious;
• cyberattacks on our internally built infrastructure on which many of our service offerings operate, or on third-party cloud-computing platform
providers;
• vulnerabilities resulting from enhancements and updates to our existing service offerings;
• vulnerabilities in the products or components across the broad ecosystem that our services operate in conjunction with and are dependent on;
• vulnerabilities existing within new technologies and infrastructures, including those from acquired companies;
• attacks on, or vulnerabilities in, the many different underlying networks and services that power the Internet that our products depend on, most of
which are not under our control or the control of our vendors, partners or customers; and
• employee or contractor errors or intentional acts that compromise our security systems.
These risks are mitigated, to the extent possible, by our ability to maintain and improve business and data governance policies, enhanced processes and
internal security controls, including our ability to escalate and respond to known and potential risks. Our Board of Directors (“Board”), Cybersecurity and
Privacy Committee and executive management are regularly briefed on our cybersecurity policies and practices and ongoing efforts to improve security, as well
as updates on cybersecurity events. We can provide no assurances that our security measures, including implemented systems and processes designed to protect
our customers’ and our customers’ customers’ proprietary and other sensitive data, will provide absolute security or otherwise be
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effective or that a material breach will not occur. For example, our ability to mitigate these risks may be impacted by the following:
• frequent changes to, and growth in complexity of, the techniques used to breach, obtain unauthorized access to, or sabotage IT systems and
infrastructure, including as a result of the increased use of AI technologies by bad actors, which are generally not recognized until launched against a
target, and could result in our being unable to anticipate or implement adequate measures to prevent such techniques;
• the continued evolution of our internal IT systems as we early adopt new technologies and new ways of sharing data and communicating internally
and with partners and customers, which increases the complexity of our IT systems;
• the acquisition of new companies, requiring us to incorporate and secure different or more complex IT environments;
• authorization by our customers to third-party technology providers to access their customer data, which may lead to our customers’ inability to protect
their data that is stored on our servers; and
• our limited control over our customers or third-party technology providers, or the processing of data by third-party technology providers, which may
not allow us to maintain the integrity or security of such transmissions or processing.
In the normal course of business, we are and have been the target of malicious cyberattack attempts and have experienced other security incidents.
Although, to date, such identified security events have not been material or significant to us, including to our reputation or business operations, or had a
material financial impact, there can be no assurance that future cyberattacks will not be material or significant. Additionally, as our market presence grows, we
may face increased risks of cyberattack attempts or security threats, and as AI technologies, including generative AI models, develop rapidly, threat actors are
starting to use these technologies to create new sophisticated attack methods that are increasingly automated, targeted and coordinated and more difficult to
defend against.
A security breach or incident could result in unauthorized parties obtaining access to, or the denial of authorized access to, our IT systems or data, or our
customers’ systems or data, including intellectual property and proprietary, sensitive or other confidential information. A security breach could also result in a
loss of confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our business and lead to increases in
insurance premiums and legal, regulatory and financial exposure and liability. Further, there can be no assurance that our insurance coverage will be sufficient
to cover the financial, legal, business, or reputational losses that may result from a cybersecurity incident or breach of our IT systems. Finally, the detection,
prevention and remediation of known or potential security vulnerabilities, including those arising from third-party hardware or software, may result in
additional financial burdens due to additional direct and indirect costs, such as additional infrastructure capacity spending to mitigate any system degradation
and the reallocation of resources from development activities.
For example, in April 2022, we learned a threat actor had obtained unauthorized access to several databases on Heroku, a Salesforce platform-as-a-
service. The threat actor downloaded stored customer security credentials and passwords for logging into GitHub, a third-party code hosting service used by
both Heroku and Heroku customers. The threat actor was also able to download passwords for a subset of customer user accounts and access the encryption
key. While we do not believe this incident materially affected our business or financial results, there is no assurance that such circumstances or other similar
incidents in the future could not result in a material adverse effect on our business.
Defects or disruptions in our services could diminish demand for our services and subject us to substantial liability.
Because our services are complex and incorporate a variety of hardware, proprietary software, third-party and open-source software, our services may
have errors or defects that could result in unanticipated downtime for our subscribers and harm to our reputation and our business. Our customers may also use
our services in unanticipated ways that may cause a disruption in services for other customers attempting to access their data. Across the industry, cloud
services frequently contain undetected errors when first introduced or when new versions or enhancements are released. We may also encounter difficulties
integrating acquired or licensed technologies into our services and in augmenting the technologies to meet the quality standards that are consistent with our
brand and reputation. As a result, our services may contain errors or defects resulting from the complexities of integrating new technologies.
We have from time to time found defects in, and experienced disruptions to, our services and new defects or disruptions may occur in the future. Such
defects could be the result of employee, contractor or other third-party acts or inaction, and could negatively affect our brand and reputation. We have
experienced and may in the future experience defects in our products that created vulnerabilities that inadvertently permitted access to protected customer data.
We can provide no assurance that such product defects or other vulnerabilities will not occur in the future that have a material adverse effect on our business or
subject us to substantial liability. Vulnerabilities in open source or any proprietary or third-party product can persist even after security patches have been
issued if customers have not installed the most recent updates, or if the attackers exploited the vulnerabilities before patching was complete. In some cases,
vulnerabilities may not be immediately detected, which may make it difficult to recover critical services and lead to damaged assets.
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Since our customers use our services for important aspects of their business, any errors, defects, disruptions in service or other performance problems
could hurt our reputation and may damage our customers’ businesses. As a result, customers could elect to not renew our services or delay or withhold payment
to us. We could also lose future sales or customers may make warranty or other claims against us, which could result in an increase in our allowance for
doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Any interruptions or delays in services from third parties, including data center hosting facilities, cloud computing platform providers and other
hardware and software vendors, or from our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements,
could impair the delivery of our services and harm our business.
We currently serve our customers from third-party data center hosting facilities and cloud computing platform providers located in the United States and
other countries. We also rely on computer hardware purchased or leased from, software licensed from, and cloud computing platforms provided by, third parties
in order to offer our services, including database software, hardware and data from a variety of vendors. Any disruption or damage to, or failure of our systems
generally, including the systems of our third-party platform providers, could result in interruptions in our services and harm our business. We have from time to
time experienced interruptions in our services and such interruptions may occur in the future. As we increase our reliance on these third-party systems,
particularly with respect to third-party cloud computing platforms, our exposure to damage from service interruptions or other performance or quality issues
may increase. Interruptions in our services or other performance or quality issues may cause us to issue credits or pay penalties, cause customers to make
warranty or other claims against us or to terminate their subscriptions, and adversely affect our attrition rates and our ability to attract new customers, all of
which would reduce our revenue. Our business and reputation would also be harmed if our customers and potential customers believe our services are
unreliable.
For many of our offerings, our production environment and customers’ data are replicated in a separate facility located elsewhere. Certain offerings,
including some offerings of companies added through acquisitions, may be served through alternate facilities or arrangements. We do not control the operation
of any of these facilities, and they may be vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and
similar events. They may also be subject to break-ins, sabotage, intentional acts of destruction or vandalism or similar misconduct, as well as local
administrative actions (including shelter-in-place or similar orders), changes to legal or permitting requirements and litigation to stop, limit or delay operation.
In addition, supply chain disruptions due to geopolitical developments in Europe may also lead to power disruptions in regions where our facilities are located.
Despite precautions taken at these facilities, such as disaster recovery and business continuity arrangements, the occurrence of any of the foregoing events or
risks, or a natural disaster or public health emergency, an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated
problems or operational failures at these facilities could result in lengthy interruptions in our services, and no assurance can be provided that any such
interruptions would be remediated without significant cost or in a timely manner or at all.
The hardware, software, data and cloud computing platforms that we rely on, including, for example, the large language models leveraged in our AI
offerings, may not continue to be available at reasonable prices, on commercially reasonable terms or at all. Any loss of the right to use any of these hardware,
software, data or cloud computing platforms could significantly increase our expenses and disrupt or otherwise result in delays in the provisioning of our
services until equivalent technology is either developed by us, or, if available, is identified, obtained through purchase or license and integrated into our
services, and no assurance can be provided that such equivalent technology would be developed or obtained in a timely manner or at all.
As we scale our operations, the amount and type of information transferred on our offerings continues to evolve, including as a result of the deployment
of AI technologies, and our infrastructure capacity requirements, including network capacity and computing power, may increase as a result. If we do not
accurately plan for our infrastructure capacity requirements and we experience significant strains on our data center capacity, our customers could experience
performance degradation or service outages that may subject us to financial liabilities, result in customer losses and harm our reputation and business. As we
add data centers and capacity and continue to move to cloud computing platform providers, we move or transfer our data and our customers’ data from time to
time. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our services, which may damage our business.
As we acquire companies or technologies, we may not realize the expected business or financial benefits and the acquisitions could prove difficult to
integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock.
As part of our business strategy, we periodically acquire complementary businesses, joint ventures, services and technologies and intellectual property
rights. We continue to evaluate such opportunities and expect to make such acquisitions in the future.
Acquisitions and other transactions and arrangements involve numerous risks and could create unforeseen operating difficulties and expenditures,
including:
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• potential failure to achieve the expected benefits on a timely basis or at all;
• potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks or delay our ability to integrate
the product into our service offerings;
• difficulties in increasing or maintaining the security standards for acquired technology consistent with our other services, and related costs;
• difficulty of transitioning the acquired technology onto our existing platforms and customer acceptance of multiple platforms on a temporary or
permanent basis;
• augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation;
• brand or reputational harm associated with our acquired companies;
• challenges converting the acquired company’s revenue recognition policies and forecasting the related revenues, including subscription-based
revenues and term software license revenue, as well as appropriate allocation of the customer consideration to the individual deliverables;
• division of financial and managerial resources from existing operations;
• challenges entering into new markets in which we have little or no experience or where competitors may have stronger market positions;
• currency and regulatory risks associated with foreign countries and potential additional cybersecurity and compliance risks resulting from entry into
new markets;
• difficulties and strain on resources in integrating acquired operations, technologies, services, platforms and personnel;
• regulatory challenges from antitrust or other regulatory authorities that may block, delay or impose conditions (such as divestitures, ownership or
operational restrictions or other structural or behavioral remedies) on the completion of transactions or the integration of acquired operations;
• failure to fully assimilate, integrate or retrain acquired employees, which may lead to retention risk with respect to both key acquired employees and
our existing key employees or disruption to existing teams;
• differences between our values and those of our acquired companies, as well as disruptions to our workplace culture;
• inability to generate sufficient revenue to offset acquisition costs;
• challenges with the acquired company’s customers and partners, including the inability to maintain such relationships and changes to perception of the
acquired business as a result of the acquisition;
• challenges with the acquired company’s third-party service providers, including those that are required for ongoing access to third-party data;
• potential for acquired products to impact the profitability of existing products;
• unanticipated expenses related to acquired technology and its integration into our existing technology;
• known and potential unknown liabilities associated with the acquired businesses, including due to litigation;
• difficulties in managing, or potential write-offs of, acquired assets, and potential financial and credit risks associated with acquired customers;
• negative impact to our results of operations because of the depreciation and amortization of acquired intangible assets, fixed assets and operating lease
right-of-use assets;
• the loss of acquired unearned revenue and unbilled unearned revenue;
• difficulties in and financial costs of addressing acquired compensation structures inconsistent with our compensation structure;
• additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our
results of operations;
• delays in customer purchases due to uncertainty related to any acquisition;
• ineffective or inadequate controls, procedures and policies at the acquired company;
• in the case of foreign acquisitions, challenges caused by integrating operations over distance, and across different languages, cultures and political
environments; and
• the tax effects related to integration and business operation changes, realizability of our deferred tax assets, and uncertain tax liabilities.
Any of these risks could harm our business or negatively impact our results of operations. In addition, to facilitate acquisitions, we may seek additional
equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions, and
which may affect the risks of owning our common stock. For example, if we finance acquisitions by issuing equity or convertible or other debt securities or
loans, our existing
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stockholders may be diluted, or we could face constraints related to the terms of, and repayment obligation related to, the incurrence of indebtedness that could
affect the market price of our common stock.
Our ability to acquire other businesses or technologies, or integrate acquired businesses effectively, may be impaired by trade tensions and increased
global scrutiny of foreign investments and acquisitions in the technology sector. For example, several countries, including the United States and countries in
Europe and the Asia-Pacific region, are considering or have adopted restrictions of varying kinds on transactions involving foreign investments and
acquisitions. Antitrust authorities in a number of countries have also reviewed acquisitions in the technology industry with increased scrutiny. Governments
may continue to adopt or tighten restrictions of this nature, some of which may apply to acquisitions or integrations of businesses by us, and such restrictions or
government actions could negatively impact our business and financial results.
Supporting our existing and growing customer base could strain our personnel resources and infrastructure, and if we are unable to scale our
operations and increase productivity, we may not be able to successfully implement our business plan.
We continue to experience significant growth in our customer base, including through acquisitions, which has placed a strain on and in the future may
stress the capabilities of our management, administrative, operational and financial infrastructure. We anticipate that significant additional investments,
including in human capital software, will be required to scale our operations and increase productivity, to address the needs of our customers, to further develop
and enhance our services, to expand into new geographic areas and to scale with our overall growth. The additional investments we are making will increase
our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. We may not be able to
make these investments as quickly or effectively as necessary to successfully scale our operations.
We regularly upgrade or replace our various software systems and processes. If the implementations of these new applications are delayed, or if we
encounter unforeseen problems with our new systems and processes or in migrating away from our existing systems and processes, our operations and our
ability to manage our business could be negatively impacted. For example, our efforts to further automate our processes for customer contracts may be
complicated by unanticipated operating difficulties.
Our success will depend in part upon the ability of our senior management to manage our projected growth effectively. To do so, we must continue to
increase the productivity of our existing employees and to hire, train and manage new employees as needed. Additionally, recent changes in our work
environment and workforce, including those arising from our Restructuring Plan or other restructuring actions or our return to office and remote work policies,
may not meet the needs and expectations of our workforce or may create operational and workplace culture challenges, which could negatively impact our
ability to increase employee productivity or attract and retain our employees and could adversely affect our operations. Further, reductions in our real estate
portfolio resulting from our Restructuring Plan may impede our ability to adequately accommodate employees returning to the office or future headcount
growth. To manage the expected domestic and international growth of our operations and personnel, we will need to continue to improve our operational,
financial and management controls, our reporting systems and procedures and our utilization of real estate. If we fail to successfully scale our operations and
increase productivity, we may be unable to execute our business plan and the value of our common stock could decline.
If our customers do not renew their subscriptions for our services or if they reduce the number of paying subscriptions at the time of renewal, our
revenue and current remaining performance obligation could decline and our business may suffer. If we cannot accurately predict subscription renewals
or upgrade rates, we may not meet our revenue targets, which may adversely affect the market price of our common stock.
Our customers have no obligation to renew their subscriptions for our services after the expiration of their contractual subscription period, which is
typically 12 to 36 months, and in the normal course of business, some customers have elected not to renew. In addition, our customers may renew for fewer
subscriptions, renew for shorter contract lengths or switch to lower cost offerings of our services, particularly in times of general economic uncertainty.
Additionally, due to our largely subscription-based business model, the long-term impact of the COVID-19 pandemic and recent economic uncertainty may not
be fully reflected in our results of operations until future periods. It is difficult to predict attrition rates given our varied customer base and the number of multi-
year subscription contracts. Our attrition rates may increase or fluctuate as a result of various factors, including customer dissatisfaction with our services,
customers’ spending levels, mix of customer base, decreases in the number of users at our customers, competition, pricing increases or changes and
deteriorating general economic conditions.
Our future success also depends in part on our ability to sell additional features and services, more subscriptions or enhanced editions of our services to
our current customers. This may also require increasingly sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at
which our customers purchase new or enhanced services depends on a number of factors, including general economic conditions and customer receptiveness to
any price changes related to these additional features and services.
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If customers do not renew their subscriptions, do not purchase additional features or enhanced subscriptions or if attrition rates increase, we may not meet
our revenue targets and our business could be harmed, which may adversely affect the market price of our common stock.
Periodic changes to our sales organization can be disruptive and may reduce our rate of growth.
We periodically change and make adjustments to our sales organization in response to market opportunities, competitive threats, management changes,
product introductions or enhancements, acquisitions, sales performance, increases in sales headcount, cost levels and other internal and external considerations.
Such sales organization changes have in some periods resulted in, and may in the future result in, a reduction of productivity, which could negatively impact
our rate of growth in the current and future quarters and operating results, including revenue. For example, the Restructuring Plan and other restructuring
actions involved such changes to our sales organization, which could negatively impact our productivity, growth rate and operating results, which may
adversely affect the market price of our common stock. In addition, any significant change to the way we structure our compensation of our sales organization
may be disruptive and may affect our revenue growth.
Our ability to deliver our services is dependent on the development and maintenance of the infrastructure of the Internet by third parties.
The Internet’s infrastructure comprises many different networks and services that are highly fragmented and distributed by design. This infrastructure is
run by a series of independent third-party organizations that work together to provide the infrastructure and supporting services of the Internet under the
governance of the Internet Corporation for Assigned Numbers and Names (“ICANN”) and the Internet Assigned Numbers Authority, now under the
stewardship of ICANN.
The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, denial-of-service attacks or
related cyber incidents, and it could face outages and delays in the future, potentially reducing the availability of the Internet to us or our customers for delivery
of our services. Additionally, the availability and reliability of the Internet may vary in certain countries, particularly those in emerging markets, which can
result in outages or delays. Any resulting interruptions in our services or the ability of our customers to access our services could result in a loss of potential or
existing customers and harm our business.
In addition, certain countries have implemented, or may implement, legislative and technological actions that either do or can effectively regulate access
to the Internet, including the ability of Internet service providers to limit access to specific websites or content. Other countries have attempted, are attempting
or may attempt to change or limit the legal protections available to businesses that depend on the Internet for the delivery of their services. These actions could
potentially limit or interrupt access to our services from certain countries or Internet service providers, increase our risk or add liabilities, impede our growth,
productivity and operational effectiveness, result in the loss of potential or existing customers and harm our business.
Sales to customers outside the United States expose us to risks inherent in international operations.
We sell our services throughout the world and are subject to risks and challenges associated with international business. We intend to seek to continue to
expand our international sales efforts. The risks and challenges associated with sales to customers outside the United States or those that can affect international
operations generally, include:
• regional economic and political conditions, natural disasters, acts of war, terrorism and actual or threatened public health emergencies;
• localization of our services, including translation into foreign languages and associated expenses;
• regulatory frameworks or business practices favoring local competitors;
• pressure on the creditworthiness of sovereign nations, where we have customers and a balance of our cash, cash equivalents and marketable securities;
• foreign currency fluctuations and controls, which may make our services more expensive for international customers and could add volatility to or
negatively impact our operating results, including, for example, the impact of Argentina’s 2023 amendments to foreign exchange controls;
• compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, privacy, anti-
corruption, import/export, customs, anti-boycott, sanctions and embargoes, antitrust, data privacy, transfer, storage and protection, cybersecurity, ESG
and industry-specific laws and regulations, including rules related to compliance by our third-party resellers and our ability to identify and respond
timely to compliance issues when they occur;
• liquidity issues or political actions by sovereign nations, including nations with a controlled currency environment, could result in decreased values of
these balances or potential difficulties protecting our foreign assets or satisfying local obligations;
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• vetting and monitoring our third-party resellers in new and evolving markets to confirm they maintain standards consistent with our brand and
reputation;
• treatment of revenue from international sources, evolving domestic and international tax environments and changes to tax codes, including being
subject to foreign tax laws and being liable for paying withholding taxes in foreign jurisdictions;
• uncertainty regarding the imposition of and changes in the United States’ and other governments’ trade regulations, trade wars, tariffs, other
restrictions or other geopolitical events, including the evolving relations between the United States and China, the United States and Russia, and
ongoing conflicts, such as the war in Ukraine and the Israel-Hamas war;
• changes in the public perception of governments in the regions where we operate or plan to operate;
• regional data privacy laws and other regulatory requirements that apply to outsourced service providers and to the transmission of our customers’ data
across international borders, which grow more complex as we scale, expand into new markets and enhance the breadth of our service offerings;
• different pricing environments;
• difficulties in staffing and managing foreign operations;
• different or lesser protection of our intellectual property, including increased risk of theft of our proprietary technology and other intellectual property,
and more prevalent cybersecurity risks, particularly in jurisdictions in which we have historically chosen not to operate; and
• longer accounts receivable payment cycles and other collection difficulties.
Any of these factors could negatively impact our business and results of operations. The above factors may also negatively impact our ability to
successfully expand into emerging market countries, where we have little or no operating experience, where it can be costly and challenging to establish and
maintain operations, including hiring and managing required personnel, and difficult to promote our brand, and where we may not benefit from any first-to-
market advantage or otherwise succeed.
As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more time-consuming and expensive, we may
encounter pricing pressure and implementation and configuration challenges, and we may have to delay revenue recognition for some complex
transactions, all of which could harm our business and operating results.
As we target more of our sales efforts at larger enterprise customers, including governmental entities, and specific industries, such as financial services
and healthcare and life sciences, we may face greater costs, longer sales cycles, greater competition and less predictability in completing some of our sales. In
these market segments, the customer’s decision to use our services is often an enterprise-wide decision and, if so, may require us to provide greater levels of
education regarding the use and benefits of our services, as well as addressing concerns regarding privacy and data protection laws and regulations of
prospective customers with international operations or whose own customers operate internationally.
In addition, larger customers and governmental entities often demand more configuration, integration services and features. As a result of these factors,
these sales opportunities often require us to devote greater sales support and professional services resources to individual customers, driving up costs and time
required to complete sales and diverting our own sales and professional services resources to a smaller number of larger transactions, while potentially
requiring us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met.
Pricing and packaging strategies for enterprise and other customers for subscriptions to our existing and future service offerings, including for our AI
offerings, may not be widely accepted by new or existing customers. Our adoption of or failure to adopt, as well as the manner and time of, changes to our
pricing and packaging models and strategies may harm our business.
We may lose key members of our management team or development and operations personnel, and may be unable to attract and retain employees we
need to support our operations and growth.
Our success depends substantially upon the continued services of our executive officers and other key members of management, particularly our chief
executive officer. From time to time, there may be changes in our management team resulting from the hiring, departure or realignment of executives. Such
changes may be disruptive to our business. We are also substantially dependent on the continued service of our existing development and operations personnel
because of the complexity of our services and technologies. Our executive officers, key management, development or operations personnel could terminate
their employment with us at any time. Effective succession planning for management is important to our long-term success. If we do not develop adequate
succession planning for our key personnel, the loss of one or more of our key employees or groups of employees could seriously harm our business.
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The technology industry is subject to substantial and continuous competition for engineers with high levels of experience in designing, developing and
managing software and technology services, as well as competition for sales executives, data scientists and operations personnel. We have experienced, and
currently experience, challenges with significant competition in talent recruitment and retention, and may not in the future be successful in recruiting or
retaining talent or achieving the workforce diversity goals we have set publicly. We have from time to time experienced, and we expect to continue to
experience, difficulty in hiring, developing, integrating and retaining highly skilled employees with appropriate qualifications. These difficulties may be
amplified by evolving restrictions on immigration, travel, or availability of visas for skilled technology workers. Additionally, our compensation arrangements
and benefits may not always be successful in attracting new employees or retaining and motivating our existing personnel. 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.
In January 2023, we announced the Restructuring Plan, which was intended to reduce operating costs, improve operating margins and continue advancing
our ongoing commitment to profitable growth. The Restructuring Plan included a reduction of our workforce, which was substantially completed by the end of
fiscal 2024, and select real estate exits and office space reductions within certain markets, which are expected to be completed by the end of fiscal 2026. In the
first quarter of fiscal 2025, we initiated a further reduction of less than one percent of our workforce, which is expected to be substantially complete in fiscal
2025. The Restructuring Plan and other recent workforce reductions, or any similar actions taken in the future, could negatively impact our ability to attract,
integrate, retain and motivate key employees.
In addition, we believe in the importance of our corporate culture, which fosters dialogue, collaboration, recognition, equality and a sense of family. As
our organization has grown and expanded globally, and as our workplace plans have developed, including, for example, workforce and office space reductions
enacted under the Restructuring Plan, we have in the past and may in the future find it increasingly difficult to maintain the beneficial aspects of our corporate
culture globally, including managing the complexities of communicating with all employees. Any inability to maintain our corporate culture could negatively
impact our ability to attract and retain employees, harm our reputation with customers, or negatively impact our future growth.
Any failure in the delivery of high-quality professional and technical support services related to our online applications may adversely affect our
relationships with our customers and our financial results.
Our customers sometimes require highly skilled and trained service professionals to successfully implement our applications and depend on our support
organization to resolve technical issues relating to our applications. Implementation services may be performed by us, our customers, a third party, or a
combination thereof. Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our
customers. If customers are not satisfied with the quality and timing of work by us or a third party or with the type of services or solutions delivered, we could
incur additional costs to address the situation, the profitability of that work might be impaired, our revenue recognition could be impacted and the customer’s
dissatisfaction with the services received could negatively impact our ability to sell our other offerings to that customer or retain existing customers. In
addition, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to
compete for new business with current or prospective customers. We may be unable to respond quickly enough to accommodate short-term increases in
customer demand for support services across our varying and diverse offerings. In addition, our sales process is highly dependent on our applications and
business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality professional and technical support
services, or a market perception that we do not maintain high-quality professional and technical support services, could adversely affect our reputation, our
ability to sell our service offerings to existing and prospective customers, and our business, operating results and financial position.
Strategic and Industry Risks
The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be harmed.
The market for enterprise applications and platform services is highly competitive, rapidly evolving, fragmented and subject to changing technology, low
barriers to entry, shifting customer needs and frequent introductions of new products and services. Many prospective customers have invested substantial
personnel and financial resources to implement and integrate their current enterprise software into their businesses and therefore may be reluctant or unwilling
to migrate away from their current solution to a different enterprise software service. Additionally, third-party developers may be reluctant to build application
services on our platform since they have invested in other competing technology platforms.
Our current competitors include:
• vendors of packaged business software, as well as companies offering enterprise apps delivered through on-premises offerings from enterprise software
application vendors and cloud computing application service providers, either individually or with others;
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• software companies that provide their product or service free of charge as a single product or when bundled with other offerings, or only charge a
premium for advanced features and functionality, as well as companies that offer solutions that are sold without a direct sales organization;
• vendors who offer software tailored to specific services, industries or market segments, as opposed to our full suite of service offerings, including
suppliers of traditional business intelligence and data preparation products, integration software vendors, marketing vendors, e-commerce solutions
vendors or data platform vendors;
• productivity tool and email providers, unified communications providers and consumer application companies that have entered the business software
market; and
• traditional platform development environment companies and cloud computing development platform companies who may develop toolsets and
products that allow customers to build new apps that run on the customers’ current infrastructure or as hosted services, as well as would-be customers
who may develop enterprise applications for internal use.
In addition, we may face more competition as we expand our product offerings. Some of our current and potential competitors may have competitive
advantages, such as greater name recognition, longer operating histories, more significant installed bases, broader geographic scope, broader suites of service
offerings and larger marketing budgets, as well as substantially greater financial, technical, personnel and other resources. In addition, many of our current and
potential competitors have established marketing relationships and access to larger customer bases, and have major distribution agreements with consultants,
system integrators and resellers. We also experience competition from smaller, younger competitors that may be more agile in responding to customers’
demands and offer more targeted and simplified solutions. Our competitors may be able to respond more quickly and effectively than we can to new or
changing opportunities, technologies, standards or customer requirements, or provide competitive pricing, more flexible contracts or faster implementations.
Additionally, we are building AI into many of our offerings, and we expect to face increased competition as AI technologies are integrated into the markets in
which we compete. Our competitors may be able to develop new AI offerings that disrupt workforce needs and negatively impact demand for our offerings, or
incorporate AI into their offerings more successfully than we do and achieve greater and faster adoption. As a result, even if our services are more effective
than the products and services that our competitors offer, potential customers might select competitive products and services in lieu of purchasing our services.
For all of these reasons, we may not be able to compete successfully against our current and future competitors, which could negatively impact our future sales
and harm our business.
Our efforts to expand our service offerings and to develop and integrate our existing services in order to keep pace with technological developments
may not succeed and may reduce our revenue growth rate and harm our business.
We derive a significant portion of our revenue from subscriptions to our CRM enterprise cloud computing application services, and we expect this will
continue for the foreseeable future. Our efforts to expand our current service offerings may not succeed and may reduce our revenue growth rate. In addition,
the markets for certain of our offerings, including our AI offerings, remain relatively new and it is uncertain whether our efforts, and related investments, will
ever result in significant revenue for us. Further, the introduction of significant platform changes and upgrades may not result in long term revenue growth.
In July 2021, we completed our acquisition of Slack, our largest acquisition to date. Slack is a relatively new category of business technology in a rapidly
evolving market for software, programs and tools used by knowledge workers. We may not succeed in enhancing and improving the features, integrations and
capabilities of Slack, or effectively introduce compelling new features, integrations and capabilities that reflect or anticipate the changing nature of the market
which may result in an inability to attract new users and organizations and increase revenue from existing paid customers.
If we are unable to develop enhancements to, and new features for, our existing or new services that keep pace with rapid technological developments,
our business could be harmed. For example, we may be required to continuously enhance our AI offerings to improve the quality of content provided to our
customers. The success of enhancements, new features and services depends on several factors, including the timely completion, introduction and market
acceptance of the feature, service or enhancement by customers, administrators and developers, as well as our ability to integrate all of our product and service
offerings and develop adequate selling capabilities in new markets. Failure in this regard may significantly impair our revenue growth as well as negatively
impact our operating results if the additional costs are not offset by additional revenues. In addition, because our services are designed to operate over various
network technologies and on a variety of mobile devices, operating systems and computer hardware and software platforms using a standard browser, we will
need to continuously modify and enhance our services to keep pace with changes in hardware, software, communication, browser, app development platform
and database technologies, as well as continue to maintain and support our services on legacy systems. We may not be successful in either developing these
modifications and enhancements or in bringing them to market timely.
Additionally, if we fail to anticipate or identify significant technology trends and developments early enough, or if we do not devote appropriate resources
to adapting to such trends and developments, our business could be harmed. Uncertainties
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about the timing and nature of new network platforms or technologies, modifications to existing platforms or technologies, including text messaging
capabilities, or changes in customer usage patterns thereof could increase our research and development or service delivery expenses or lead to our increased
reliance on certain vendors. Any failure of our services to operate effectively with future network platforms and technologies could reduce the demand for our
services, result in customer dissatisfaction and harm our business.
Our continued success depends on our ability to maintain and enhance our brands.
We believe that the brand identities we have developed, including associations with trust, customer success, innovation, equality and sustainability have
significantly contributed to the success of our business. Maintaining and enhancing the Salesforce brand and our other brands is critical to expanding our base
of customers, partners and employees. Our brand strength, particularly for our core services, depends largely on our ability to remain a technology leader and to
continue to provide high-quality innovative products, services and features in a secure, reliable manner that enhances our customers’ success even as we scale
and expand our services. In order to maintain and enhance the strength of our brands, we have made and may in the future make substantial investments to
expand or improve our product offerings and services, or we may enter new markets that may be accompanied by initial complications or ultimately prove to
be unsuccessful.
In addition, we have secured the naming rights to facilities controlled by third parties, such as office towers and a transit center, and any negative events
or publicity arising in connection with these facilities could adversely impact our brand.
Further, entry into markets with weaker protection of brands or changes in the legal systems in countries we operate may impact our ability to protect our
brands. If we fail to maintain, enhance or protect our brands, or if we incur excessive expenses in our efforts to do so, our business, operating results and
financial condition may be materially and adversely affected.
We are subject to risks associated with our strategic investments, including partial or complete loss of invested capital. Significant changes in the fair
value of this portfolio, including changes in the valuation of our investments in publicly traded and privately held companies, could negatively impact our
financial results.
We manage a portfolio of strategic investments in both privately held and publicly traded companies focused primarily on enterprise cloud companies,
technology startups and system integrators. While we invest in companies that we believe are digitally transforming their industries, advancing responsible
generative AI, improving customer experiences, helping us expand our solution ecosystem or supporting other corporate initiatives, we may still experience
unforeseen brand or reputational harm associated with our investments. Our investments range from early to late stage companies, including investments made
concurrent with a company’s initial public offering. Investments in early stage companies are inherently speculative, as these companies may not yet be
revenue-generating and could still be in the process of developing their products and services at the time of our investment. The financial success of our
investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition or other favorable market event reflecting
appreciation to the cost of our initial investment. We may also experience challenges from regulatory authorities in connection with our investments, including
from antitrust authorities who are increasingly scrutinizing technology investments and acquisitions, and which may lead to unforeseen expenditures or which
may block, delay or impose undesirable conditions on transactions involving our investment portfolio. In certain cases, our ability to sell these investments may
be impacted by contractual obligations to hold the securities for a set period of time after a public offering. All of our investments are subject to a risk of partial
or total loss of invested capital.
We anticipate future volatility in our condensed consolidated statements of operations due to changes in market prices, observable price changes and
impairments of our strategic investments. The resulting gains or losses could be material depending on market conditions and events, particularly in periods
with economic uncertainty, inflation, geopolitical conflict, volatile public equity markets or unsettled global market conditions.
If third-party developers and providers do not continue to embrace our technology delivery model and enterprise cloud computing services, or if our
customers seek warranties from us for third-party applications, integrations, data and content, our business could be harmed.
Our success depends on the willingness of a growing community of third-party developers and technology providers to build applications and provide
integrations, data and content that are complementary to our services. Without the continued development of these applications and provision of such
integrations, data and content, both current and potential customers may not find our services sufficiently attractive, which could impact future sales. In
addition, for those customers who authorize a third-party technology partner to access their data, we do not provide any warranty related to the functionality,
security or integrity of the data access, transmission or processing. Despite contract provisions to protect us, customers may look to us to support and provide
warranties for the third-party applications, integrations, data and content, even though not developed or sold by us, which may expose us to potential claims,
liabilities and obligations, all of which could harm our reputation and our business.
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Social and ethical issues, including the use or capabilities of AI in our offerings, may result in reputational harm and liability.
Policies we adopt or choose not to adopt on social and ethical issues, especially regarding the use of our products, may be unpopular with some of our
employees or with our customers or potential customers, and have in the past impacted and may in the future impact our ability to attract or retain employees
and customers. We also may choose not to conduct business with potential customers or discontinue or not expand business with existing customers due to
these policies. Further, actions taken by our customers and employees, including through the use or misuse of our products or new technologies for illegal
activities or improper information sharing, may result in reputational harm or possible liability, particularly in light of regulatory requirements like the Digital
Services Act (“DSA”) from the EU. For example, we have been subject to allegations in legal proceedings that we should be liable for the use of certain of our
products by third parties. Although we believe that we have a strong defense against these allegations, legal proceedings can be lengthy, expensive and
disruptive to our operations and the outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Regardless of outcome, these types of
claims could cause reputational harm to our brand or result in liability.
We are increasingly building AI into many of our offerings, including generative AI. As with many innovations, AI and our Customer 360 platform
present additional risks and challenges that could affect their adoption and therefore our business. For example, the development of AI and Customer 360, the
latter of which provides information regarding our customers’ customers, presents emerging ethical issues. If we enable or offer solutions that draw controversy
due to their perceived or actual impact on human rights, privacy, employment, or in other social contexts, we may experience new or enhanced governmental or
regulatory scrutiny, brand or reputational harm, competitive harm or legal liability, especially as geopolitical turmoil creates increasingly volatile political and
market conditions. Data practices by us or others that result in controversy could also impair the acceptance of AI solutions. This in turn could undermine
confidence in the decisions, predictions, analysis or other content that our AI applications produce, subjecting us to competitive harm, legal liability and brand
or reputational harm. The rapid evolution of AI will require the application of resources to develop, test and maintain our products and services to help ensure
that AI is implemented ethically in order to minimize unintended, harmful impact. Uncertainty around new and emerging AI applications such as generative AI
content creation will require additional investment in the licensing or development of proprietary datasets, machine learning models and systems to test for
accuracy, bias and other variables, which are often complex, may be costly and could impact our profit margin. Moreover, the move from AI content
classification to AI content generation through our development of Einstein Copilot and other generative AI products brings additional risks and responsibility.
Known risks of generative AI currently include risks related to accuracy, bias, toxicity, privacy and security and data provenance. For example, AI
technologies, including generative AI, may create content that appears correct but is factually inaccurate or flawed, or contains copyrighted or other protected
material, and if our customers or others use this flawed or protected content to their detriment, or the owners of such copyrighted material seek to enforce their
rights, we may be exposed to brand or reputational harm, competitive harm and/or legal liability. Developing, testing and deploying AI systems may also
increase the cost profile of our offerings due to the nature of the computing costs involved in such systems. If we are unable to mitigate these risks, or if we
incur excessive expenses in our efforts to do so, our reputation, business, operating results and financial condition may be harmed.
Our aspirations and disclosures related to ESG matters expose us to risks that could adversely affect our reputation and performance.
We have established and publicly announced ESG goals, including our commitments to advancing racial and gender equality within our workforce and
reducing greenhouse gas emissions. These statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our
failure to accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance and
growth, and expose us to increased scrutiny from the investment community as well as enforcement authorities.
Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control. Examples of such risks include:
• the availability and cost of low- or non-carbon-based energy sources;
• the evolving regulatory requirements affecting ESG practices and/or disclosures;
• the availability of suppliers that can meet our sustainability, diversity and other ESG standards;
• our ability to recruit, develop and retain diverse talent in our labor markets; and
• the success of our organic growth and acquisitions, dispositions or restructuring of our businesses or operations.
Standards for tracking and reporting ESG matters continue to evolve. Our use of disclosure frameworks and standards, and the interpretation or
application of those frameworks and standards, may change from time to time or differ from those of others. This may result in a lack of consistent or
meaningful comparative data from period to period or between Salesforce and other companies in the same industry. In addition, our processes and controls
may not comply with evolving standards for
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identifying, measuring and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC and other
regulators, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals,
or ability to achieve such goals in the future. For example, the proliferation of climate and other ESG disclosure requirements at the local, national and
international levels have required and may continue to require significant effort and resources and could result in changes to our current ESG goals in order to
comply with differing requirements.
If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain
employees, and our attractiveness as an investment, business partner, acquiror or service provider could be negatively impacted. Further, our failure or
perceived failure to pursue or fulfill our goals and objectives or to satisfy various reporting standards on a timely basis, or at all, could have similar negative
impacts or expose us to government enforcement actions and private litigation.
Legal and Regulatory Risks
Privacy concerns and laws as well as evolving regulation of cloud computing, AI services, cross-border data transfer restrictions and other domestic
or foreign regulations may limit the use and adoption of our services and adversely affect our business.
Regulation related to the provision of services over the Internet is evolving, as federal, state and foreign governments continue to adopt new, or modify
existing, laws and regulations addressing data privacy, cybersecurity, data protection, data sovereignty and the collection, processing, storage, hosting, transfer
and use of data, generally. In some cases, data privacy laws and regulations, such as the EU’s General Data Protection Regulation (“GDPR”), impose
obligations directly on Salesforce as both a data controller and a data processor, as well as on many of our customers. In addition, domestic data privacy laws,
such as the California Consumer Privacy Act (“CCPA”) as amended by the California Privacy Rights Act (“CPRA”), and laws that have recently passed and/or
gone into effect in many other states similarly impose new obligations on us and many of our customers, potentially as both a covered business and service
provider. These laws continue to evolve, including most recently with India’s Digital Personal Data Protection Act 2023, and as various jurisdictions introduce
similar proposals, which often include subsequent rules and regulation, we and our customers become subject to additional regulatory burdens. New EU laws
related to the use of data, including in the DSA, the Data Act and AI Act, may impose additional rules and restrictions on the use of the data in our products and
services.
In addition, various safe harbors have historically been provided to those who hosted content provided by others, such as safe harbors from monetary
damages for copyright infringement arising from copyrighted content provided by customers and others and for defamation and other torts arising from
information provided by customers and others. There is an increasing demand for repealing or limiting these safe harbors by either judicial decision or
legislation, and we have active legal proceedings that have been impacted by the repeal or limiting of safe harbors that were previously available to us. Loss of
these safe harbors may require altering or limiting some of our services or may require additional contractual terms to avoid liabilities for our customers’
misconduct.
Although we monitor the regulatory, judicial and legislative environment and have invested in addressing these developments, these laws may require us
to make additional changes to our practices and services to enable us or our customers to meet the new legal requirements, and may also increase our potential
liability exposure through new or higher potential penalties for noncompliance, including as a result of penalties, fines and lawsuits related to data breaches.
Furthermore, privacy laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions. These and other requirements
are causing increased scrutiny among customers, particularly in the public sector and highly regulated industries, and may be perceived differently from
customer to customer. These developments could reduce demand for our services, require us to take on more onerous obligations in our contracts, restrict our
ability to store, transfer and process data or, in some cases, impact our ability or our customers' ability to offer our services in certain locations, to deploy our
solutions, to reach current and prospective customers, or to derive insights from customer data globally. For example, on July 16, 2020, the Court of Justice of
the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield Framework, one of the mechanisms that allowed companies, including Salesforce, to
transfer personal data from the European Economic Area (“EEA”) to the United States. Even though the CJEU decision upheld the Standard Contractual
Clauses (“SCCs”) as an adequate transfer mechanism, the decision created uncertainty around the validity of all EU-to-U.S. data transfers. While the EU and
U.S. governments have since adopted the EU-U.S. Data Privacy Framework to foster EU-to-U.S. data transfers and address the concerns raised in the
aforementioned CJEU decision, it is uncertain whether this framework will be overturned in court like the previous two EU-U.S. bilateral cross-border transfer
frameworks. As a result, regulators may continue to be inclined to interpret the CJEU’s decision, and the logic behind it, as significantly restricting certain
cross-border transfers and the cost and complexity of providing our services in certain markets may increase. Certain countries outside of the EEA have also
passed or are considering passing laws requiring varying degrees of local data residency. By way of further example, statutory damages available through a
private right of action for certain data breaches under the CPRA and potentially other states’ laws, may increase our and our customers’ potential liability and
the demands our customers place on us.
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The costs of compliance with, and other burdens imposed by, privacy laws, regulations and standards may limit the use and adoption of our services,
reduce overall demand for our services, make it more difficult to meet expectations from our commitments to customers and our customers’ customers, lead to
significant fines, penalties or liabilities for noncompliance, impact our reputation, or slow the pace at which we close sales transactions, in particular where
customers request specific warranties and unlimited indemnity for noncompliance with privacy laws, any of which could harm our business. In March 2023,
Salesforce launched the Hyperforce EU Operating Zone, which is designed to enable storage and processing of customer data solely within the EU. This EU
service may enhance our ability to attract and retain customers operating in the EU, but may also increase the cost and complexity of supporting those
customers, and our customers may demand similar offerings in other territories.
In addition to government activity, privacy advocates and other industry groups have established or may establish new self-regulatory standards that may
place additional burdens on our ability to provide our services globally. Our customers expect us to meet voluntary certification and other standards established
by third parties. If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain
customers and could harm our business. In addition, we have seen a trend toward the private enforcement of data protection obligations, including through
private actions for alleged noncompliance, which could harm our business and negatively impact our reputation. For example, in 2020 we were made a party to
a legal proceeding brought by a Dutch privacy advocacy group (the Privacy Collective) on behalf of certain Dutch citizens that claims we violated the GDPR
and Dutch Telecommunications Act through the processing and sharing of data in connection with our Audience Studio and Data Studio products. In December
2021, the Amsterdam District Court declared the Privacy Collective’s claims against us inadmissible and dismissed the case, however, this ruling was appealed
by the Privacy Collective. The appeal hearing took place in the Amsterdam Court of Appeal on February 8, 2024 and we are currently awaiting judgment. We
were also named as a defendant in a similar lawsuit brought in the UK, which has subsequently been dismissed. Although we believe we have a strong defense
for these claims, these or similar future claims could cause reputational harm to our brand or result in liability. In addition, a shift in consumers’ data privacy
expectations or other social, economic or political developments could impact the regulatory enforcement of privacy regulations, which could require our
cooperation and increase the cost of compliance with the imposed regulations.
Furthermore, the uncertain and shifting regulatory environment and trust climate may raise concerns regarding data privacy and cybersecurity, which may
cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. In addition, new
products we develop or acquire in connection with changing events may expose us to liability or regulatory risk. Even the perception that the privacy and
security of personal information are not satisfactorily protected or do not meet regulatory requirements could inhibit sales of our products or services and could
limit adoption of our cloud-based solutions.
Industry-specific regulations and other requirements and standards are evolving and industry-specific laws, regulations, interpretive positions or
standards could harm our business.
Our customers and potential customers conduct business in a variety of industries, including financial services, the public sector, healthcare and
telecommunications. Regulators in certain industries have adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud
computing, AI services and other outsourced services. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations and
interpretive positions may limit our customers’ use and adoption of our services and reduce overall demand for our services. Compliance with these regulations
may also require us to devote greater resources to support certain customers, which may increase costs and lengthen sales cycles. For example, some financial
services regulators have imposed guidelines for use of cloud computing services that mandate specific controls or require financial services enterprises to
obtain regulatory approval prior to outsourcing certain functions. In the United States, a cybersecurity Executive Order released in May 2021 may heighten
future compliance and incident reporting standards in order to obtain certain public sector contracts. If we are unable to comply with these guidelines or
controls, or if our customers are unable to obtain regulatory approval to use our services where required, our business may be harmed. In addition, an inability
to satisfy the standards of certain voluntary third-party certification bodies that our customers may expect, such as an attestation of compliance with the
Payment Card Industry Data Security Standards, may have an adverse impact on our business and results. If in the future we are unable to achieve or maintain
industry-specific certifications or other requirements or standards relevant to our customers, it may harm our business and adversely affect our results.
Further, in some cases, industry-specific, regionally-specific or product-specific laws, regulations or interpretive positions may impact our ability, as well
as the ability of our customers, partners and data providers, to collect, augment, analyze, use, transfer and share personal and other information that is integral
to certain services we provide. The interpretation of many of these statutes, regulations and rulings is evolving in the courts and administrative agencies and an
inability to comply may have an adverse impact on our business and results. This impact may be particularly acute in countries that have passed or are
considering passing legislation that requires data to remain localized “in country,” as this may impose financial costs on companies required to store data in
jurisdictions not of their choosing and to use nonstandard operational processes that add complexity and are difficult and costly to integrate with global
processes. This is also true with respect to the global proliferation of laws regulating the financial services industry, including its use of cloud services. In
Europe, the Digital
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Operational Resilience Act (DORA), which aims to ensure the resilience of the EU financial sectors, including through mandatory risk management, incident
reporting, resilience testing and third-party outsourcing restrictions, was formally adopted by the Council of the EU in November 2022. The UK is advancing
similar legislation and other countries may follow.
Further, countries are applying their data and consumer protection laws to AI, and particularly generative AI, and/or are considering legal frameworks on
AI. Any failure or perceived failure by Salesforce to comply with such requirements could have an adverse impact on our business.
There are various statutes, regulations and rulings relevant to direct email marketing and text-messaging industries, including the Telephone Consumer
Protection Act (“TCPA”) and related Federal Communication Commission orders, which impose significant restrictions on the ability to utilize telephone calls
and text messages to mobile telephone numbers as a means of communication, when the prior consent of the person being contacted has not been obtained. We
have been, and may in the future be, subject to one or more class-action lawsuits, as well as individual lawsuits, containing allegations that one of our
businesses or customers violated the TCPA. A determination that we or our customers violated the TCPA or other communications-based statutes could expose
us to significant damage awards that could, individually or in the aggregate, materially harm our business. In addition, many jurisdictions across the world are
currently considering, or have already begun implementing, changes to antitrust and competition laws, regulations or interpretative positions to enhance
competition in digital markets and address practices by certain digital platforms that they perceive to be anticompetitive. These regulatory efforts could result in
laws, regulations or interpretative positions that may require us to change certain of our business practices, undertake new compliance obligations or otherwise
may have an adverse impact on our business and results.
We have been and may in the future be sued by third parties for various claims, including alleged infringement of proprietary rights.
We are involved in various legal matters arising from the normal course of business activities. These include claims, suits, government investigations and
other proceedings involving alleged infringement of third-party patents and other intellectual property rights, as well as commercial, corporate and securities,
labor and employment, class actions, wage and hour, antitrust, data privacy, cybersecurity and other matters.
The software and Internet industries are characterized by the existence of many patents, trademarks, trade secrets and copyrights and by frequent
litigation based on allegations of infringement or other violations of intellectual property rights. We have received in the past and may receive in the future
communications from third parties, including practicing entities and non-practicing entities, claiming that we have infringed their intellectual property rights.
We have also been, and may in the future be, sued by third parties for alleged infringement of their claimed proprietary rights. Our technologies may be subject
to injunction if they are found to infringe the rights of a third party or we may be required to pay damages, or both. Further, 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 on such a claim.
In addition, we have in the past been, and may in the future be, sued by third parties who seek to target us for actions taken by our customers, including
through the use or misuse of our products. For example, we have been subject to allegations in legal proceedings that we should be liable for the use of certain
of our products by third parties. Although we believe we have a strong defense for these claims, such claims could cause reputational harm to our brand or
result in liability.
Our exposure to risks associated with various claims, including claims related to the use of intellectual property as well as securities and related
stockholder derivative claims, may be increased as a result of acquisitions of other companies. For example, we are subject to ongoing securities class action
litigation and related stockholder derivative claims brought against Slack that remain outstanding, and as to which we may ultimately be subject to liability or
settlement costs. Additionally, we may have a lower level of visibility into the development process with respect to intellectual property or the care taken to
safeguard against infringement risks with respect to acquired companies or technologies. In addition, third parties have made claims in connection with our
acquisitions and may do so in the future, and they may also make infringement and similar or related claims after we have acquired technology that had not
been asserted prior to our acquisition.
The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims or lawsuits, and the disposition of such claims and
lawsuits, whether through settlement or licensing discussions, or litigation, could be time-consuming and expensive to resolve, divert management attention
from executing our business plan, result in efforts to enjoin our activities, lead to attempts on the part of other parties to pursue similar claims and, in the case
of intellectual property claims, require us to change our technology, change our business practices, pay monetary damages or enter into short- or long-term
royalty or licensing agreements.
Any adverse determination or settlement related to intellectual property claims or other litigation could prevent us from offering our services to others,
could be material to our financial condition or cash flows, or both, or could otherwise adversely affect our operating results, including our operating cash flow
in a particular period. In addition, depending on the nature and timing of any such dispute, an unfavorable resolution of a legal matter could materially affect
our current or future results of operations or cash flows in a particular period.
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Any failure to obtain registration or protection of our intellectual property rights could impair our ability to protect our proprietary technology and
our brand, causing us to incur significant expenses and harm our business.
If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology, affecting our brand, causing us to incur
significant expenses and harming our business. Any of our patents, trademarks or other intellectual property rights may be challenged by others or invalidated
through administrative process or litigation. While we have many U.S. patents and pending U.S. and international patent applications, we may be unable to
obtain patent protection for the technology covered in our patent applications or the patent protection may not be obtained quickly enough to meet our business
needs. In addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged
by third parties. Similar uncertainty applies to our U.S. and international trademark registrations and applications. Furthermore, legal standards relating to the
validity, enforceability and scope of protection of intellectual property rights are uncertain, and we also may face proposals to change the scope of protection
for some intellectual property rights in the U.S. and elsewhere. Additionally, the intellectual property ownership and license rights, including copyright,
surrounding AI technologies, which we are increasingly building into our product offerings, has not been fully addressed by U.S. courts or other federal or state
laws or regulations, and the use or adoption of AI technologies in our products and services may expose us to copyright infringement or other intellectual
property misappropriation claims related to AI training or output. Effective patent, trademark, copyright and trade secret protection may not be available to us
in every country in which our services are available and legal changes and uncertainty in various countries’ intellectual property regimes may result in making
conduct that we believe is lawful to be deemed violative of others’ rights. The laws of some foreign countries may not be as protective of intellectual property
rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Also, our involvement in standard-setting
activity, our contribution to open source projects, various competition law regimes or the need to obtain licenses from others may require us to license our
intellectual property in certain circumstances. Accordingly, despite our efforts, we may be unable to prevent third parties from using our intellectual property.
We may be required to spend significant resources and expense 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. If we fail to protect our intellectual property
rights, it could impact our ability to protect our technology and brand. Furthermore, any litigation, whether or not it is resolved in our favor, could result in
significant expense to us, cause us to divert time and resources from our core business, and harm our business.
We may be subject to risks related to government contracts and related procurement regulations.
Our contracts with federal, state, local and foreign government entities are subject to various procurement regulations and other requirements relating to
their formation, administration and performance. We are from time to time subject to audits and investigations relating to our government contracts, and any
violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunding or suspending of
payments, forfeiture of profits, payment of fines and suspension or debarment from future government business. In addition, such contracts may provide for
termination by the government at any time, without cause. Any of these risks related to contracting with governmental entities could adversely impact our
future sales and operating results.
We are subject to governmental sanctions and export and import controls that could impair our ability to compete in international markets and may
subject us to liability if we are not in full compliance with applicable laws.
Our solutions are subject to export and import controls where we conduct our business activities, including the U.S. Commerce Department’s Export
Administration Regulations, U.S. Customs regulations, U.S. supply chain regulations and various economic and trade sanctions regulations established by the
U.S. Treasury Department’s Office of Foreign Assets Control. If we fail to comply with applicable trade laws, we and certain of our employees could be subject
to substantial civil or criminal penalties, including the possible loss of trade privileges; fines, which may be imposed on us and responsible employees or
managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining necessary authorizations, including any required licenses,
may be time-consuming, requires expenditure of corporate resources, is not guaranteed, and may result in the delay or loss of sales opportunities or the ability
to realize value from certain acquisitions or engagements. Acquisitions may also subject us to successor liability and other integration compliance risks.
Furthermore, export control laws and economic sanctions may prohibit or limit the transfer of certain products and services to embargoed or sanctioned
countries, governments and parties. We can provide no assurance that any of the precautions we take to prevent our solutions from being provisioned or
provided to sanctions targets in violation of applicable regulations will be effective, and, accordingly, our solutions could be provisioned or provided to those
targets, including by our resellers or other third parties, which could have negative consequences for our business, including government investigations,
penalties and reputational harm. Changes in our solutions or trade regulations may create delays in the introduction, sale and deployment of our solutions in
international markets or prevent the export or import of our solutions to certain countries, governments or persons altogether. Any decreased use of our
solutions or limitation on our ability to export or sell our solutions may adversely affect our business, financial condition and results of operations. Sanctions
and import and export control regulations in the United States and other
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countries are subject to change and uncertainty, including as a result of rapidly evolving technology and geopolitical developments such as events affecting
relations between the United States and China, multi-jurisdictional sanctions on Russia, war in Ukraine and the Israel-Hamas war. Regulators in the United
States and elsewhere have signaled an increased emphasis on sanctions and export control enforcement, including efforts to combat diversion of services to
sanctioned countries and parties, several recent high-profile enforcement actions and increased pressure for companies to self-disclose potential violations.
Financial Risks
Because we generally recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business
may not be immediately reflected in our operating results.
We generally recognize revenue from customers ratably over the terms of their subscription and support agreements, which are typically 12 to 36 months.
As a result, most of the revenue we report in each quarter is the result of subscription and support agreements entered into during previous quarters.
Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our revenue results for that quarter but will negatively
impact our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services, and changes in our
attrition rate, 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 recognized over the applicable subscription and support term.
If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses with our revenue forecasts, our business
could be harmed and the market price of our common stock could decline.
Due to the unpredictability of future general economic and financial market conditions, including from the global economic impact of ongoing conflicts,
such as the war in Ukraine and the Israel-Hamas war, the pace of change and innovation in enterprise cloud computing services, the impact of foreign currency
exchange rate fluctuations, the growing complexity of our business, including the use of multiple pricing and packaging models and the increasing amount of
revenue from term software license sales, and our increasing focus on enterprise cloud computing services, we may not be able to realize our projected revenue
growth plans. We plan our expense and investment levels based on estimates of future revenue and future anticipated rate of growth. We may not be able to
adjust our spending appropriately if the addition of new subscriptions or the renewals of existing subscriptions fall short of our expectations, and unanticipated
events may cause us to incur expenses beyond what we anticipated. A portion of our expenses may also be fixed in nature for some minimum amount of time,
such as with costs capitalized to obtain revenue contracts, data center and infrastructure service contracts or office leases, so it may not be possible to reduce
costs in a timely manner, or at all, without the payment of fees to exit certain obligations early. Additionally, if sales through indirect channels increase, this
may lead to greater difficulty in forecasting revenue and anticipated rate of growth. As a result, our revenues, operating results and cash flows may fluctuate
significantly on a quarterly basis and revenue growth rates may not be sustainable and may decline in the future. If we are not able to provide continued
operating margin expansion, our business could be harmed and the market price of our common stock could decline.
Unanticipated changes in our effective tax rate and additional tax liabilities and global tax developments may impact our financial results.
We are subject to income taxes in the United States and various other jurisdictions. Significant judgment is often required in the determination of our
worldwide provision for income taxes. Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax
rates, changes in operations, changes in non-deductible expenses, changes in the tax effects of stock-based compensation expense, changes in the valuation of
deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions and changes in accounting
principles and tax laws. Any changes, ambiguity or uncertainty in taxing jurisdictions’ administrative interpretations, decisions, policies and positions could
also materially impact our income tax liabilities.
We may also be subject to additional tax liabilities and penalties due to changes in non-income based taxes resulting from changes in federal, state, local
or international tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies and positions, results of tax examinations,
settlements or judicial decisions, changes in accounting principles, or changes to our business operations, including as a result of acquisitions. Any resulting
increase in our tax obligation or cash taxes paid could adversely affect our cash flows and financial results.
We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions. While we regularly evaluate new information that
may change our judgment resulting in recognition, derecognition or changes in measurement of a tax position taken, there can be no assurance that the final
determination of any examinations will not have an adverse effect on our operating results or financial position.
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As our business continues to grow, increasing our brand recognition and profitability, we may be subject to increased scrutiny and corresponding tax
disputes, which may impact our cash flows and financial results. Furthermore, our growing prominence may bring public attention to our tax profile, and if
perceived negatively, may cause brand or reputational harm.
Global tax developments applicable to multinational businesses may have a material impact to our business, cash flows, or financial results. Such
developments, for example, may include certain new provisions introduced by the Inflation Reduction Act, certain Organization for Economic Co-operation
and Development’s proposals including the implementation of the global minimum tax under the Pillar Two model rules, and the European Commission’s and
certain major jurisdictions’ heightened interest in and taxation of companies participating in the digital economy. Furthermore, governments’ responses to
macroeconomic factors and tax revenue needs may lead to tax rule changes that could materially and adversely affect our cash flows and financial results.
We are exposed to fluctuations in currency exchange rates that have in the past and could in the future negatively impact our financial results and
cash flows from changes in the value of the U.S. Dollar versus local currencies.
We primarily conduct our business in the following regions: the Americas, Europe and Asia Pacific. The expanding global scope of our business exposes
us to risk of fluctuations in foreign currency markets, including in emerging markets. This exposure is the result of selling in multiple currencies, growth in our
international investments, additional headcount in foreign locations, and operating in countries where the functional currency is the local currency. Specifically,
our results of operations and cash flows are subject to currency fluctuations primarily in Euro, British Pound Sterling, Japanese Yen, Canadian Dollar,
Australian Dollar, Brazilian Real and Indian Rupee against the U.S. Dollar. These exposures may change over time as business practices evolve, economic and
political conditions change and evolving tax regulations come into effect. The fluctuations of currencies in which we conduct business can both increase and
decrease our overall revenue and expenses for any given fiscal period. Furthermore, fluctuations in foreign currency exchange rates, combined with the
seasonality of our business, could affect our ability to accurately predict our future results and earnings.
Additionally, global events as well as geopolitical developments, including war in Ukraine and the Israel-Hamas war, fluctuating commodity prices, trade
tariff developments and inflation have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment,
which has and could in the future amplify the volatility of currency fluctuations. Although we attempt to mitigate some of this volatility and related risks
through foreign currency hedging, our hedging activities are limited in scope and may not effectively offset the adverse financial impacts that may result from
unfavorable movements in foreign currency exchange rates, which could adversely impact our financial condition or results of operations.
Our debt service obligations, lease commitments and other contractual obligations may adversely affect our financial condition, results of operations
and cash flows.
As of April 30, 2024, we had a substantial level of outstanding debt, including our Senior Notes. We are also party to the Revolving Loan Credit
Agreement, which provides for our $3.0 billion Credit Facility. Although there were no outstanding borrowings under the Credit Facility as of April 30, 2024,
we may use the proceeds of future borrowings under the Credit Facility for general corporate purposes, which may include, without limitation, the
consideration, fees, costs and expenses related to any acquisition.
In addition to the outstanding and potential debt obligations above, we have also recorded substantial liabilities associated with noncancellable future
payments on our long-term lease agreements. We also have significant other contractual commitments, including leases that have not yet commenced and
commitments with infrastructure service providers, which are not reflected on our condensed consolidated balance sheets.
Maintenance of our indebtedness and contractual commitments and any additional issuances of indebtedness could:
• impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other
purposes;
• cause us to dedicate a substantial portion of our cash flows from operations toward debt service obligations and principal repayments; and
• make us more vulnerable to downturns in our business, our industry or the economy in general.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic,
regulatory and other factors. We will not be able to control many of these factors, such as economic conditions and governmental regulations. Further, our
operations may not generate sufficient cash to enable us to service our debt or contractual obligations resulting from our leases. If we fail to make a payment on
our debt, we could be in default on such debt. If we are at any time unable to generate sufficient cash flows from operations to service our indebtedness when
payment is due, we may be required to attempt to renegotiate the terms of the instruments relating to the indebtedness, seek to refinance all or a portion of the
indebtedness or obtain additional financing. There can be no assurance that we would be able to successfully renegotiate such terms, that any such refinancing
would be possible or that any additional financing could
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be obtained on terms that are favorable or acceptable to us. Any new or refinanced debt may be subject to substantially higher interest rates, which could
adversely affect our financial condition and impact our business. In addition, we may seek debt financing to fund future acquisitions. We can offer no assurance
that we can obtain debt financing on terms acceptable to us, if at all.
In addition, adverse changes by any rating agency to our credit ratings may negatively impact our reputation, the value and liquidity of both our debt and
equity securities, as well as the potential costs associated with a refinancing of our debt. Downgrades in our credit ratings could also affect the terms of any
such refinancing or future financing or restrict our ability to obtain additional financing in the future.
The indentures governing our Senior Notes and the Revolving Loan Credit Agreement impose restrictions on us and require us to maintain compliance
with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. A failure to comply with the covenants and
other provisions of our outstanding debt could result in events of default under such instruments, which could permit acceleration of all of our debt and
borrowings. Any required repayment of our debt as a result of a fundamental change or other acceleration would lower our current cash on hand such that we
would not have those funds available for use in our business.
Lease accounting guidance requires that we record a liability for operating lease activity on our condensed consolidated balance sheet, which increases
both our assets and liabilities and therefore may impact our ability to obtain the necessary financing from financial institutions at commercially viable rates or
at all. Our lease terms may include options to extend or terminate the lease. Periods beyond the noncancellable term of the lease are included in the
measurement of the lease liability and associated asset only when it is reasonably certain that we will exercise the associated extension option or waive the
termination option. We reassess the lease term if and when a significant event or change in circumstances occurs within our control. The potential impact of
these options to extend could be material to our financial position and financial results.
Current and future accounting pronouncements and other financial and nonfinancial reporting standards may negatively impact our financial
results.
We regularly monitor our compliance with applicable financial and nonfinancial reporting standards and review new pronouncements and interpretations
that are relevant to us. As a result of new financial or nonfinancial standards or pronouncements, changes to existing standards or pronouncements and changes
in their interpretation, we may be required to change our accounting policies, to alter our operational policies, to implement new or enhance existing systems so
that they reflect new or amended financial reporting standards, and to adjust our published financial statements. For example, new and proposed reporting
requirements, such as the SEC’s recently adopted climate-related disclosure requirements, may require us to change our accounting policies, to alter our
operational policies, and to implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or to restate our
published financial statements. Such changes may have an adverse effect on our business, financial position and operating results, or cause an adverse deviation
from our revenue and operating profit targets, which may negatively impact our financial results.
Risks Related to Owning Our Common Stock
Our quarterly results are likely to fluctuate, which may cause the value of our common stock to decline substantially.
Our quarterly results are likely to fluctuate. Fluctuations have occurred due to known and unknown risks, such as the global economic impact of ongoing
conflicts, including the war in Ukraine and the Israel-Hamas war, and rising interest rates. In addition, our fiscal fourth quarter has historically been our
strongest quarter for new business and renewals, and the year-over-year compounding effect of this seasonality in billing patterns and overall new business and
renewal activity causes the value of invoices that we generate in the fourth quarter to continually increase in proportion to our billings in the other three
quarters of our fiscal year. As a result, our fiscal first quarter has typically in the past been our largest collections and operating cash flow quarter.
Additionally, some of the important factors that may cause our revenues, operating results and cash flows to fluctuate from quarter to quarter include:
• general economic or geopolitical conditions, including the impacts of the war in Ukraine and the Israel-Hamas war, financial market conditions,
increasing costs of operation and foreign currency exchange rates, any of which can adversely affect either our customers’ ability or willingness to
purchase additional subscriptions or upgrade their services, or delay prospective customers’ purchasing decisions, reduce the value of new
subscription contracts, or affect attrition rates;
• our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ requirements;
• the attrition rates for our services;
• the size and productivity of our sales force;
• the length of the sales cycle for our services;
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• new product and service introductions by our competitors;
• our success in selling our services to large enterprises;
• changes in unearned revenue and remaining performance obligation, due to seasonality, the timing of and compounding effects of renewals, invoice
duration, size and timing, new business linearity between quarters and within a quarter, average contract term, the collectability of invoices related to
multi-year agreements, the timing of license software revenue recognition, or fluctuations due to foreign currency movements, all of which may
impact implied growth rates;
• our ability to realize benefits from strategic partnerships, acquisitions or investments;
• our ability to execute and realize benefits from the Restructuring Plan and other workforce reductions, or any similar actions taken in the future;
• variations in the revenue mix of our services and growth rates of our subscription and support offerings, including the timing of term software license
sales for which the revenue is recognized at a point in time;
• the seasonality of our sales cycle, including term software license sales, and timing of contract execution and the corresponding impact on revenue
recognized at a point in time;
• changes in our pricing policies and terms of contracts, whether initiated by us or as a result of competition, customer preference or other factors;
• expenses associated with our pricing policies and terms of contracts, such as the costs of customer SMS text usage paid by us and the related impacts
to our gross margin;
• the seasonality of our customers’ businesses, especially our Commerce service offering customers, including retailers and branded manufacturers;
• fluctuations in foreign currency exchange rates such as with respect to the U.S. Dollar against the Euro and British Pound Sterling;
• the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;
• the number of new employees, including the cost to recruit and train such employees;
• the timing of commission, bonus and other compensation payments to employees, including decisions to guarantee some portion of commissions
payments in connection with extraordinary events;
• the cost, timing and management effort required for the introduction of new features to our services;
• the costs associated with acquiring new businesses and technologies and the follow-on costs of integration and consolidating the results of acquired
businesses;
• expenses related to our real estate or changes in the nature or extent of our use of existing real estate, including our office leases and our data center
capacity and expansion;
• timing of additional investments in our enterprise cloud computing application and platform services and in our consulting services;
• expenses related to significant, unusual or discrete events, which are recorded in the period in which the events occur, including litigation or other
dispute-related settlement payments;
• income tax effects resulting from, but not limited to, tax law changes, court decisions on tax matters, global tax developments applicable to
multinational corporations, changes in operations or business structures and acquisition activity;
• the timing of payroll and other withholding tax expenses, which are triggered by the payment of bonuses and when employees exercise their vested
stock options;
• technical difficulties or interruptions in our services;
• changes in interest rates and our mix of investments, which impact the return on our investments in cash and marketable securities;
• conditions, and particularly sudden changes, in the financial markets, which have impacted and may continue to impact the value and liquidity of our
investment portfolio;
• changes in the fair value of our strategic investments, including impairments, which could negatively and materially impact our financial results,
particularly in periods of significant market fluctuations;
• equity or debt issuances, including as consideration in or in conjunction with acquisitions;
• the timing of stock awards to employees and the related adverse financial statement impact of having to expense those stock awards over their vesting
schedules;
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• evolving regulations of cloud computing and cross-border data transfer restrictions and similar regulations;
• regulatory compliance and acquisition costs; and
• the impact of new accounting pronouncements and associated system implementations.
Many of these factors are outside of our control, and the occurrence of one or more of them might cause our operating results to vary widely. If we fail to
meet or exceed operating results expectations or if securities analysts and investors have estimates and forecasts of our future performance that are unrealistic
or that we do not meet, the market price of our common stock could decline. In addition, if one or more of the securities analysts who cover us adversely
change their recommendations regarding our stock, the market price of our common stock could decline.
The market price of our common stock is likely to be volatile and could subject us to litigation.
The trading prices of the securities of technology companies have historically been highly volatile. Accordingly, the market price of our common stock
has been and is likely to continue to be subject to wide fluctuations. Factors affecting the market price of our common stock include:
• variations in our operating results, including operating margin, earnings per share, cash flows from operating activities, unearned revenue, remaining
performance obligation, year-over-year growth rates for individual service offerings and other financial and non-financial metrics, and how those
results compare to analyst expectations;
• variations in, and limitations of, the various financial and other metrics and modeling used by analysts in their research and reports about our business;
• forward-looking guidance to industry and financial analysts related to, for example, future revenue, current remaining performance obligation, cash
flows from operating activities, operating margin and earnings per share, the accuracy of which may be impacted by various factors, many of which
are beyond our control, including general economic and market conditions and unanticipated delays in the integration of acquired companies as a
result of regulatory review;
• our ability to meet or exceed forward-looking guidance we have given or to meet or exceed the expectations of investors, analysts or others; our
ability to give forward-looking guidance consistent with past practices; and changes to or withdrawal of previous guidance or long-range targets;
• changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock;
• announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our
competitors;
• announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors;
• announcements of customer additions and customer cancellations or delays in customer purchases;
• the coverage of our common stock by the financial media, including television, radio and press reports and blogs;
• recruitment or departure of key personnel;
• disruptions in our service due to computer hardware, software, network or data center problems;
• the economy as a whole, geopolitical conditions, including global trade and health concerns, market conditions in our industry and the industries of
our customers, and financial institution instability;
• trading activity or positions by a limited number of stockholders who together beneficially own a significant portion of our outstanding common
stock, as well as other institutional or activist investors;
• the issuance of shares of common stock by us, whether in connection with an acquisition or a capital-raising transaction;
• our ability to execute on our Share Repurchase Program as planned, including whether we meet internal or external expectations around the timing or
price of share repurchases, and any reductions or discontinuances of repurchases thereunder;
• issuance of debt or other convertible securities;
• any increase to or reduction, suspension or elimination of dividend payments;
• the inability to conclude that our internal controls over financial reporting are effective;
• changes to our credit ratings; and
• ESG and other issues impacting our reputation.
In addition, if the market for technology stocks or the greater securities market in general experience uneven investor confidence, the market price of our
common stock has and could in the future decline for reasons unrelated to our business, operating results or financial condition, including as a reaction to
events that affect other companies within, or outside, our
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industry. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation, such as
the securities litigation against Slack that was brought before our acquisition. Such litigation, whether against Salesforce or an acquired subsidiary, could result
in substantial costs and a diversion of management’s attention and resources and any liability resulting from or the settlement of such litigation could result in
material adverse impacts to our operating cash flows or results of operations for a given period.
Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of
control of the Company or changes in our management and, therefore, depress the market price of our common stock.
Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the market price of our common stock by acting
to discourage, delay or prevent a change in control of the Company or changes in our management that the stockholders of the Company may deem
advantageous. These provisions among other things:
• permit the Board to establish the number of directors;
• authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison
pill”);
• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
• provide that the Board is expressly authorized to make, alter or repeal our bylaws; and
• establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at
annual stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203
imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15 percent or more of our common stock.
There can be no assurance that we will continue to declare cash dividends in any particular amounts, or at all.
On February 28, 2024, we announced a quarterly dividend policy and the declaration of our first-ever cash dividend. Whether we continue to pay cash
dividends, as well as the rate at which we pay cash dividends, in the future is subject to continued capital availability, general economic and market conditions,
applicable laws and agreements and our Board continuing to determine that the declaration of dividends is in the best interests of the Company and its
stockholders. The declaration and payment of any dividend may be discontinued at any time and dividend amounts may be reduced at any time. A
discontinuation of or reduction in our dividend payments could have a negative effect on our stock price.
General Risks
Volatile and significantly weakened global economic conditions have in the past and may in the future adversely affect our industry, business and
results of operations.
Our overall performance depends in part on worldwide economic and geopolitical conditions. The United States and other key international economies
have experienced significant economic and market downturns in the past, and are likely to experience additional cyclical downturns from time to time in which
economic activity is impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in
credit, equity and foreign exchange markets, inflation, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise
suddenly and the full impact of such conditions can be difficult to predict. In addition, geopolitical and domestic political developments, such as existing and
potential trade wars and other events beyond our control, such as war in Ukraine and the Israel-Hamas war, have increased and may continue to increase levels
of political and economic unpredictability globally and the volatility of global financial markets. Moreover, these conditions have affected and may continue to
affect the rate of IT spending; could adversely affect our customers’ ability or willingness to attend our events or to purchase our enterprise cloud computing
services; have delayed and may delay customer purchasing decisions; and have reduced and may in the future reduce the value and duration of customer
subscription contracts or cause our customers to seek to modify their existing subscription contracts. All of these risks and conditions could materially
adversely affect our future sales, attrition rates and operating results.
Natural disasters and other events beyond our control have in the past and may in the future materially adversely affect us.
Natural disasters or other catastrophic events have in the past and may in the future cause damage or disruption to our operations, international commerce
and the global economy, and thus could have a strong negative effect on us. Our business operations, the business operations of third-party providers or
suppliers that we rely on to conduct our business and the business operations of our customers are subject to interruption by natural disasters, fire, power
shutoffs or shortages, actual or
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threatened public health emergencies and other events beyond our control. For example, the occurrence of regional epidemics or a global pandemic, such as
COVID-19, and related public health measures have in the past and may in the future materially affect how we and our customers operate our businesses, as
well as our operating results and cash flows. Although we maintain crisis management and disaster response plans, such events could make it difficult or
impossible for us to deliver our services to our customers, and could decrease demand for our services. Our corporate headquarters, and a significant portion of
our personnel, research and development activities and other critical business operations, are located near major seismic faults in the San Francisco Bay Area.
Because we do not carry earthquake insurance for direct earthquake-related losses and significant recovery time could be required to resume operations, our
financial condition and operating results could be materially and adversely affected in the event of a major earthquake or catastrophic event, and the adverse
effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event.
Climate change may have an impact on our business.
While we seek to mitigate our business risks associated with climate change by establishing robust environmental programs and partnering with
organizations who are also focused on mitigating their own climate-related risks, we recognize that there are inherent climate-related risks wherever business is
conducted. Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our offices globally have historically
experienced, and are projected to continue to experience, climate-related events at an increasing frequency, including drought, water scarcity, heat waves, cold
waves, flooding, wildfires and resultant air quality impacts and power shutoffs associated with climate-related events. These events in turn have impacts on
inflation risks, food security, water security (including for water availability for data center cooling), energy security and on our employees’ health and well-
being. Furthermore, it is more difficult to mitigate the impact of these events on our employees working remotely or at client sites. Changing market dynamics,
global policy developments and the increasing frequency and impact of extreme weather events on critical infrastructure in the United States and elsewhere
have the potential to disrupt our business, the business of companies we invest in, the business of third-party providers or suppliers that we rely on to conduct
our business and the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. In
particular, climate-related events, energy market volatility, and power grid disruptions may increase the operational costs of data centers for Salesforce or our
third-party providers. Additionally, failure to uphold, meet or make timely forward progress against our public commitments and goals related to climate action
could adversely affect our reputation with investors, suppliers and customers, our financial performance or our ability to recruit and retain talent.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share repurchases of the Company’s common stock for the three months ended April 30, 2024 were as follows (in millions, except for average price paid
per share):
Period
Total Number of Shares Purchased
(1)
Average Price Paid Per
Share
Total Number of Shares Purchased as Part
of Publicly Announced Program (1)
Approximate Dollar Value of Shares that
May Yet Be Purchased Under the Program
February 2024 1 $289.94 1 $17,836
March 2024 3 305.32 3 17,001
April 2024
3
283.41
3
16,158
Total
7 7
(1) In August 2022, the Board of Directors authorized a program to repurchase up to $10.0 billion of the Company’s common stock. In February 2023, the
Board of Directors authorized an additional $10.0 billion in repurchases under the Share Repurchase Program. In February 2024, the Board of Directors
authorized an additional $10.0 billion in repurchases under the Share Repurchase Program for an aggregate total authorization of $30.0 billion. The Share
Repurchase Program does not have a fixed expiration date and does not obligate the Company to acquire any specific number of shares. Under the Share
Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and/or open market transactions,
including under plans complying with Rule 10b5-1 under the Exchange Act, as part of accelerated share repurchases and other methods. The timing, manner,
price and amount of any repurchases are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price
and economic and market conditions. All repurchases disclosed in the table were made pursuant to the publicly announced Share Repurchase Program.
In connection with the Company’s acquisition of Spiff, Inc., on February 1, 2024, the Company issued 45,845 shares of its common stock to certain
former stockholders of Spiff, Inc. that will vest over time. These issuances were made in reliance on one or more of the following exemptions or exclusions
from the registration requirements of the Securities Act: Section 4(a)(2) of the Securities Act, Regulation D promulgated under the Securities Act and
Regulation S promulgated under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended April 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the
adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K).
ITEM 6. EXHIBITS
The documents listed in the Index to Exhibits of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report
on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
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Index to Exhibits
Exhibit
No.
Provided
Herewith
Incorporated by Reference
Exhibit Description Form SEC File No. Exhibit Filing Date
3.1 Restated Certificate of Incorporation of Salesforce,
Inc.
8-K 001-32224 3.1 4/4/2022
3.2 Amended and Restated Bylaws of Salesforce, Inc. 8-K 001-32224 3.1 12/16/2022
10.1*
Amended and Restated Annual Performance Bonus
Plan
X
10.2*
Salesforce, Inc. Amended and Restated 2013 Equity
Incentive Plan
X
10.3*
Salesforce, Inc. Amended and Restated 2014
Inducement Equity Incentive Plan
X
10.4* Forms of equity award agreements under the
Amended and Restated 2013 Equity Incentive Plan
X
10.5* Form of Restricted Stock Unit Agreement under the
Amended and Restated 2014 Inducement Equity
Incentive Plan
X
10.6* Offer Letter, dated June 8, 2023, between Salesforce,
Inc. and Sabastian Niles
X
31.1 Certification of Chief Executive Officer pursuant to
Exchange Act Rule 13a-14(a) or 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
X
31.2 Certification of Chief Financial Officer pursuant to
Exchange Act Rule 13a-14(a) or 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
X
32.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
X
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema
Document
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF Inline XBRL Extension Definition
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
Document
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document
104
The Cover Page Interactive Data File, formatted in
Inline XBRL (included in Exhibit 101)
* Indicates a management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: May 29, 2024
Salesforce, Inc.
By: /s/ AMY WEAVER
Amy Weaver
President and
Chief Financial Officer
(Principal Financial Officer)
Dated: May 29, 2024
Salesforce, Inc.
By: /s/ SUNDEEP REDDY
Sundeep Reddy
Executive Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
70
Exhibit 10.1
Annual Performance Bonus Plan
(Amended and Restated March 20, 2024)
Overview:
The objective of the Annual Performance Bonus Plan, f/k/a the Gratitude Bonus Plan (the “Plan”) is to motivate and reward
performing eligible employees for their contributions to Salesforce, Inc.’s (the “Company”) success by aligning the goals of each
employee with those of the Company.
Effective Date:
This Plan is amended and restated effective March 20, 2024. This Plan replaces or supersedes all previous bonus plan documents,
plan descriptions, and bonus practices under which employees were previously eligible with respect to all versions of the Plan prior
to this most recent amendment and restatement; provided, however, that amounts earned but unpaid under such previous versions of
the plan will be paid in accordance with their terms.
Bonus Period:
Unless determined otherwise by the Administrator, the Plan performance period coincides with the Company’s fiscal year from
February 1 to January 31 (“Bonus Period”) and, subject to the Section 409A provisions below, bonuses under the Plan (“Bonus
Awards”) will be paid at times determined by the Administrator. Previous timing of Bonus payments does not dictate timing of
future bonus payments, if any.
Eligibility:
Unless the Administrator (as defined below) determines otherwise with respect to an employee, an employee is eligible to participate
in the Plan if the employee meets all of the criteria listed below. In order for an employee to be eligible to receive any Bonus Award
under this Plan, the employee must:
• Be an active, regular, full-time, part-time or fixed term employee of the Company (or Company subsidiary or affiliate).
For the avoidance of doubt, for purposes of the Plan, active employment includes being on a Company-approved leave of
absence
• Be an employee on the Company’s (or a Company subsidiary’s or Company affiliate’s) payroll on the date of the bonus
payment
• Be performing at or above his or her leadership’s expectations
• Not be on a commission, departmental bonus, Management by Objective, or Marketing Cloud or other ExactTarget bonus
plan, or other bonus or incentive compensation plan or arrangement designated by the Administrator, in each case, unless
otherwise approved prior to the date the bonus payment is distributed by the Administrator
st st
1
• Have submitted, through such means as determined by the Company, his or her V2MOM (or other employee individual
performance objectives, if so determined by the Administrator) for the applicable fiscal year by the applicable deadline
established by the Company, unless the Administrator determines that such submission will not be required for the
employee (including through a waiver of such requirement at any time prior to the payment date of a Bonus Amount, if
any, to the applicable employee for the applicable Company fiscal year). Notwithstanding the foregoing, unless and until
the Administrator determines otherwise, an employee on a Company-approved leave of absence during such times as
determined by the Company (for purposes of clarity, a Company-approved leave of absence does not include paid-time
off, vacation, sabbatical, or similar time off arrangements), shall not be subject to such submission requirements. If the
Administrator determines otherwise pursuant to the prior sentence, such V2MOM (or other applicable employee
individual performance objectives) submission requirements as the Administrator determines shall apply instead
• Have met such other requirements as the Administrator has determined to be applicable for the relevant Bonus Period
The Administrator may waive or modify any eligibility criteria otherwise applicable to an employee at any time prior to the date a
bonus payment, if any, otherwise is or would be distributed to the employee under the Plan for the applicable Bonus Period.
Performance Objectives and Plan Components:
Notwithstanding any contrary provision of the Plan, the Administrator, in its sole discretion, will determine the performance
objective or objectives applicable to any potential Target Bonus (or portion thereof). Until and unless the Administrator determines
otherwise, the Plan will be comprised of two components: Company performance and individual performance.
Company Performance
“Company Performance” is based on the Company’s achievement of such performance objective or objectives as the Administrator
may determine to be applicable for the Bonus Period (and which objectives may differ by Pool (as defined below), by employee or
group of employees, or on such other basis as the Administrator deems appropriate). Performance objectives included in the
determination of Company Performance may include, but are not limited to, any one or more of bookings, customer attrition, non-
GAAP operating income, revenue, and operating cash flow, or other metric or metrics determined by the Administrator to be
appropriate. Until and unless the Administrator determines otherwise, while Company Performance remains a component of the Plan
for a Bonus Period, after the close of the Bonus Period, a “Corporate Multiplier” will be assigned based on the level of Company
Performance.
2
Individual Performance
Unless and until the Administrator determines otherwise, after the close of the Bonus Period, each applicable employee will be
assigned an “Individual Multiplier” based on such employee’s levels of performance (as determined by the Administrator with
respect to any Section 16 Officer and, until and unless the Administrator determines otherwise, the employee’s manager with respect
to any employee that is not a Section 16 Officer) and other factors as deemed appropriate. If determined by the Administrator to be
appropriate, each eligible employee, along with his or her manager, will establish key “Individual Performance Objectives,” with the
final Individual Performance Objectives for an eligible employee to be determined by the Administrator with respect to any Section
16 Officer and, until and unless the Administrator determines otherwise, by the employee’s manager with respect to any employee
that is not a Section 16 Officer. Individual Performance Objectives may include, but are not limited to any one or more of individual
objectives, developmental areas, and career development, project completion, operational targets, financial targets, any other
quantifiable goal relating to the Company’s V2MOM and the employee’s individual performance, or any other metric or metrics
determined to by the Administrator to be appropriate. The Administrator may periodically review the objectives to evaluate, update,
adjust or validate them, and the levels of performance against such Individual Performance Objective may impact the determination
of the employee’s Individual Multiplier.
Funding of the Annual Performance Bonus Pool:
For each Bonus Period, the Company will create one or more Annual Performance Bonus Pools (together, the “Pools” and each, a
“Pool”), which Pools may be established before, during or after the applicable Bonus Period. Bonus Awards for a Bonus Period will
be paid from the Pools. Until and unless the Administrator determines otherwise, for each Bonus Period, the Company will create
three Pools, each of which are to be funded based on the achievement of such performance objective or objectives as the
Administrator will determine (and which objectives may differ by Pool, by employee or group of employees, or on such other basis
as the Administrator deems appropriate). Until and unless the Administrator determines otherwise, the Pools will be funded based on
the achievement of Company Performance objectives (as indicated based on the Corporate Multiplier and as set for the applicable
Pool) for the applicable Bonus Period. Until and unless the Administrator determines otherwise, the three Pools will be for 1) Senior
Vice President level and below positions (the “SVP & Below Pool”); 2) Executive Vice President and above positions (excluding
Section 16 Officers) (the “EVP & Above Pool”); and 3) the Company’s Section 16 Officers (the “Section 16 Officer Pool”). For
purposes of the Plan, “Section 16 Officer” means an employee of the Company (or its affiliate) who is subject to Section 16 of the
Securities Exchange Act of 1934, as amended.
The objectives set forth above and the funding of the Pools are subject to approval by the Administrator. The Administrator may
increase or decrease (including to zero) the funding of any Pool. The Pools are intended to represent discrete bonus funding
allocations for those levels. However, subject to the approval of the Administrator, funding of the Section 16 Officer Pool
3
and EVP & Above Pool may be decreased and all or a portion of the decrease may be shifted to the SVP & Below Pool.
The Administrator may determine that a minimal level of achievement must be obtained by the Company to fund the Pools. The
minimum level of performance, if any, necessary to fund the Pools will be determined by the Administrator (and may differ by Pool,
by employee or group of employees, or on such other basis as the Administrator deems appropriate). Once the Company achieves its
minimum performance (if any), the Pools will continue to be funded as the Company’s performance increases until the Company’s
maximum goals under the Plan are achieved. The Administrator may set maximum performance levels and multipliers for a Bonus
Period (which maximums may differ by Pool, by employee or group of employees, or on such other basis as the Administrator
deems appropriate). Notwithstanding the foregoing, until and unless changed by the Administrator, the maximum corporate funding
multiplier for the Section 16 Officer Pool is set at 100%, and the maximum corporate funding multiplier for the EVP & Above Pool
and the SVP & Below Pool is 110%.
Target Bonus:
The “Target Bonus” under the Plan for any eligible employee for a Bonus Period will be set by the Administrator (which Target
Bonus may be expressed as a percentage of the eligible employee’s annual base salary or other earnings components (as selected by
the Administrator) for the Bonus Period, a fixed dollar amount, or such other amount or based on such other formula as the
Administrator determines). The Administrator may modify an eligible employee’s Target Bonus for a Bonus Period at any time prior
to the end of such Bonus Period.
Awarding Bonuses:
Subject to the discretion of the Administrator, the amount of an eligible employee’s Bonus Award, if any, for a Bonus Period is
determined based on the level of funding (if any) of the Pools, the employee’s Individual Multiplier (if applicable), the employee’s
Target Bonus, such other metrics the Administrator has determined to be applicable for the Bonus Period, and date of hire or
eligibility under the Plan. Until and unless the Administrator determines otherwise, when, and if, the Pools fund, designated
managers will recommend an Individual Multiplier for an eligible employee based on the employee’s individual performance, the
allocated Pool for the Bonus Period, date of hire, and any other matters as the Administrator deems appropriate. The fact and amount
of a Bonus Award, if any, is at the sole discretion of the Administrator and may be less than, equal to or greater than the employee’s
Target Bonus or the amount that would otherwise result based on the Individual Multiplier recommended by the employee’s manager
and may vary from employee to employee.
Notwithstanding anything herein to the contrary, and subject to any continued employment requirements of the Plan, during a Bonus
Period, the Administrator may, in its discretion, choose to pay all or a portion of a then-current employee’s Target Bonus for the
Bonus Period without regard to whether the applicable Pool has been funded or Company Performance Objectives or Individual
Performance Objectives have been achieved and without regard to the Corporate Multiplier or Individual Multiplier assigned,
including paying all or a portion of a Bonus
4
Amount prior to the end of the Bonus Period. For purposes of clarity, if such a Bonus Award is paid, the Administrator may
determine that any later Bonus Award for such Bonus Period will be reduced by all or a portion of the amount of the earlier payment.
Except as provided above or otherwise determined by the Administrator, an employee who does not meet his or her manager’s or the
Administrator’s expectations with respect to individual performance will not receive any Bonus Award under this Plan.
Bonus Award payments are subject to the approval of the Administrator. The Administrator retains the right to increase, decrease,
pro-rate or eliminate an individual Bonus Award or to increase, decrease, pro-rate or eliminate Bonus Awards collectively as the
Administrator deems necessary or appropriate.
All Bonus Awards paid under the Plan will be subject to all applicable tax withholdings.
Pro-Rated Bonus Awards:
Unless determined otherwise by the Administrator, for any employee hired after the first day of the Bonus Period, Bonus Awards, if
any, will be pro-rated on such basis as the Administrator determines to be appropriate. An employee who leaves the Company and is
re-hired within the same Bonus Period may be eligible to receive a pro-rated Bonus Award based solely on the employee’s re-hire
date or on such other basis as the Administrator determines to be appropriate. The Administrator also may pro-rate Bonus Awards, if
any, in connection with an employee’s leave of absence or on any other basis the Administrator deems appropriate.
Promotions/Transfers:
Unless determined otherwise by the Administrator, an employee who transfers into or out of a Plan-eligible job may be eligible for a
pro-rated Bonus Award based on the period of time spent in the Annual Performance Bonus Plan-eligible position (or on such other
basis as the Administrator determines to be appropriate) provided such employee has been actively employed during the Bonus
Period and performing at an acceptable level, the relevant Pool has funded, and he or she is an active employee of the Company (or a
Company subsidiary or Company affiliate) when bonuses are paid.
Unless determined otherwise by the Administrator, if any employee transfers from one Plan-eligible position to another Plan-eligible
position (with a higher, lower, or same Target Bonus), the employee’s Bonus Award, if any, will be calculated based on the
employee’s pro-rated Target Bonus and metrics on which the Target Bonus are based (e.g., annual base salary) in each position at the
end of the applicable Bonus Period, and then applying the Corporate Multiplier and Individual Multiplier as provided under the Plan,
subject to the discretion of the Administrator. The pro-rated Target Bonus for each Plan-eligible position will be determined based on
the number of months during the Bonus Period the employee spent in that position.
5
Employees who transfer from one country’s payroll to another’s will be paid in accordance with the mobility practice in place at the
time of payment, and in accordance with applicable local laws, subject to the discretion of the Administrator.
Termination of Employment:
Unless otherwise provided by applicable law or otherwise provided by the Administrator, an employee who ceases employment with
the Company (and the Company’s subsidiaries and affiliates) for any reason prior to the date bonuses are paid for a Bonus Period
will not be eligible for and will not earn any Bonus Award for that Bonus Period. In the case of death, permanent disability or
exceptional circumstances, deviations from eligibility under the Plan may be approved and reviewed by the Administrator or the
SVP, Employee Success on a case-by-case basis; provided that any deviation with respect to a Section 16 Officer must be approved
by the Compensation Committee.
Administrator:
The Plan will be administered by the Administrator. The “Administrator” means, with respect to a Section 16 Officer and the Section
16 Officer Pool, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). With respect
to all other employees and the EVP & Above Pool and SVP & Below Pool, the “Administrator” means individually or collectively,
the Company’s Chief Executive Officer, the Company’s Chief Financial Officer, any member of the Executive Committee of the
Company or such other Company officers as may be delegated authority by the Compensation Committee; provided, however, that
the Compensation Committee or the Company’s Board of Directors may, at any time, elect to act in whole or in part in the capacity
of Administrator.
The Administrator, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority
and powers under the Plan to one or more members of the Company’s Board of Directors or one or more officers or employees of
the Company; provided, however, that the Compensation Committee may not delegate its authority as Administrator with respect to
Section 16 Officers other than to the Company’s Board of Directors. If the Administrator delegates any authority for the
administration of the Plan, the term “Administrator” will include the individuals delegated such authority with respect to such
authority.
Section 409A:
Bonuses, if any, under the Plan will be paid at the time or times determined by the Administrator, but in all cases no later than as
soon as practicable following the end of the applicable Bonus Period to which the bonus relates. In no event will bonuses, if any,
under the Plan be paid later than the later of (1) the fifteenth day of the third month following the end of the first Company fiscal
year in which the applicable Bonus is no longer subject to a substantial risk of forfeiture (within the meaning of Section 409A), or
(2) the fifteenth day of the third month following the end of the first calendar year in which the applicable Bonus Amount is no
longer subject to a substantial risk of forfeiture (within the meaning of Section 409A); further, in all cases, Bonus
6
Amounts, if any, under the Plan will be paid within ninety days following the end of the applicable Bonus Period to which the bonus
relates. It is intended that all bonuses payable under this Plan will be exempt from the requirements of “Section 409A” (as defined
below) pursuant to the “short-term deferral” exemption or, in the alternative, comply with the requirements of Section 409A so that
none of the payments and benefits to be provided under this Plan will be subject to the additional tax imposed under Section 409A,
and any ambiguities or ambiguous terms herein will be interpreted to so comply or be exempt. Further, if and to the extent necessary
to avoid subjecting an employee to additional taxation under Section 409A, payment to an employee of all or a portion of any
severance-related payment of a bonus under the Plan, and any other severance payments to the employee that are deferred
compensation for purposes of Section 409A, will be delayed until the date that is six months and one day following the employee’s
separation from service. Each payment and benefit payable under this Plan is intended to constitute a separate payment for purposes
of Section 1.409A-2(b)(2) of the Treasury Regulations. The Company may, in good faith and without the consent of any participant,
make any amendments to this Plan and take such reasonable actions as it deems necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition under Section 409A prior to actual payment to the participant. “Section
409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder, as they
may be amended or modified from time to time, and any applicable state law equivalents.
Modification, Interpretation, and Termination of the Plan:
The Plan, as set forth in this document, represents the general guidelines the Company intends to utilize to determine what Bonus
Award payments, if any, will be paid. The Administrator reserves the right to modify or terminate the Plan, at any time, with or
without written notification; provided that any modification or termination impacting a Section 16 Officer must be approved by the
Compensation Committee or the Company’s Board of Directors. The Administrator will have the full power and authority to
interpret and administer the Plan and will be the sole arbiter of all manners of interpretation and application of the Plan. All
determinations and decisions made by the Administrator or any delegate of the Administrator pursuant to the provisions of the Plan
are in the Administrator’s sole discretion, will be final, conclusive, and binding on all persons, and will be given the maximum
deference permitted by law. For avoidance of doubt, Administrator determinations and decisions under this Plan may differ from
Bonus Period to Bonus Period, from Pool to Pool, from employee to employee or on such other basis, consistent with applicable law,
as the Administrator deems appropriate.
The existence of, or an employee’s eligibility for, this Plan will not be deemed to give the employee the right to be retained in the
employment of the Company and will not change employees’ at-will employment status, where applicable. The Plan is strictly non-
contractual and does not form part of any employee’s terms and conditions of employment, or part of any employee’s employment
contract. The Plan will not be deemed to constitute a contract of employment with any participating employee, nor be deemed to be
consideration for the employment of any participant.
7
Exhibit 10.2
SALESFORCE, INC.
AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN
1. PURPOSES OF THE PLAN. The purposes of this Plan are:
• to attract and retain the best available personnel for positions of substantial responsibility,
• to provide incentive to Employees, Directors and Consultants, and
• to promote the success of the Company’s business.
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units,
Stock Appreciation Rights, Performance Bonus Awards, Performance Units and Performance Shares.
2. DEFINITIONS. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance
with Section 4 of the Plan.
(b) “Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.
(c) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common
Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.
(d) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Bonus Awards, Performance Units or Performance Shares.
(e) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) “Award Transfer Program” means any program instituted by the Administrator that would permit
Participants the opportunity to transfer for value any outstanding Awards to a financial institution or other person or entity approved
by the Administrator. A transfer for “value” shall not be deemed to occur under this Plan where an Award is transferred by a
Participant for bona fide estate planning purposes to a trust or other testamentary vehicle approved by the Administrator.
(g) “Board” means the Board of Directors of the Company.
(h) “Cause” means, unless otherwise defined by the Participant’s Award Agreement or contract of employment or
service, any of the following: (i) the Participant’s theft, dishonesty, or falsification of any Participating Company documents or
records; (ii) the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information; (iii)
any action by the Participant which has a detrimental effect on a Participating Company’s reputation or business; (iv) the
Participant’s failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and
a reasonable opportunity to cure, such failure or inability; (v) any material breach by the Participant of any employment or service
agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement;
or (vi) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the
Participant’s ability to perform his or her duties with a Participating Company.
(i) “Change in Control” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than
one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held
by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided,
however, that for purposes of this clause (i), (1) the acquisition of beneficial ownership of additional stock by any one Person
who is considered to beneficially own more than fifty percent (50%) of the total voting power of the stock of the Company
will not be considered a Change in Control; and (2) if the stockholders of the Company immediately before such change in
ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their
ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect
beneficial ownership of fifty percent (50%) or more of the total voting power of the stock of the Company, such event shall
not be considered a Change in Control under this clause (i). For this purpose, indirect beneficial ownership shall include,
without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business
entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other
business entities;
(ii) A change in the effective control of the Company which occurs on the date that a majority of members
of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by
a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if
any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by
the same Person will not be considered a Change in Control; or
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(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the date
that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more
than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a
change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the
Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the
Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty
percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a
Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding
stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned,
directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair
market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.
For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a
change in control event within the meaning of Section 409A.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to
change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(j) “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or
regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(k) “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed
by the Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof.
(l) “Common Stock” means the common stock of the Company.
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(m) “Company” means Salesforce, Inc., a Delaware corporation, or any successor thereto.
(n) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or
Subsidiary or other Affiliate to render services to such entity.
(o) “Director” means a member of the Board.
(p) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in
the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and
total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(q) “Dividend Equivalent” means a credit, made at the discretion of the Administrator or as otherwise provided
by the Plan, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by
an Award held by such Participant.
(r) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or
Subsidiary or other Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be
sufficient to constitute “employment” by the Company or an Affiliate. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such
individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the
Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination.
(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(t) “Exchange Program” means a program under which (i) outstanding awards are surrendered or cancelled in
exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different
type, and/or cash, (ii) Participants would have the opportunity to participate in an Award Transfer Program, and/or (iii) the exercise
price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its
sole discretion.
(u) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system,
including without limitation the New York Stock Exchange, Nasdaq Global Select Market, the Nasdaq Global Market or the
Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for
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such stock (or the mean of the closing bid and asked prices for the Common Stock, if no sales were reported) as quoted on
such exchange or system on the day of determination, as reported in the Wall Street Journal or such other source as the
Administrator deems reliable. If the relevant date does not fall on a day on which the Common 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 Common Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the
Administrator, in its discretion;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common
Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date
such bids and asks were reported), as reported in the Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be
determined in good faith by the Administrator.
(v) “Fiscal Year” means the fiscal year of the Company.
(w) “Fiscal Quarter” means a fiscal quarter within a Fiscal Year of the Company.
(x) “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(y) “Inside Director” means a Director who is an Employee.
(z) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify
as an Incentive Stock Option.
(aa) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(bb) “Option” means a stock option granted pursuant to the Plan.
(cc) “Outside Director” means a Director who is not an Employee.
(dd) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the
Code.
(ee) “Participant” means the holder of an outstanding Award.
(ff) “Participating Company” means the Company or any Affiliate.
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(gg) “Performance Bonus Award” means a cash award set forth in Section 12.
(hh) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its
discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures:
(i) revenue;
(ii) gross margin;
(iii) operating margin;
(iv) operating income;
(v) operating profit or net operating profit;
(vi) pre-tax profit;
(vii) earnings (which may include earnings before interest, taxes and depreciation, earnings before taxes
and net earnings);
(viii) net income;
(ix) cash flow (including operating cash flow or free cash flow);
(x) expenses;
(xi) the market price of the Common Stock;
(xii) earnings per share;
(xiii) return on stockholder equity;
(xiv) return on capital;
(xv) return on assets or net assets;
(xvi) return on equity;
(xvii) return on investment;
(xviii) economic value added;
(xix) number of customers;
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(xx) stock price;
(xxi) growth in stockholder value relative to the moving average on the S&P 500 Index or another index;
(xxii) market share;
(xxiii) contract awards or backlog;
(xxiv) overhead or other expense reduction;
(xxv) credit rating;
(xxvi) objective customer indicators;
(xxvii) new product invention or innovation;
(xxviii) attainment of research and development milestones;
(xxix) improvements in productivity; and
(xxx) any other measure or metric the Administrator deems appropriate.
The Performance Goals may differ from Participant to Participant and from Award to Award. Any criteria used may be
measured, as applicable, (i) in absolute terms, (ii) in combination with another Performance Goal or Goals (for example, but not by
way of limitation, as a ratio or matrix), (iii) in relative terms (including, but not limited to, results for other periods, passage of time
and/or against another company or companies or an index or indices), (iv) on a per-share or per-capita basis, (v) against the
performance of the Company as a whole or a segment of the Company (including, but not limited to, any combination of the
Company and any subsidiary, division, joint venture, Affiliate and/or other segment) and/or (vi) on a pre-tax or after-tax basis. The
Administrator shall determine whether any significant element(s) or item(s) shall be included in or excluded from the calculation of
any Performance Goal with respect to any Participants (for example, but not by way of limitation, the effect of mergers and
acquisitions). As determined in the discretion of the Administrator, achievement of Performance Goals for a particular Award may be
calculated in accordance with the Company’s financial statements, prepared in accordance with generally accepted accounting
principles (“GAAP”), or on a basis other than GAAP, including as adjusted for certain costs, expenses, gains and losses to provide
non-GAAP measures of operating results.
(ii) “Performance Period” means the time period determined by the Administrator in its sole discretion during
which the performance objectives must be met.
(jj) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon
attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 11.
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(kk) “Performance Unit” means an Award denominated in cash which may be earned in whole or in part upon
attainment of performance goals or other vesting criteria as the Administrator may determine and which may be settled for cash,
Shares or other securities or a combination of the foregoing pursuant to Section 11.
(ll) “Plan” means this Amended and Restated 2013 Equity Incentive Plan.
(mm) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 8 of the Plan, or
issued pursuant to the early exercise of an Option.
(nn) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value
of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the
Company.
(oo) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.
(pp) “Section 16(b)” means Section 16(b) of the Exchange Act.
(qq) “Section 409A” means Section 409A of the Code, and any proposed, temporary or final Treasury Regulations
and Internal Revenue Service guidance thereunder, as each may be amended from time to time.
(rr) “Securities Act” means the Securities Act of 1933, as amended.
(ss) “Service Provider” means an Employee, Director or Consultant. The Company shall determine in good faith
and in the exercise of its discretion whether an individual has become or has ceased to be a Service Provider and the effective date of
such individual’s status as, or cessation of status as, a Service Provider. For purposes of an individual’s rights, if any, under the Plan
as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination.
(tt) “Share” means a share of the Common Stock, as adjusted in accordance with Section 15 of the Plan.
(uu) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that
pursuant to Section 10 is designated as a Stock Appreciation Right.
(vv) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section
424(f) of the Code.
(ww) “Tax Obligations” means tax and social insurance liability obligations and requirements in connection with
the Awards, including, without limitation, (a) all federal, state, and local taxes (including the Participant’s Federal Insurance
Contributions Act (FICA) obligation) that are required to be withheld by the Company or the employing Affiliate, (b) the
8
Participant’s and, to the extent required by the Company (or Affiliate), the Company’s (or Affiliate’s) fringe benefit tax liability, if
any, associated with the grant, vesting, or exercise of an Award or sale of Shares, and (c) any other Company (or Affiliate) taxes the
responsibility for which the Participant has, or has agreed to bear, with respect to such Award (or exercise thereof or issuance of
Shares thereunder).
3. STOCK SUBJECT TO THE PLAN.
(a) Stock Subject to the Plan. Subject to the provisions of Section 15 of the Plan, the maximum aggregate number
of Shares that may be issued under the Plan is 292,700,000 plus (i) any Shares that, as of the date stockholders initially approve the
Plan, have been reserved but not issued pursuant to any awards granted under the 2004 Equity Incentive Plan (the “2004 Plan”)
and/or the 2004 Outside Directors Stock Plan (the “Director Plan” and, together with the 2004 Plan, the “Prior Plans” and each, a
“Prior Plan”) and are not subject to any awards granted thereunder, with the Shares subject to the awards referenced in this clause
(i) credited to the aggregate number of Shares that may be awarded under the Plan as one (1) Share for every one (1) Share subject
thereto, and (ii) any Shares subject to stock options or other awards granted under the Prior Plans that, after the date stockholders
initially approve the Plan, expire or otherwise terminate without having been vested or exercised in full, Shares issued pursuant to
awards granted under the Prior Plans that, after the date stockholders initially approve the Plan, are forfeited to or repurchased by the
Company due to failure to vest, and Shares subject to awards granted under a Prior Plan that, after the date stockholders initially
approve the Plan, would have, but for the termination of the applicable Prior Plan, again become available for future use under the
terms of such Prior Plan (as applicable), with the Shares subject to those of the awards referenced in this clause (ii) that are stock
options and/or stock appreciation rights credited to the aggregate number of Shares that may be awarded under the Plan as one (1)
Share for every one (1) Share subject thereto, and the Shares subject to those of the awards referenced in this clause (ii) that are
awards other than stock options or stock appreciation rights credited to the aggregate number of Shares that may be awarded under
the Plan as two and fifteen- one hundredths (2.15) Shares for every one (1) Share subject thereto. Notwithstanding the foregoing, the
maximum number of Shares to be added to the Plan pursuant to clause (i) of the prior sentence shall be equal to 23,800,000 Shares
and the maximum number of Shares to be added to the Plan pursuant to clause (ii) of the prior sentence shall be equal to 54,332,000
Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. Any Shares subject to Awards of Options or
Stock Appreciation Rights shall be counted against the numerical limits of this Section 3 as one (1) Share for every one (1) Share
subject thereto. Any Shares subject to Awards granted under the Plan other than Options or Stock Appreciation Rights shall be
counted against the numerical limits of this Section 3 as two and fifteen-one hundredths (2.15) Shares for every one (1) Share
subject thereto and shall be counted as two and fifteen-one hundredths (2.15) Shares for every one (1) Share returned to or deemed
not issued from the Plan pursuant to this Section 3. The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, is
surrendered pursuant to an Exchange Program, or, with respect
9
to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to or repurchased by the
Company due to failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited
or repurchased Shares), which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has
terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the
Award so exercised, whether or not actually issued pursuant to such exercise will cease to be available under the Plan. Shares that
have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future
distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock Units,
Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company due to failure to vest,
such Shares will become available for future grant under the Plan. Notwithstanding the foregoing, Shares used to pay the exercise
price or purchase price of an Award other than an Option or SAR or to satisfy the tax withholding obligations related to an Award
other than an Option or SAR will become available for future grant and/or sale under the Plan; Shares used to pay the exercise price
or purchase of an Option or SAR or to satisfy the tax withholding obligations related to an Option or SAR will not become available
for future grant or sale under the Plan. To the extent an Award (including a Dividend Equivalent) under the Plan is paid out in cash
rather than Shares, whether pursuant to a Performance Bonus Award or other Award, such cash payment will not result in reducing
the number of Shares available for issuance under the Plan. Notwithstanding anything in the Plan or any Award Agreement to the
contrary, Shares actually issued pursuant to Awards transferred under any Award Transfer Program will not be again available for
grant under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 15, the maximum number of
Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a),
plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that
become available for issuance under the Plan pursuant to this Section 3(b).
(c) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such
number of Shares as will be sufficient to satisfy the requirements of the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service
Providers may administer the Plan.
(ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the
transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iii) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or
(B) a Committee, which committee will be
10
constituted to satisfy Applicable Laws. The Administrator may, in its discretion and to the extent permitted by Applicable
Laws, delegate to a Committee, including but not limited to, comprised of one or more Officers, the authority to grant one or
more Awards, without further approval of the Administrator, on such terms and conditions as the Administrator, in its
discretion, deems appropriate. To the extent of any delegation by the Administrator, references to the Administrator in the
Plan and any Award Agreement shall be deemed also to include reference to the applicable delegate(s).
(iv) Delegation of Authority for Day-to-Day Administration; Authority of Officers. Except to the extent
prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of
the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time. Any Officer 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.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to
the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award
granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the method of payment for
Shares purchased under any Award, the method for satisfaction of any tax withholding obligation arising in connection with
an Award, the time or times when Awards may be exercised (which may be based on performance criteria), subject to any
minimum vesting requirements set forth in the Plan, any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the
Administrator will determine;
(vi) to determine the terms and conditions of any Exchange Program and/or Award Transfer Program and
with the consent of the Company’s stockholders, to institute an Exchange Program and/or Award Transfer Program (provided
that the Administrator may not institute an Exchange Program and/or Award Transfer Program without first receiving the
consent of the Company’s stockholders);
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(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and
regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws and/or for qualifying for
favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 21 of the Plan), including but not limited to the
discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an
Option (subject to Section 7(b) of the Plan regarding Incentive Stock Options);
(x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 17
of the Plan;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the
grant of an Award previously granted by the Administrator pursuant to such procedures as the Administrator may determine;
(xii) to allow a Participant, in compliance with all Applicable Laws including, but not limited to, Section
409A, to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant
under an Award;
(xiii) to determine whether Awards will be settled in Shares, cash or in any combination thereof;
(xiv) to impose such restrictions, conditions or limitations as it determines appropriate as to the timing and
manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or
under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the
use of a specified brokerage firm for such resales or other transfers;
(xv) to require that the Participant’s rights, payments and benefits with respect to an Award (including
amounts received upon the settlement or exercise of an Award) shall be subject to reduction, cancellation, forfeiture or
recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award, as may be specified in an Award Agreement at the time of the Award, or later if (A) Applicable Laws
require the Company to adopt a policy requiring such reduction, cancellation, forfeiture or recoupment, or (B) pursuant to an
amendment of an outstanding Award; and
(xvi) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award
Agreement and to make all other determinations
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and take such other actions with respect to the Plan or any Award deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be
final and binding on all Participants and any other holders of Awards and shall be given the maximum deference permitted by law.
5. ELIGIBILITY. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares and Performance Units may be granted to Service Providers. Performance Bonus Awards may be granted only
to Employees. Incentive Stock Options may be granted only to Employees of the Company or Parent or Subsidiary of the Company.
6. LIMITATIONS.
(a) Incentive Stock Options. Each Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any
calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such
Options will be treated as Nonstatutory Stock Options. If the Code is amended to provide for a different limitation from that set forth
in this Section, 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. Further, if for any reason an Option (or portion thereof) designated as an
Incentive Stock Option shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or
portion thereof) shall be regarded as a Nonstatutory Stock Option granted under the Plan. For purposes of this Section 6(a), Incentive
Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be
determined as of the time the Option with respect to such Shares is granted.
(b) Employee Award Limitations. The following limitations shall apply to Awards under the Plan: subject to
adjustment as provided in Section 15, during any Fiscal Year, no Employee will be granted:
(i) Options and/or SARs covering more than a total of 20,000,000 Shares; provided, however, that in
connection with his or her initial employment, an Employee may be granted Options and/or SARs covering up to a total of
8,000,000 additional Shares in the Fiscal Year in which his or her service as an Employee first commences;
(ii) Restricted Stock and/or Restricted Stock Units and/or Performance Shares covering more than
10,000,000 Shares; provided, however, that in connection with his or her initial employment, an Employee may be granted
Restricted Stock, Restricted Stock Units and/or Performance Shares covering up to a total of 4,000,000
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additional Shares in the Fiscal Year in which his or her service as an Employee first commences;
(iii) Performance Units having an initial value greater than $15,000,000; provided, however, that in
connection with his or her initial employment, an Employee may be granted additional Performance Units in the Fiscal Year
in which his or her service as an Employee first commences having an initial value no greater than $5,000,000; and
(iv) Performance Bonus Awards that could result in such Employee receiving more than $10,000,000 in
any one Fiscal Year.
If an Award is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction
described in Section 15(c)), the cancelled Award will be counted against the limits set forth in this subsection (b).
(c) Outside Director Award Limitations. Subject to adjustment as provided in Section 15, no Outside Director
may be granted, in any Fiscal Year, Awards covering more than 60,000 Shares. Any Awards granted to an individual while he or she
was an Employee, or while he or she was a Consultant but not an Outside Director, shall not count for purposes of this limitation.
(d) Minimum Vesting. Notwithstanding anything in the Plan to the contrary, equity-based Awards granted under
the Plan may not become exercisable, vest or be settled, in whole or in part, prior to the one-year anniversary of the date of grant,
except that the Administrator may provide that Awards become exercisable, vest or settle prior to such date in the event of the
Participant’s death or Disability or in the event of a transaction described in Section 15(c). Notwithstanding the foregoing, up to 5%
of the sum of (a) the number of Shares available for future grants on the date the Board approved this amended and restated version
of the Plan, plus (b) the increase in the number of Shares available for grant under the Plan (as described in Section 3(a)) approved
by the Company’s stockholders at the 2023 annual meeting, may be issued pursuant to Awards subject to any, or no, vesting
conditions, as the Administrator determines appropriate.
7. STOCK OPTIONS.
(a) Grant of Option. Subject to the terms and conditions of the Plan, Option may be granted to Service Providers
at any time and from time to time as will be determined by the Administrator, in its sole discretion. Subject to Section 6 and the other
terms and conditions of the Plan, the Administrator will have complete discretion to determine the number of Shares granted to any
Service Provider. Each Option shall be evidenced by an Award Agreement (which may be in electronic form) that shall specify the
exercise price, the expiration date of the Option, the number of Shares covered by the Option, any conditions to exercise the Option,
and such other terms and conditions as the Administrator, in its discretion, shall determine.
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(b) Term of Option. The term of each Option will be stated in the Award Agreement; provided, however, that the
term will be no more than seven (7) years from the date of grant hereof. In the case of an Incentive Stock Option, the term will be
seven (7) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an
Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award
Agreement.
(c) Option Exercise Price and Consideration.
(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an
Option will be determined by the Administrator, subject to the following:
(1) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A)
immediately above, the per Share exercise price will be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant.
(2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be no less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less
than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described
in, and in a manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates. Subject to Section 6 and the other terms and conditions of the
Plan, at the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and
will determine any conditions that must be satisfied before the Option may be exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will
determine the
15
acceptable form of consideration at the time of grant. Such consideration may consist entirely of, without limitation: (1) cash;
(2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have
a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will
be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the
Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under a cashless
exercise program (whether through a broker, net exercise program or otherwise) implemented by the Company in connection
with the Plan; (6) by reduction in the amount of any Company liability to the Participant, (7) by net exercise; (8) such other
consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (9) any
combination of the foregoing methods of payment.
(d) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable
according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) a notice of exercise (in such form as the Administrator
may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and
method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon
exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant
and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends, Dividend Equivalents or any other rights as a
stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will
issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend,
Dividend Equivalent or other right for which the record date is prior to the date the Shares are issued, except as provided in Section
15 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider,
other than upon the Participant’s termination as the result of the Participant’s death or Disability or as a result of a
termination for Cause, the Participant may exercise his or her Option within such period of time as is specified in the Award
Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
16
Option will remain exercisable for ninety (90) days following the Participant’s termination. Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s
Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement
to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will
remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her
Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the
Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised
following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such
Option as set forth in the Award Agreement), by the personal representative of the Participant’s estate or by the person(s) to
whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution.
In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested
as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If
the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such
Option will revert to the Plan. The Participant’s status as a Service Provider shall be deemed to have terminated on account of
death if the Participant dies within ninety (90) days (or such longer period of time as determined by the Administrator, in its
discretion) after the Participant’s termination as a Service Provider.
(v) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the
Participant’s status as a Service Provider is terminated for Cause, the Option shall terminate and cease to be exercisable
immediately upon such termination as a Service Provider.
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(e) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for
Cause, if the exercise of an Option within the applicable time periods set forth in Section 7(d) is prevented by the provisions of
Section 26 below, the Option shall remain exercisable until ninety (90) days (or such longer period of time as determined by the
Administrator, in its discretion) after the date the Participant is notified by the Company that the Option is exercisable, but in no
event later than the expiration of the term of such Option as set forth in the Award Agreement.
(f) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, other than termination of
Service for Cause, if a sale within the applicable time periods set forth in Section 7(d) of shares acquired upon the exercise of the
Option would subject the Participant 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 Participant would no longer be
subject to such suit, and (ii) the expiration of the term of such Option as set forth in the Award Agreement.
8. RESTRICTED STOCK.
(a) Grant of Restricted Stock. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the
Administrator, in its sole discretion, will determine.
(b) Restricted Stock Agreement. Subject to Section 6 and the other terms and conditions of the Plan, each Award
of Restricted Stock will be evidenced by an Award Agreement (which may be in electronic form) that will specify any vesting
conditions, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will
determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until
the restrictions on such Shares, if any, have lapsed.
(c) Transferability. Except as provided in this Section 8, Section 14 or the Award Agreement, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable vesting
period (if any).
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of
Restricted Stock as it may deem advisable or appropriate.
(i) General Restrictions. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator may set restrictions based upon continued employment or service, the achievement of Performance Goals or
other specific performance objectives (Company-wide, departmental, divisional, business unit, or individual goals),
applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.
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(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the
vesting period or at such other time as the Administrator may determine. The Administrator, in its discretion, may establish
procedures regarding the release of Shares from escrow and/or removal of legends, as necessary or appropriate to minimize
administrative burdens on the Company.
(f) Legend on Certificates. The Administrator, in its discretion, may require that one or more legends be placed
on the certificates representing Restricted Stock to give appropriate notice of the applicable restrictions.
(g) Voting Rights. During the vesting period, Service Providers holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(h) Dividends and Other Distributions. During the vesting period, Participants holding Shares of Restricted Stock
will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides
otherwise. Notwithstanding anything herein to the contrary, dividends or other distributions credited/payable in connection with
Shares of Restricted Stock that are not yet vested will be subject to the same restrictions and risk of forfeiture as the underlying
Award and will not be paid until the underlying Award vests.
(i) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock
for which restrictions have not lapsed will revert to the Company and, subject to Section 3, again will become available for grant
under the Plan.
9. RESTRICTED STOCK UNITS.
(a) Grant. Subject to Section 6 and the other terms and conditions of the Plan, the Administrator, at any time and
from time to time, may grant Restricted Stock Units to Service Providers in such amounts as the Administrator, in its sole discretion,
will determine.
(b) Award Agreement. Subject to Section 6 and the other terms and conditions of the Plan, each Award of
Restricted Stock Units will be evidenced by an Award Agreement (which may be in electronic form) that will specify any vesting
conditions, the number of Restricted Stock Units granted, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.
(c) Vesting Criteria and Other Terms. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator will set vesting criteria (if any) in its discretion, which, depending on the extent to which the criteria are met, will
determine the number of Restricted Stock Units that will be paid out to the Participant.
(i) General Restrictions. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator may set vesting criteria based upon continued
19
employment or service, the achievement of Performance Goals or other specific performance objectives (Company-wide,
departmental, divisional, business unit, or individual goals), applicable federal or state securities laws or any other basis
determined by the Administrator in its discretion.
(d) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to
receive a payout as determined by the Administrator.
(e) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable
after the date(s) determined by the Administrator and set forth in the Award Agreement; provided, however, that the timing of
payment shall in all cases comply with Section 409A to the extent applicable to the Award. The Administrator, in its sole discretion,
may settle earned Restricted Stock Units in cash, Shares, or a combination of both.
(f) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be
forfeited to the Company and, subject to Section 3, again will become available for grant under the Plan.
(g) Voting Rights, Dividend Equivalents and Distributions. Participants shall have no voting rights with respect to
Shares represented by Restricted Stock Units until the date of the issuance of such Shares (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company). However, the Administrator, in its discretion, may
provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the
Restricted Stock Units held by such Participant are settled. Settlement of Dividend Equivalents may be made in cash, Shares, or a
combination thereof as determined by the Administrator. Except as otherwise provided in an Award Agreement, Dividend
Equivalents, if any, shall be accrued by crediting the Participant with additional whole Restricted Stock Units as of the date of
payment of such cash dividends on Shares (or as of the record date if the Restricted Stock Units are settled on or after the record date
and before the date of payment of the cash dividend) and the number of additional Restricted Stock Units (rounded to the nearest
whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid (or to be paid) on such date
with respect to the number of Shares represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair
Market Value per Share as of the date such Dividend Equivalents are credited. Any such additional Restricted Stock Units shall be
subject to the same terms and conditions, including but not limited to vesting conditions, and shall be settled in the same manner and
at the same time (or as soon thereafter as practicable) as the Restricted Stock Units originally subject to the Restricted Stock Unit
Award. For the avoidance of doubt, such additional Restricted Stock Units or other Dividend Equivalents will not vest or be paid
prior to the time that the original Award vests. In the event of a dividend or distribution paid in Shares or any other adjustment made
upon a change in the capital structure of the Company as described in Section 15 appropriate adjustments shall be made in the
Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which
20
the Participant would be entitled by reason of the Shares issuable upon settlement of the Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same vesting conditions as are applicable to the Award.
10. STOCK APPRECIATION RIGHTS.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole
discretion.
(b) Number of Shares. Subject to Section 6 and the other terms and conditions of the Plan, the Administrator will
have complete discretion to determine the number of Stock Appreciation Rights granted to any Service Provider.
(c) Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to exercise
of a Stock Appreciation Right will be determined by the Administrator and will be no less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, Stock Appreciation Rights may be granted with a
per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to
a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Otherwise, the Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted
under the Plan. Until Shares are issued in respect of a Stock Appreciation Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends, Dividend Equivalents
or any other rights as a stockholder will exist with respect to the Shares subject to a Stock Appreciation Right.
(d) Stock Appreciation Right Agreement. Subject to Section 6 and the other terms and conditions of the Plan, each
Stock Appreciation Right grant will be evidenced by an Award Agreement (which may be in electronic form) that will specify the
exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the
foregoing, the rules of Section 7(b) relating to the maximum term and Sections 7(d), 7(e) and 7(f) relating to exercise also will apply
to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will
be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise
price; times
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(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.
11. PERFORMANCE UNITS AND PERFORMANCE SHARES.
(a) Grant of Performance Units/Shares. Subject to the terms and conditions of the Plan, Performance Units and
Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. Subject to Section 6 and the other terms and conditions of the Plan, the Administrator will have
complete discretion in determining the number of Performance Units and/or Performance Shares granted to each Participant.
(b) Award Agreement. Subject to Section 6 and the other terms and conditions of the Plan, each Award of
Performance Shares and Performance Units will be evidenced by an Award Agreement (which may be in electronic form) that will
specify any vesting conditions, the number of Performance Shares or Performance Units, as applicable, granted, and such other
terms and conditions as the Administrator, in its sole discretion, will determine.
(c) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a
Share on the date of grant.
(d) Performance Objectives and Other Terms. Subject to Section 6 and the other terms and conditions of the Plan,
the Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a
Service Provider) (if any) in its discretion which, depending on the extent to which they are met, will determine the number or value
of Performance Units or Performance Shares, as applicable, that will be paid out to the Service Providers. The time period during
which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of
Performance Units and Performance Shares will be evidenced by an Award Agreement that will specify the Performance Period, and
such other terms and conditions as the Administrator, in its sole discretion, will determine.
(i) General Restrictions. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator may set vesting criteria based upon continued employment or service, the achievement of specific
Performance Goals or other performance objectives (Company-wide, departmental, divisional, business unit, or individual
goals), applicable federal or state securities laws or any other basis determined by the Administrator in its discretion.
22
(e) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of
Performance Units or Performance Shares, as applicable, will be entitled to receive a payout of the number of Performance Units or
Performance Shares, as applicable, earned by the Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance objectives or other vesting provisions have been achieved.
(f) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units and
Performance Shares will be made as soon as practicable after the expiration of the applicable Performance Period or as otherwise
determined by the Administrator; provided, however, that the timing of payment shall in all cases comply with Section 409A to the
extent applicable to the Award. The Administrator, in its sole discretion, may pay earned Performance Units and Performance Shares
in the form of cash, in Shares or in a combination thereof.
(g) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or
unvested Performance Units or Performance Shares, as applicable, will be forfeited to the Company, and, subject to Section 3, again
will be available for grant under the Plan.
(h) Voting Rights, Dividend Equivalents and Distributions. Participants shall have no voting rights with respect to
Shares represented by Performance Units and/or Performance Shares until the date of the issuance of such Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the
Administrator, in its discretion, may provide in the Award Agreement evidencing any Award of Performance Shares that the
Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Shares having a record
date prior to the date on which the Performance Shares are settled. Settlement of Dividend Equivalents may be made in cash, Shares,
or a combination thereof as determined by the Administrator, and may be paid on the same basis as settlement of the related
Performance Share. Except as otherwise provided in an Award Agreement, Dividend Equivalents, if any, shall be accrued by
crediting the Participant with additional whole Performance Shares as of the date of payment of such cash dividends on Shares (or as
of the record date if the Performance Shares are settled on or after the record date and before the date of payment of the cash
dividend) and the number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be
determined by dividing (a) the amount of cash dividends paid (or to be paid) on such date with respect to the number of Shares
represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per Share as of the date
such Dividend Equivalents are credited. Any such additional Performance Shares shall be subject to the same terms and conditions,
including but not limited to vesting conditions, and shall be settled in the same manner and at the same time (or as soon thereafter as
practicable) as the Performance Shares originally subject to the Award of Performance Shares. For the avoidance of doubt, such
additional Performance Shares or other Dividend Equivalents will not vest or be paid prior to the time that the original Award vests.
Dividend Equivalents shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in Shares or
any other
23
adjustment made upon a change in the capital structure of the Company as described in Section 15 appropriate adjustments shall be
made in the Participant’s Award of Performance Shares so that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by
reason of the Shares issuable upon settlement of the Award, and all such new, substituted or additional securities or other property
shall be immediately subject to the same vesting conditions as are applicable to the Award.
12. PERFORMANCE BONUS AWARDS.
(a) Grant of Performance Bonus Awards. Subject to the terms and conditions of the Plan, Performance Bonus
Awards may be granted to Employees at any time and from time to time, as will be determined by the Administrator, in its sole
discretion, in the form of a cash bonus payable upon the attainment of Performance Goals and/or other performance objectives that
are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the
Administrator.
(b) Subject to Section 6 and the other terms and conditions of the Plan, the Administrator will have complete
discretion to determine the amount of the cash bonus that could be earned under a Performance Bonus Award.
13. LEAVES OF ABSENCE/TRANSFER BETWEEN LOCATIONS. Unless the Administrator provides otherwise or
as otherwise required by Applicable Law, vesting of Awards granted hereunder will be suspended during any unpaid personal leave
of absence other than a Company-approved sabbatical, such that vesting shall cease on the first day of any such unpaid personal
leave of absence and shall only recommence upon return to active service. A Participant will not cease to be an Employee in the case
of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company,
its Parent, or any Subsidiary or Affiliate. For purposes of Incentive Stock Options, no such leave may exceed three (3) months,
unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave any
Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option.
14. TRANSFERABILITY OF AWARDS.
(a) Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant (or the Participant’s guardian or legal representative). If the
Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate. Notwithstanding anything to the contrary in the Plan, in no event will the Administrator have the right to
determine and implement the terms and conditions of any Award Transfer Program without stockholder approval.
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15. ADJUSTMENTS; DISSOLUTION OR LIQUIDATION; MERGER OR CHANGE IN CONTROL.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property, but excepting normal cash dividends), recapitalization, stock split, reverse stock split, reorganization,
reincorporation, reclassification, merger, consolidation, split-up, split-off, spin-off, combination, repurchase, or exchange of Shares
or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the
Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available
under the Plan, will adjust the number and class of shares of stock that may be delivered under the Plan and/or the number, class, and
price of shares of stock covered by each outstanding Award, the numerical Share limits in Section 3 of the Plan and the per person
numerical Share limits in Section 6. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a
whole number. Any fractional share resulting from an adjustment pursuant to this Section 15(a) shall be rounded down to the nearest
whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par
value, if any, of the stock subject to such Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the
Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the
extent it has not been previously exercised (with respect to an Option or SAR) or vested (with respect to an Award other than an
Option or SAR), an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control. In the event of a merger of the Company with or into another corporation or other entity or
a Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the provisions of the
following paragraph), including, without limitation, that each Award be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. The Administrator will not be required to treat all
Awards similarly in the transaction.
In the event that the successor corporation does not assume or substitute for the Award, the Participant will fully vest in and
have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such
Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and,
with respect to Awards with performance-based vesting, unless determined otherwise by the Administrator, all performance goals or
other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.
In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the
Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be exercisable
for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate
upon the expiration of such period.
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For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received
in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock
Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to
such Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction
of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance
goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
(d) Outside Director Awards. With respect to Awards granted to an Outside Director that are assumed or
substituted for, if on the date of or following such assumption or substitution the Participant’s status as a Director or a director of the
successor or acquiring corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant (unless
such resignation is at the request of the acquirer), then the Participant will fully vest in and have the right to exercise Options and/or
Stock Appreciation Rights as to all of the Shares underlying such Award, including those Shares which would not otherwise be
vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with
performance-based vesting, unless determined otherwise by the Administrator, all performance goals or other vesting criteria will be
deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.
16. DEFERRALS. The Administrator, in its sole discretion, may permit a Participant to defer receipt of the payment of
cash or the delivery of Shares that would otherwise be due to such Participant under an Award. Any such deferral elections shall be
subject to such rules and procedures as shall be determined by the Administrator in its sole discretion and, unless otherwise expressly
determined by the Administrator, shall comply with the requirements of Section 409A.
17. TAX.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise
thereof) or such earlier time as any Tax Obligations are due,
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the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy all Tax Obligations.
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may
specify from time to time, may designate the method or methods by which a Participant may satisfy such Tax Obligations. As
determined by the Administrator in its discretion from time to time, these methods may include one or more of the following (a)
paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the
minimum statutory amount required to be withheld or remitted, (c) delivering to the Company already-owned Shares having a Fair
Market Value equal to the minimum statutory amount required to be withheld or remitted, (d) selling a sufficient number of Shares
otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether
through a broker or otherwise) equal to the Tax Obligations required to be withheld or remitted, (e) retaining from salary or other
amounts payable to the Participant cash having a sufficient value to satisfy the Tax Obligations, or (f) any other means which the
Administrator, in its sole discretion, determines to both comply with Applicable Laws, and to be consistent with the purposes of the
Plan. The amount of Tax Obligations will be deemed to include any amount that the Administrator agrees may be withheld at the
time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax
rates applicable to the Participant or the Company, as applicable, with respect to the Award on the date that the amount of tax or
social insurance liability to be withheld or remitted is to be determined. The Fair Market Value of the Shares to be withheld or
delivered shall be determined as of the date that the Tax Obligations are required to be withheld.
(c) Compliance With Section 409A. Awards will be designed and operated in such a manner that they are either
exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or
deferral will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise determined in the sole
discretion of the Administrator. Each payment or benefit under this Plan and under each Award Agreement is intended to constitute a
separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The Plan, each Award and each Award
Agreement under the Plan is intended to be exempt from or otherwise meet the requirements of Section 409A and will be construed
and interpreted, including but not limited with respect to ambiguities and/or ambiguous terms, in accordance with such intent, except
as otherwise specifically determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the
settlement or deferral thereof, is subject to Section 409A, the Award will be granted, paid, settled or deferred in a manner that will
meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax
or interest applicable under Section 409A.
18. NO EFFECT ON EMPLOYMENT OR SERVICE. Neither the Plan nor any Award will confer upon a Participant
any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in
any way with the
27
Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted
by Applicable Laws.
19. DATE OF GRANT. The date of grant of an Award will be, for all purposes, the date on which the Administrator
makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the
determination will be provided to each Participant within a reasonable time after the date of such grant.
20. TERM OF PLAN. Subject to Section 29 of the Plan, the Plan will become effective upon its approval by the
Company’s stockholders. It will continue in effect for a term of ten (10) years from March 10, 2022 unless terminated earlier under
Section 21 of the Plan. For the avoidance of doubt, neither the amendment and restatement of the Plan in 2018, nor any subsequent
amendment and/or restatement is intended to, and shall not be interpreted to, modify any Awards granted prior to approval of the
amendment and restatement of this Plan by the Company’s stockholders at its 2018 annual meeting to the extent such modification
would result in a loss of deductibility under Code Section 162(m).
21. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will
materially impair the rights of any Participant, unless required by Applicable Law or mutually agreed between the Participant and
the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will
not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan
prior to the date of such termination.
22. 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.
23. SEVERABILITY. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal
or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.
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24. FRACTIONAL SHARES. The Company shall not be required to issue fractional shares upon the exercise or
settlement of any Award.
25. UNFUNDED OBLIGATION. Participants shall have the status of general unsecured creditors of the Company. Any
amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including,
without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to
segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the
Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the Administrator or any Participating
Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in
any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in
the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
26. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Legal Compliance. The granting of Awards and the issuance and delivery of Shares under the Plan shall be
subject to all Applicable Laws, rule and regulations, and to such approvals by any governmental agencies or national securities
exchanges as may be required. Shares will not be issued pursuant to the exercise or vesting of an Award unless the exercise or
vesting of such Award and the issuance and delivery of such Shares will comply with Applicable Laws, rules and regulations and
will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
27. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory
body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares
under any state, federal or foreign law or under the rules and regulations of the Securities and Exchange Commission, the stock
exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority,
registration, qualification or rule compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and
sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority, registration, qualification or rule compliance will not have been obtained.
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28. FORFEITURE EVENTS. To the extent applicable, Awards shall be subject to any recovery, recoupment, clawback
and/or other forfeiture policy maintained by the Company from time to time. The Administrator may specify in an Award Agreement
that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to, fraud, breach of a fiduciary duty, restatement of
financial statements as a result of fraud or willful errors or omissions, termination of employment for cause, violation of material
Company and/or Subsidiary policies, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the
Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its
Subsidiaries. The Administrator may also require the application of this Section with respect to any Award previously granted to a
Participant even without any specified terms being included in any applicable Award Agreement to the extent required under
Applicable Laws.
29. STOCKHOLDER APPROVAL. The Plan will be subject to approval by the stockholders of the Company within
twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to
the degree required under Applicable Laws.
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Exhibit 10.3
SALESFORCE, INC.
2014 INDUCEMENT EQUITY INCENTIVE PLAN
(As Amended and Restated Effective March 21, 2024)
1. Purposes of the Plan. The purposes of this Plan are:
• to attract and retain the best available Employees,
• to provide incentive to Employees, and
• to promote the success of the Company’s business.
The Plan permits the grant of Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation
Rights, Performance Bonus Awards, Performance Units and Performance Shares. Each Award under the Plan is intended to qualify
as an employment inducement award under New York Stock Exchange Listing Rule 303A.08 (the “Listing Rule”) and the Plan shall
be interpreted and administered accordingly.
2. Definitions. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with
Section 4 of the Plan.
(b) “Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures)
controlling, controlled by, or under common control with the Company.
(c) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state
corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common
Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.
(d) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Bonus Awards, Performance Units or Performance Shares.
(e) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each
Award granted under the Plan. Each Award Agreement is subject to the terms and conditions of the Plan.
(f) “Award Transfer Program” means any program instituted by the Administrator that would permit Participants the
opportunity to transfer for value any outstanding Awards to a
financial institution or other person or entity approved by the Administrator. A transfer for “value” shall not be deemed to occur
under this Plan where an Award is transferred by a Participant for bona fide estate planning purposes to a trust or other testamentary
vehicle approved by the Administrator.
(g) “Board” means the Board of Directors of the Company.
(h) “Cause” means, unless otherwise defined by the Participant’s Award Agreement or contract of employment or service,
any of the following: (i) the Participant’s theft, dishonesty, or falsification of any Participating Company documents or records;
(ii) the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information; (iii) any action
by the Participant which has a detrimental effect on a Participating Company’s reputation or business; (iv) the Participant’s failure or
inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material breach by the Participant of any employment or service agreement
between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vi) the
Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the Participant’s ability
to perform his or her duties with a Participating Company.
(i) “Change in Control” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one
person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such
Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for
purposes of this clause (i), (1) the acquisition of beneficial ownership of additional stock by any one Person who is considered to
beneficially own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a
Change in Control; and (2) if the stockholders of the Company immediately before such change in ownership continue to retain
immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s
voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of
the total voting power of the stock of the Company, such event shall not be considered a Change in Control under this clause (i). For
this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or
through one or more subsidiary corporations or other business entities;
(ii) A change in the effective control of the Company which occurs on the date that a majority of members of the
Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of
the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is
considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will
not be considered a Change in Control; or
2
(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any
Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such
person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the
total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided,
however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion
of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer,
or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange
for or with respect to the Company’s stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is
owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total
value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or
voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this
subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of,
determined without regard to any liabilities associated with such assets.
For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation
that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies
as a change in control event within the meaning of Section 409A.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is
to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned
in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(j) “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or
regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(k) “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the
Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof.
(l) “Common Stock” means the common stock of the Company.
(m) “Company” means Salesforce, Inc., a Delaware corporation, or any successor thereto.
3
(n) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary or
other Affiliate to render services to such entity. However, a person shall not be deemed a Consultant if inclusion of that person as a
Consultant would cause the Awards or Shares available under the Plan to be ineligible for registration on a Form S-8 Registration
Statement under the Securities Act.
(o) “Director” means a member of the Board.
(p) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that the
Administrator, in its discretion, may determine whether a permanent and total disability exists in accordance with uniform and non-
discriminatory standards adopted by the Administrator from time to time.
(q) “Dividend Equivalent” means a credit, made at the discretion of the Administrator or as otherwise provided by the
Plan, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by an
Award held by such Participant.
(r) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or
Subsidiary or other Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be
sufficient to constitute “employment” by the Company or an Affiliate. However, for the avoidance of doubt, although a person who
is an Employee also may be a Director, a person who already is serving as a Director prior to becoming an Employee will not be
eligible to be granted an Award under the Plan unless permitted under the Listing Rule. The Company shall determine in good faith
and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such
individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the
Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination.
(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(t) “Exchange Program” means a program under which (i) outstanding awards are surrendered or cancelled in exchange
for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, or
cash, (ii) Participants would have the opportunity to participate in an Award Transfer Program, or (iii) the exercise price of an
outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole
discretion. For the avoidance of doubt, the term Exchange Program does not include any action authorized under Section 14 or
Section 15 of the Plan.
(u) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
4
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without
limitation the New York Stock Exchange, NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital
Market of The NASDAQ Stock Market, its Fair Market Value will be the closing sales price for such stock (or the mean of the
closing bid and asked prices for the Common Stock, if no sales were reported) as quoted on such exchange or system on the day of
determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable. If the relevant date
does not fall on a day on which the Common 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 Common Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Administrator, in its discretion;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of
determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were
reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in
good faith by the Administrator.
(v) “Fiscal Year” means the fiscal year of the Company.
(w) “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(x) “Inside Director” means a Director who is an Employee.
(y) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an
Incentive Stock Option.
(z) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(aa) “Option” means a stock option granted pursuant to the Plan. All Options granted under the Plan are intended to be
Nonstatutory Stock Options.
(bb) “Outside Director” means a Director who is not an Employee.
(cc) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(dd) “Participant” means the holder of an outstanding Award.
(ee) “Participating Company” means the Company or any Affiliate.
5
(ff) “Performance Bonus Award” means a cash award set forth in Section 12.
(gg) “Performance Period” means the time period determined by the Administrator in its sole discretion during which the
performance objectives must be met.
(hh) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon
attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 11.
(ii) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of performance goals
or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a
combination of the foregoing pursuant to Section 11.
(jj) “Plan” means this 2014 Inducement Equity Incentive Plan, as the same may be amended from time to time.
(kk) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 8 of the Plan, or issued
pursuant to the early exercise of an Option.
(ll) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one
Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(mm) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(nn) “Section 16(b)” means Section 16(b) of the Exchange Act.
(oo) “Section 409A” means Section 409A of the Code, and any proposed, temporary or final Treasury Regulations and
Internal Revenue Service guidance thereunder, as each may be amended from time to time.
(pp) “Securities Act” means the Securities Act of 1933, as amended.
(qq) “Service Provider” means an Employee, Director or Consultant. The Company shall determine in good faith and in
the exercise of its discretion whether an individual has become or has ceased to be a Service Provider and the effective date of such
individual’s status as, or cessation of status as, a Service Provider. For purposes of an individual’s rights, if any, under the Plan as of
the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination.
(rr) “Share” means a share of the Common Stock, as adjusted in accordance with Section 15 of the Plan.
6
(ss) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant
to Section 10 is designated as a Stock Appreciation Right.
(tt) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the
Code.
(uu) “Tax Obligations” means tax and social insurance liability obligations and requirements in connection with the
Awards, including, without limitation, (A) all federal, state, and local taxes (including the Participant’s Federal Insurance
Contributions Act (FICA) obligation) that are required to be withheld by the Company or the employing Affiliate, (B) the
Participant’s and, to the extent required by the Company (or Affiliate), the Company’s (or Affiliate’s) fringe benefit tax liability, if
any, associated with the grant, vesting, or exercise of an Award or sale of Shares, and (C) any other Company (or Affiliate) taxes the
responsibility for which the Participant has, or has agreed to bear, with respect to such Award (or exercise thereof or issuance of
Shares thereunder).
3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. Subject to the provisions of Section 15 of the Plan, the maximum aggregate number of
Shares that may be issued under the Plan is the sum of (i) 5,085,000 Shares, plus (ii) the number of Shares (not to exceed a total of
2,750,000) that, as of July 9, 2014, remain available for issuance under the Company’s 2006 Inducement Equity Incentive Plan (the
“2006 Plan”) or that, after that date, otherwise would have returned to the 2006 Plan pursuant to the terms of the 2006 Plan (for
example, but not by way of limitation, due to the expiration or forfeiture of an award thereunder). The Shares may be authorized, but
unissued, or reacquired Common Stock.
(b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, is surrendered
pursuant to an Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance
Shares, is forfeited to or repurchased by the Company due to failure to vest, the unpurchased Shares (or for Awards other than
Options or Stock Appreciation Rights the forfeited or repurchased Shares), which were subject thereto will become available for
future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares,
the gross number of Shares covered by the portion of the Award so exercised, whether or not actually issued pursuant to such
exercise will cease to be available under the Plan. Shares that have actually been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued
pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the
Company or are forfeited to the Company due to failure to vest, such Shares will become available for future grant under the Plan.
Notwithstanding the foregoing, Shares used to pay the exercise price or purchase of an Award other than an Option or SAR or to
satisfy the tax withholding obligations related to an Award other than an Option or SAR will become available for future grant or
sale under the Plan; Shares used to pay the exercise price or
7
purchase of an Option or SAR or to satisfy the tax withholding obligations related to an Option or SAR will not become available for
future grant or sale under the Plan. To the extent an Award (including a Dividend Equivalent) under the Plan is paid out in cash
rather than Shares, whether pursuant to a Performance Bonus Award or other Award, such cash payment will not result in reducing
the number of Shares available for issuance under the Plan. Notwithstanding anything in the Plan or any Award Agreement to the
contrary, Shares actually issued pursuant to Awards transferred under any Award Transfer Program will not be again available for
grant under the Plan.
(c) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of
Shares as will be sufficient to satisfy the requirements of the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may
administer the Plan.
(ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the
transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iii) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a
Committee, which committee will be constituted to satisfy Applicable Laws. The Administrator may, in its discretion and to the
extent permitted by Applicable Laws, delegate to a Committee, including but not limited to, a Committee comprised of one or more
Officers, the authority to grant one or more Awards, without further approval of the Administrator, on such terms and conditions as
the Administrator, in its discretion, deems appropriate. To the extent of any delegation by the Administrator, references to the
Administrator in the Plan and any Award Agreement shall be deemed also to include reference to the applicable delegate(s).
(iv) Delegation of Authority for Day-to-Day Administration; Authority of Officers. Except to the extent prohibited
by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of
the functions assigned to it in this Plan. Such delegation may be revoked at any time. Any Officer 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.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
8
(i) to determine the Fair Market Value;
(ii) to select the individuals to whom Awards may be granted hereunder (which Awards shall be intended as a
material inducement to the individual becoming an Employee);
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder. Such terms and conditions include, but are not limited to, the exercise price, the method of payment for Shares purchased
under any Award, the method for satisfaction of any tax withholding obligation arising in connection with an Award, the time or
times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as
the Administrator will determine;
(vi) to determine the terms and conditions of any Exchange Program or Award Transfer Program and with the
consent of the Company’s stockholders, to institute an Exchange Program or Award Transfer Program (provided that the
Administrator may not institute an Exchange Program or Award Transfer Program without first receiving the consent of the
Company’s stockholders);
(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of satisfying applicable foreign laws or qualifying for favorable tax treatment under
applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 21 of the Plan), including but not limited to the
discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an Option;
(x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 17 of the
Plan;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an
Award previously granted by the Administrator pursuant to such procedures as the Administrator may determine;
(xii) to allow a Participant, in compliance with all Applicable Laws including, but not limited to, Section 409A, to
defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award;
9
(xiii) to determine whether Awards will be settled in Shares, cash or in any combination thereof;
(xiv) to impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner
of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award,
including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified
brokerage firm for such resales or other transfers;
(xv) to require that the Participant’s rights, payments and benefits with respect to an Award (including amounts
received upon the settlement or exercise of an Award) shall be subject to reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award, as
may be specified in an Award Agreement at the time of the Award, or later if (A) Applicable Laws require the Company to adopt a
policy requiring such reduction, cancellation, forfeiture or recoupment, or (B) pursuant to an amendment of an outstanding Award;
and
(xvi) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement
and to make all other determinations and take such other actions with respect to the Plan or any Award deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and
binding on all Participants and any other holders of Awards and shall be given the maximum deference permitted by law.
5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Bonus Awards, Performance Shares and Performance Units may be granted to any individual as a material inducement to the
individual becoming an Employee, as provided in the Listing Rule.
6. Limitations on Grants. The following limitations shall apply to Awards under the Plan: subject to adjustment as provided in
Section 15, during any Fiscal Year, no Employee will be granted:
(i) Options or SARs covering more than a total of 28,000,000 Shares;
(ii) Restricted Stock or Restricted Stock Units or Performance Shares covering more than 14,000,000 Shares;
(iii) Performance Units having an initial value greater than $20,000,000;
(iv) Performance Bonus Awards that could result in such Employee receiving more than $10,000,000 in any one
Fiscal Year; and
10
(v) If an Award is cancelled in the same Fiscal Year in which it was granted (other than in connection with a
transaction described in Section 15(c)), the cancelled Award will be counted against the limits set forth in this Section 6.
7. Stock Options.
(a) Grant of Option. The Administrator, in its sole discretion and subject to the terms and conditions of the Plan, may grant
Options to any individual as a material inducement to the individual becoming an Employee, which grant shall become effective
only if the individual actually becomes an Employee. Subject to Section 6 and the other terms and conditions of the Plan, the
Administrator will have complete discretion to determine the number of Shares granted to any Employee. Each Option shall be
evidenced by an Award Agreement (which may be in electronic form) that shall specify the exercise price, the expiration date of the
Option, the number of Shares covered by the Option, any conditions to exercise the Option, and such other terms and conditions as
the Administrator, in its discretion, shall determine.
(b) Term of Option. The term of each Option will be stated in the Award Agreement; provided, however, that the term will
be no more than seven (7) years from the date of grant hereof.
(c) Option Exercise Price and Consideration.
(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be
determined by the Administrator, subject to the following:
(1) The per Share exercise price will be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant; and
(2) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a
manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within
which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised. At
any time after the grant of an Option, the Administrator, in its sole discretion, may reduce or waive any vesting criteria or waiting
periods and may accelerate the time at which any restrictions will lapse or be removed.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an
Option, including the method of payment. Such consideration may consist entirely of, without limitation: (1) cash; (2) check;
(3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
11
Shares as to which such Option will be exercised and provided that accepting such Shares will not result in any adverse accounting
consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company
under a cashless exercise program (whether through a broker, net exercise program or otherwise) implemented by the Company in
connection with the Plan; (6) by reduction in the amount of any Company liability to the Participant, (7) by net exercise; (8) such
other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (9) any
combination of the foregoing methods of payment.
(d) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to
the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award
Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) a notice of exercise (in such form as the
Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any
consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares
issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the
Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will
exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause
to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided in Section 15 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than
upon the Participant’s termination as the result of the Participant’s death or Disability or as a result of a termination for Cause, the
Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the
Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for ninety
(90) days following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the
Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the
Plan. If after termination the
12
Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s
Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth
in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve
(12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination
the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the
Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the
Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the
date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the
Award Agreement), by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred
pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise
provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified
herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. The Participant’s status as a Service
Provider shall be deemed to have terminated on account of death if the Participant dies within ninety (90) days (or such longer
period of time as determined by the Administrator, in its discretion) after the Participant’s termination as a Service Provider.
(v) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s status
as a Service Provider is terminated for Cause, the Option shall terminate and cease to be exercisable immediately upon such
termination as a Service Provider.
(e) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if
the exercise of an Option within the applicable time periods set forth in Section 7(d) is prevented by the provisions of Section 26
below, the Option shall remain exercisable until ninety (90) days (or such longer period of time as determined by the Administrator,
in its discretion) after the date the Participant is notified by the Company that the Option is exercisable, but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement.
13
(f) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, other than termination of Service for
Cause, if a sale within the applicable time periods set forth in Section 7(d) of shares acquired upon the exercise of the Option would
subject the Participant 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 Participant would no longer be subject to such
suit, or (ii) the expiration of the term of such Option as set forth in the Award Agreement.
8. Restricted Stock.
(a) Grant of Restricted Stock. The Administrator, in its sole discretion and subject to the terms and conditions of the Plan,
may grant Awards of Restricted Stock to any individual as a material inducement to the individual becoming an Employee, which
grant shall become effective only if the individual actually becomes an Employee. The Administrator, in its sole discretion and
subject to Section 6 of the Plan, shall determine the number of Shares to be granted to each such individual.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement (which may
be in electronic form) that will specify any vesting conditions, the number of Shares granted, and such other terms and conditions as
the Administrator, in its sole discretion, will determine. For purposes of clarity, an Award of Restricted Stock may be granted without
vesting conditions or other restrictions. Unless the Administrator determines otherwise, the Company as escrow agent will hold
Shares of Restricted Stock until the restrictions on such Shares, if any, have lapsed.
(c) Transferability. Except as provided in this Section 8, Section 14 or the Award Agreement, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable vesting period
(if any).
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate. The Administrator may set restrictions based upon continued employment or service,
the achievement of specific performance objectives (Company-wide, departmental, divisional, business unit, or individual),
applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.
(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the vesting
period or at such other time as the Administrator may determine. The Administrator, in its discretion, may reduce or waive any
vesting criteria and may accelerate the time at which any restrictions will lapse or be removed. The Administrator, in its discretion,
may establish procedures regarding the release of Shares from escrow or removal of legends, as necessary or appropriate to
minimize administrative burdens on the Company.
14
(f) Legend on Certificates. The Administrator, in its discretion, may require that one or more legends be place on the
certificates representing Restricted Stock to give appropriate notice of the applicable restrictions.
(g) Voting Rights. During the vesting period, Service Providers holding Shares of Restricted Stock granted hereunder may
exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(h) Dividends and Other Distributions. During the vesting period, Participants holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise.
Any such dividends or distributions shall be subject to the same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid, unless otherwise provided in the Award Agreement.
(i) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which
restrictions have not lapsed will revert to the Company and, subject to Section 3, again will become available for grant under the
Plan.
9. Restricted Stock Units.
(a) Grant. The Administrator, in its sole discretion and subject to the terms and conditions of the Plan, may grant
Restricted Stock Units to any individual as a material inducement to the individual becoming an Employee, which grant shall
become effective only if the individual actually becomes an Employee. The Administrator, in its sole discretion and subject to
Section 6 of the Plan, shall determine the number of Shares to be covered by each such Award.
(b) Award Agreement. Each Award of Restricted Stock Units will be evidenced by an Award Agreement (which may be in
electronic form) that will specify any vesting conditions, the number of Restricted Stock Units granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.
(c) Vesting Criteria and Other Terms. The Administrator will set vesting criteria (if any) in its discretion, which, depending
on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the
Participant. The Administrator may set vesting criteria based upon continued employment or service, the achievement of specific
performance objectives (Company-wide, departmental, divisional, business unit, or individual goals (including, but not limited to,
continued employment or service)), applicable federal or state securities laws or any other basis determined by the Administrator in
its discretion.
(d) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive
a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units,
the
15
Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout and may
accelerate the time at which any restrictions will lapse or be removed.
(e) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the
date(s) determined by the Administrator and set forth in the Award Agreement; provided, however, that the timing of payment shall
in all cases comply with Section 409A to the extent applicable to the Award. The Administrator, in its sole discretion, may settle
earned Restricted Stock Units in cash, Shares, or a combination of both.
(f) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the
Company and, subject to Section 3, again will become available for grant under the Plan.
(g) Voting Rights, Dividend Equivalents and Distributions. Participants shall have no voting rights with respect to Shares
represented by Restricted Stock Units until the date of the issuance of such Shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company). However, the Administrator, in its discretion, may
provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the
Restricted Stock Units held by such Participant are settled. Settlement of Dividend Equivalents may be made in cash, Shares, or a
combination thereof as determined by the Administrator. Except as otherwise provided in an Award Agreement, Dividend
Equivalents, if any, shall be accrued by crediting the Participant with additional whole Restricted Stock Units as of the date of
payment of such cash dividends on Shares (or as of the record date if the Restricted Stock Units are settled on or after the record date
and before the date of payment of the cash dividend) and the number of additional Restricted Stock Units (rounded to the nearest
whole number) to be so credited shall be determined by dividing (i) the amount of cash dividends paid (or to be paid) on such date
with respect to the number of Shares represented by the Restricted Stock Units previously credited to the Participant by (ii) the Fair
Market Value per Share as of the date such Dividend Equivalents are credited. Any such additional Restricted Stock Units shall be
subject to the same terms and conditions, including but not limited to vesting conditions, and shall be settled in the same manner and
at the same time (or as soon thereafter as practicable) as the Restricted Stock Units originally subject to the Restricted Stock Unit
Award. For the avoidance of doubt, such additional Restricted Stock Units or other Dividend Equivalents will not vest or be paid
prior to the time that the original Award vests. In the event of a dividend or distribution paid in Shares or any other adjustment made
upon a change in the capital structure of the Company as described in Section 15 appropriate adjustments shall be made in the
Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the
Shares issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be
immediately subject to the same vesting conditions as are applicable to the Award.
16
10. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. The Administrator, in its sole discretion and subject to the terms and conditions of
the Plan, may grant Stock Appreciation Rights to any individual as a material inducement to the individual becoming an Employee,
which grant shall become effective only if the individual actually becomes an Employee.
(b) Number of Shares. Subject to Section 6 and the other terms and conditions of the Plan, the Administrator will have
complete discretion to determine the number of Shares subject to Stock Appreciation Rights granted to any Service Provider.
(c) Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to exercise of a Stock
Appreciation Right will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant. Notwithstanding the foregoing, Stock Appreciation Rights may be granted with a per Share
exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of the Code. Otherwise, the Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted
under the Plan. At any time after the grant of a Stock Appreciation Right, the Administrator, in its sole discretion, may reduce or
waive any vesting criteria and may accelerate the time at which any restrictions will lapse or be removed.
(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement
(which may be in electronic form) that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the
rules of Section 7(b) relating to the maximum term and Sections 7(d), 7(e) and 7(f) relating to exercise also will apply to Stock
Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in
Shares of equivalent value, or in some combination thereof.
17
11. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. The Administrator, in its sole discretion and subject to the terms and conditions of
the Plan, may grant an Award of Performance Units or Performance Shares to any individual as a material inducement to the
individual becoming an Employee, which grant shall become effective only if the individual actually becomes an Employee. The
Administrator, in its sole discretion and subject to Section 6 of the Plan, shall determine the number of Shares to be covered by each
such Award.
(b) Award Agreement. Each Award of Performance Shares and Performance Units will be evidenced by an Award
Agreement (which may be in electronic form) that will specify any vesting conditions, the number of Performance Shares or
Performance Units, as applicable, granted, and such other terms and conditions as the Administrator, in its sole discretion, will
determine.
(c) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a
Share on the date of grant.
(d) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting
provisions (including, without limitation, continued status as a Service Provider) (if any) in its discretion which, depending on the
extent to which they are met, will determine the number or value of Performance Units or Performance Shares, as applicable, that
will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must
be met is the Performance Period. Each Award of Performance Units and Performance Shares will be evidenced by an Award
Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion,
will determine. The Administrator may set vesting criteria based upon continued employment or service, the achievement of specific
performance objectives (Company-wide, departmental, divisional, business unit, or individual goals (including, but not limited to,
continued employment or service)), applicable federal or state securities laws or any other basis determined by the Administrator in
its discretion.
(e) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance
Units or Performance Shares, as applicable, will be entitled to receive a payout of the number of Performance Units or Performance
Shares, as applicable, earned by the Participant over the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit or
Performance Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting
provisions for such Performance Unit or Performance Share, as applicable, and may accelerate the time at which any restrictions will
lapse or be removed.
(f) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units and Performance
Shares will be made as soon as practicable after the expiration of the applicable Performance Period or as otherwise determined by
the
18
Administrator; provided, however, that the timing of payment shall in all cases comply with Section 409A to the extent applicable to
the Award. The Administrator, in its sole discretion, may pay earned Performance Units and Performance Shares in the form of cash,
in Shares or in a combination thereof.
(g) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested
Performance Units or Performance Shares, as applicable, will be forfeited to the Company, and, subject to Section 3, again will be
available for grant under the Plan.
(h) Voting Rights, Dividend Equivalents and Distributions. Participants shall have no voting rights with respect to Shares
represented by Performance Units or Performance Shares until the date of the issuance of such Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Administrator,
in its discretion, may provide in the Award Agreement evidencing any Award of Performance Shares that the Participant shall be
entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the
date on which the Performance Shares are settled. Settlement of Dividend Equivalents may be made in cash, Shares, or a
combination thereof as determined by the Administrator, and may be paid on the same basis as settlement of the related Performance
Share. Except as otherwise provided in an Award Agreement, Dividend Equivalents, if any, shall be accrued by crediting the
Participant with additional whole Performance Shares as of the date of payment of such cash dividends on Shares (or as of the record
date if the Performance Shares are settled on or after the record date and before the date of payment of the cash dividend) and the
number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by dividing
(i) the amount of cash dividends paid (or to be paid) on such date with respect to the number of Shares represented by the
Performance Shares previously credited to the Participant by (ii) the Fair Market Value per Share as of the date such Dividend
Equivalents are credited. Any such additional Performance Shares shall be subject to the same terms and conditions, including but
not limited to vesting conditions, and shall be settled in the same manner and at the same time (or as soon thereafter as practicable)
as the Performance Shares originally subject to the Award of Performance Shares. For the avoidance of doubt, such additional
Performance Shares or other Dividend Equivalents will not vest or be paid prior to the time that the original Award vests. Dividend
Equivalents shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in Shares or any other
adjustment made upon a change in the capital structure of the Company as described in Section 15 appropriate adjustments shall be
made in the Participant’s Award of Performance Shares so that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by
reason of the Shares issuable upon settlement of the Award, and all such new, substituted or additional securities or other property
shall be immediately subject to the same vesting conditions as are applicable to the Award.
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12. Performance Bonus Awards.
(a) Grant of Performance Bonus Awards. Subject to the terms and conditions of the Plan, Performance Bonus Awards may
be granted to Employees at any time and from time to time, as will be determined by the Administrator, in its sole discretion, in the
form of a cash bonus payable upon the attainment of Performance Goals or other performance objectives that are established by the
Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator.
(b) Subject to Section 6 and the other terms and conditions of the Plan, the Administrator will have complete discretion to
determine the amount of the cash bonus that may be earned under a Performance Bonus Award.
13. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise or as otherwise required by
Applicable Law, vesting of Awards granted hereunder will be suspended during any unpaid personal leave of absence other than a
Company-approved sabbatical, such that vesting shall cease on the first day of any such unpaid personal leave of absence and shall
only recommence upon return to active service. A Participant will not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary.
14. Transferability of Awards.
(a) Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during
the lifetime of the Participant, only by the Participant (or the Participant’s guardian or legal representative). If the Administrator
makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.
Notwithstanding anything to the contrary in the Plan, in no event will the Administrator have the right to determine and implement
the terms and conditions of any Award Transfer Program without stockholder approval.
15. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities,
or other property, but excepting normal cash dividends), recapitalization, stock split, reverse stock split, reorganization,
reincorporation, reclassification, merger, consolidation, split-up, split-off, spin-off, combination, repurchase, or exchange of Shares
or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the
Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available
under the Plan, will equitably adjust the number and class of shares of stock that may be delivered under the Plan and the number,
class, and price of shares of stock covered by each outstanding Award, the numerical Share limits in Section 3 of the Plan and the per
person numerical Share limits in Section 6. Notwithstanding the preceding, the number of Shares subject to any Award always shall
be a whole number. Any fractional share resulting from an adjustment pursuant to this
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Section 15(a) shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any
Award be decreased to an amount less than the par value, if any, of the stock subject to such Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator
will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not
been previously exercised (with respect to an Option or SAR) or vested (with respect to an Award other than an Option or SAR), an
Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control. In the event of a merger of the Company with or into another corporation or other entity or a
Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the provisions of the
following paragraph), including, without limitation, that each Award be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. The Administrator will not be required to treat all
Awards similarly in the transaction.
In the event that the successor corporation does not assume or substitute for the Award, the Participant will fully vest
in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which
such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse,
and, with respect to Awards with performance-based vesting, unless determined otherwise by the Administrator, all performance
goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and
conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in
Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be
exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right
will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control,
the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control,
the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received
in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock
Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to
such Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.
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Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the
satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such
performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the
successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award
assumption.
16. Deferrals. The Administrator, in its sole discretion, may permit a Participant to defer receipt of the payment of cash or the
delivery of Shares that would otherwise be due to such Participant under an Award. Any such deferral elections shall be subject to
such rules and procedures as shall be determined by the Administrator in its sole discretion and, unless otherwise expressly
determined by the Administrator, shall comply with the requirements of Section 409A.
17. Tax.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof) or
such earlier time as any Tax Obligations are due, the Company will have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy all Tax Obligations.
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify
from time to time, may designate the method or methods by which a Participant may satisfy such Tax Obligations. As determined by
the Administrator in its discretion from time to time, these methods may include one or more of the following (A) paying cash,
(B) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the amount required or
permitted by the Administrator to be withheld or remitted, (C) delivering to the Company already-owned Shares having a Fair
Market Value equal to the amount required or permitted by the Administrator to be withheld or remitted, (D) selling a sufficient
number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole
discretion (whether through a broker or otherwise) equal to the Tax Obligations required or permitted by the Administrator to be
withheld or remitted, (E) retaining from salary or other amounts payable to the Participant cash having a sufficient value to satisfy
the Tax Obligations, or (F) any other means which the Administrator, in its sole discretion, determines to both comply with
Applicable Laws, and to be consistent with the purposes of the Plan. The amount of Tax Obligations will be deemed to include any
amount that the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by
using the maximum federal, state or local marginal income tax rates applicable to the Participant or the Company, as applicable, with
respect to the Award on the date that the amount of tax or social insurance liability to be withheld or remitted is to be determined.
The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date that the Tax Obligations are
required to be withheld.
(c) Compliance with Section 409A. Awards will be designed and operated in such a manner that they are either exempt
from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or deferral will
not be subject to the
22
additional tax or interest applicable under Section 409A, except as otherwise determined in the sole discretion of the Administrator.
Each payment or benefit under this Plan and under each Award Agreement is intended to constitute a separate payment for purposes
of Section 1.409A-2(b)(2) of the Treasury Regulations. The Plan, each Award and each Award Agreement under the Plan is intended
to be exempt from or otherwise meet the requirements of Section 409A and will be construed and interpreted, including but not
limited to with respect to ambiguities or ambiguous terms, in accordance with such intent, except as otherwise specifically
determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof,
is subject to Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of
Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable
under Section 409A. Notwithstanding any contrary provision of the Plan, in no event will the Company be obligated to pay or
reimburse the Participant (or any permitted transferee) for any tax or other cost under or in connection with Section 409A.
18. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect
to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the
Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted
by Applicable Laws.
19. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the
determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will
be provided to each Participant within a reasonable time after the date of such grant.
20. Term of Plan. The Plan originally became effective on July 10, 2014 and has been amended and restated by the
Administrator, most recently on March 21, 2024. The Plan will continue in effect until terminated under Section 21 of the Plan.
21. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent that the
Administrator (in its discretion) determines such approval is necessary to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the
rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be
in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
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22. 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.
23. Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or
unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality
and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.
24. Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any
Award.
25. Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts
payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to
segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the
Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the Administrator or any Participating
Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in
any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in
the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
26. Conditions Upon Issuance of Shares.
(a) Legal Compliance. The granting of Awards and the issuance and delivery of Shares under the Plan shall be subject to
all Applicable Laws, and to such approvals by any governmental agencies or national securities exchanges as may be required.
Shares will not be issued pursuant to the exercise or vesting of an Award unless the exercise or vesting of such Award and the
issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
27. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction
or to complete or comply with the requirements of any
24
registration or other qualification of the Shares under any state, federal or foreign law or under the rules and regulations of the
Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other
governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s
counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance
will not have been obtained. The Company will use its reasonable good faith efforts (as determined by the Administrator) to obtain
any approval, authority, registration, qualification or rule compliance described in this Section 27.
28. Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments, and
benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include,
but shall not be limited to, fraud, breach of a fiduciary duty, restatement of financial statements as a result of fraud or willful errors
or omissions, termination of employment for cause, violation of material Company or Subsidiary policies, breach of non-
competition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that
is detrimental to the business or reputation of the Company or its Subsidiaries. The Administrator may also require the application of
this Section with respect to any Award previously granted to a Participant even without any specified terms being included in any
applicable Award Agreement to the extent required under Applicable Laws.
25
Exhibit 10.4
Salesforce, Inc.
Salesforce Tower
415 Mission Street, 3 Floor
San Francisco, CA 94105
Notice of Grant of Restricted Stock Units
and Terms and Conditions of Restricted Stock Units
(together, with the exhibits and appendices thereto,
the “Agreement”)
NAME:
ADDRESS:
AWARD NUMBER:
PLAN:
2013 Equity Incentive Plan
EMPLOYEE ID:
Grant Date:
Award Type:
Restricted Stock Units
Total Shares Granted:
Vest Commencement Date:
Effective on the grant date indicated above (the “Grant Date”), you have been granted an award of restricted stock units over
the number of shares specified above (the “Award”). These units are restricted until the vest date(s), at which time you will receive
shares of Salesforce, Inc. (the “Company”) common stock.
Vesting Schedule: Subject to any acceleration provisions contained in the Plan:
The Award granted hereunder (including the Vesting Schedule above) is subject to the terms and conditions of any change of
control, offer, retention and/or other agreement entered into between you and the Company (whether entered into before, on or after
the Grant Date).
rd
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By signifying my acceptance below (either by my electronic signature or acceptance or by my written signature), I agree that
the Award is granted under and governed by the terms and conditions of the 2013 Equity Incentive Plan (the “Plan”) and the
Agreement (including this Notice of Grant of Restricted Stock Units, the Terms and Conditions of Restricted Stock Units and any
exhibits or appendices thereto), all of which are attached and made a part of this package. In particular, I acknowledge the data
privacy notice provisions included in paragraph 13 of the Terms and Conditions of Restricted Stock Units.
I agree to notify the Company upon any change in my residence address indicated above.
By clicking the “ACCEPT” button, you agree to the following: “This electronic contract contains my electronic signature,
which I have executed with the intent to sign this Agreement.”
If you prefer not to electronically sign or accept this Agreement, you may accept this Agreement by signing a paper copy of
the Agreement and delivering it to Global Equity Plan Services Department.
Signature
Date
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SALESFORCE, INC.
RESTRICTED STOCK UNIT AGREEMENT
TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
1. Grant. The Company hereby grants to the individual (the “Participant”) named in the Notice of Grant of Restricted
Stock Units (the “Grant Notice”) to which these Terms and Conditions of Restricted Stock Units (together with the Grant Notice and
attachments to each document, the “Agreement”) are attached, an Award of Restricted Stock Units upon the terms and conditions set
forth in this Agreement and the Salesforce, Inc. 2013 Equity Incentive Plan (the “Plan”), which is incorporated herein by reference.
Unless otherwise determined by the Administrator, the Restricted Stock Units include a right to Dividend Equivalents equal to the
value of any cash dividends paid on the Shares for which the record date occurs during the period commencing on the Grant Date
and ending prior to the date the Restricted Stock Units (or portion thereof) are settled. Subject to vesting, each Dividend Equivalent
entitles Participant to receive the equivalent cash value of any cash dividends paid on the number of Shares underlying the Restricted
Stock Units that are outstanding during such period. Dividend Equivalents will be accrued (without interest) and will be subject to
the same conditions as the Restricted Stock Units to which they are attributable, including, without limitation, the vesting conditions
and the provisions governing the timing of settlement of the Restricted Stock Units (or portion thereof). Dividend Equivalents will
be settled in cash or, subject to the approval of the Administrator, in Shares, in either case, subject to withholding of any applicable
Tax-Related Items.
2. Company’s Obligation to Pay. For each Restricted Stock Unit that vests, Participant will receive one Share and, unless
otherwise determined by the Administrator, any accrued Dividend Equivalents with respect to such Share. Unless and until the
Restricted Stock Units have vested in the manner set forth in paragraphs 3 or 4, Participant will have no right to payment of such
Restricted Stock Units or any accrued Dividend Equivalents. Prior to actual payment of any vested Restricted Stock Units, such
Restricted Stock Units will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the
Company. Any Restricted Stock Units that vest in accordance with paragraphs 3 or 4 will be paid to Participant (or in the event of
Participant’s death, to his or her estate) in whole Shares, subject to Participant satisfying any obligations for Tax Obligations.
Payment of any vested Restricted Stock Units shall be made in whole Shares only.
3. Vesting Schedule. Except as otherwise provided in paragraph 4 of this Agreement, and subject to paragraph 6, the
Restricted Stock Units awarded by this Agreement shall vest in accordance with the vesting schedule set forth in the Grant Notice,
provided that Participant has continuously remained a Service Provider from the Grant Date through the relevant vesting date.
Notwithstanding anything in this paragraph 3 to the contrary, and except as otherwise provided by the Administrator or as required
by Applicable Law, vesting of the Restricted Stock Units shall be suspended during any unpaid personal leave of absence other than
a Company-approved sabbatical and other than military leave such that vesting shall cease
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on the first (1st) day of any such unpaid personal leave of absence and shall only recommence upon return to active service;
provided, however, that no vesting credit will be awarded for the time vesting has been suspended during such leave of absence.
4. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser
portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such
Restricted Stock Units will be considered as having vested as of the date specified by the Administrator. Subject to the provisions of
this paragraph 4, if the Administrator, in its discretion, accelerates the vesting of all or a portion of any unvested Restricted Stock
Units, the payment of such accelerated Restricted Stock Units shall be made as soon as practicable upon or following the accelerated
vesting date; provided, however, that if Participant is subject to a Change of Control and Retention Agreement or other agreement
with or authorized by the Company (or with its Parent or one of its Subsidiaries) providing for acceleration of vesting of the
Restricted Stock Units, in each case entered into prior to the Grant Date, and such agreement provides different timing of payment
for such accelerated Restricted Stock Units, the timing in such agreement shall control (provided that, if Participant is a U.S.
taxpayer, such timing is compliant with Section 409A or results in such accelerated Restricted Stock Units being exempt from
Section 409A, and subject to any delay required below by this paragraph 4; otherwise, this paragraph 4 shall control).
Notwithstanding anything in the Plan, this Agreement or any other agreement (whether entered into before, on or after the Grant
Date) to the contrary, if the Administrator, in its discretion, following the Grant Date provides for the further acceleration of vesting
of any of the Restricted Stock Units subject to this Award, if Participant is a U.S. taxpayer, the payment of such accelerated
Restricted Stock Units may only be made at a time or times that would result in such Restricted Stock Units to be exempt from or
complying with the requirements of Section 409A. The prior sentence may be superseded in a future agreement or amendment to
this Agreement only by direct and specific reference to such sentence.
Notwithstanding anything in the Plan, this Agreement or any other agreement (whether entered into before, on or after the
Grant Date) to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units is
accelerated in connection with Participant’s termination as a Service Provider (provided that such termination is a “separation from
service” within the meaning of Section 409A, as determined by the Company), other than due to death, and if (x) Participant is a
U.S. taxpayer and a “specified employee” within the meaning of Section 409A at the time of such termination as a Service Provider
and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of additional tax under Section 409A if
paid to Participant on or within the six (6) month period following Participant’s termination as a Service Provider, then the payment
of such accelerated Restricted Stock Units will not be made until the date six (6) months and one (1) day following the date of
Participant’s termination as a Service Provider, unless Participant dies following his or her termination as a Service Provider, in
which case, the Restricted Stock Units will be paid in Shares to Participant’s estate as soon as practicable following his or her death.
It is the intent of this Agreement that it and all payments and benefits to U.S. taxpayers hereunder be exempt from, or comply with,
the requirements of Section 409A so that none of the Restricted Stock Units provided under this Agreement or Shares (or cash
pursuant to the Dividend Equivalents)
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issuable thereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted
to be so exempt or so comply. Each payment payable to a U.S. taxpayer under this Agreement is intended to constitute a separate
payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). For purposes of this Agreement, “Section 409A” means
Section 409A of the Code, and any final Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be
amended from time to time.
5. Payment after Vesting. The payment of Shares (including any related Dividend Equivalents) vesting pursuant to this
Agreement shall in all cases be made at a time or in a manner that is exempt from, or complies with, Section 409A, unless otherwise
determined by the Administrator. The prior sentence may be superseded in a future agreement or amendment to this Agreement only
by direct and specific reference to such sentence. Any Restricted Stock Units that vest in accordance with paragraph 3 will be paid to
Participant (or in the event of Participant’s death, to his or her estate) as soon as practicable following the date of vesting, subject to
paragraph 8. Any Restricted Stock Units that vest in accordance with paragraph 4 will be paid to Participant (or in the event of
Participant’s death, to his or her estate) in accordance with the provisions of such paragraph, subject to paragraph 8. In no event will
Participant be permitted, directly or indirectly, to specify the taxable year of the payment of any Restricted Stock Units payable
under this Agreement.
6. Forfeiture upon Termination of Status as a Service Provider. Notwithstanding any contrary provision of this Agreement,
the balance of the Restricted Stock Units that have not vested as of the time of Participant’s termination as a Service Provider for any
or no reason will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company, and
Participant’s right to acquire any Shares (or cash pursuant to the Dividend Equivalents) hereunder will immediately terminate. The
date of Participant’s termination as a Service Provider is detailed in paragraph 11(h).
7. Death of Participant. Any distribution or delivery to be made to Participant under this Agreement will, if Participant is
then deceased, be made to the administrator or executor of Participant’s estate. Any such administrator or executor must furnish the
Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the
validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
8. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if
different, the Participating Company employing or retaining Participant (the “Employer”), the ultimate liability
for Tax Obligations is and remains Participant’s responsibility and may exceed the amount, if any, actually
withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the
Employer (i) make no representations or undertakings regarding the treatment of any Tax Obligations in
connection with any aspect of the Restricted Stock Units or any related Dividend Equivalents, including, but not
limited to, the grant, vesting
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or settlement of the Restricted Stock Units, payment of any Dividend Equivalents, the subsequent sale of Shares
acquired pursuant to such settlement and the receipt of any dividends or other distributions, and (ii) do not commit
to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to
reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if
Participant is subject to Tax Obligations in more than one jurisdiction, Participant acknowledges that the
Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for
Tax Obligations in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the
payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant
acknowledges and agrees that the Company may refuse to issue or deliver the Shares, Dividend Equivalents or the
proceeds of the sale of Shares.
(b) Withholding of Taxes. Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees to
make adequate arrangements satisfactory to the Company or the Employer to satisfy all Tax Obligations. In this
regard, Participant authorizes the Company and the Employer, or their respective agents, at their discretion, to
satisfy their withholding obligations with regard to all Tax Obligations, if any, by withholding from proceeds of
the sale of Shares acquired at vesting of the Restricted Stock Units, either through a voluntary sale or through a
mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further
consent. Alternatively, the Company and the Employer, or their respective agents, in their sole discretion and
pursuant to such procedures as they may specify from time to time, may satisfy their withholding obligations with
regard to all Tax Obligations, if any, in whole or in part (without limitation) by (i) requiring Participant to deliver
cash or a check to the Company or the Employer, (ii) withholding from Participant’s wages or other cash
compensation paid to Participant by the Company or the Employer, or (iii) reducing the number of Shares or
amount of Dividend Equivalents otherwise deliverable to Participant; provided, however, that if Participant is a
Section 16 officer of the Company under the Exchange Act, then the Company will withhold from any cash
Dividend Equivalents and from proceeds of the sale of Shares acquired at vesting of the Restricted Stock Units,
unless the use of such withholding method is inadvisable under Applicable Laws or has materially adverse
accounting consequences, in which case, the withholding obligation for Tax Obligations, if any, may be satisfied
by one or a combination of methods (i) and (ii) above. For avoidance of doubt, if Participant is a non-U.S.
employee, payment of Tax Obligations may not be effectuated by surrender of other Shares with a Fair Market
Value equal to the amount of any Tax Obligations. Further, depending on the withholding method, the Company
or the Employer may withhold or account for Tax Obligations by considering statutory or other withholding rates,
including minimum or maximum rates applicable in
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Participant’s jurisdiction(s). In the event of over-withholding, Participant may receive a refund from the Company
of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded
by the Company, Participant must seek a refund from the local tax authorities to the extent Participant wishes to
recover the over-withheld amount in the form of a refund); provided, however, that where the application of such
maximum rates would, in the Company’s determination, result in adverse accounting consequences to the
Company, the Company shall withhold only amounts sufficient to meet the minimum statutory Tax Obligations
required to be withheld or remitted with respect to the Restricted Stock Units.
9. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the
rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates
representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such
issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such
Shares and receipt of dividends and distributions on such Shares.
10. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS
OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT
INTERFERE IN ANY WAY WITH ANY RIGHT OF PARTICIPANT OR OF THE COMPANY (OR THE EMPLOYER) TO
TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
11. Nature of Grant. In accepting the grant, Participant acknowledges, understands and agrees that:
(a) the grant of the Restricted Stock Units is exceptional, voluntary and occasional and does not create any
contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock
Units, even if Restricted Stock Units have been granted in the past;
(b) all decisions with respect to future Restricted Stock Units or other grants, if any, will be at the sole discretion of
the Company;
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(c) Participant is voluntarily participating in the Plan;
(d) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income from and value of
same, are not intended to replace any pension rights or compensation;
(e) unless otherwise agreed with the Company, the Restricted Stock Units and the Shares subject to the Restricted
Stock Units, and the income from and value of same, are not granted as consideration for, or in connection with,
the service Participant may provide as a director of a Subsidiary or an Affiliate;
(f) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income from and value of
same, are not part of normal or expected compensation for purposes of calculating any severance, resignation,
termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension
or retirement or welfare benefits or similar mandatory payments;
(g) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted;
(h) for purposes of the Restricted Stock Units, Participant’s status as a Service Provider will be considered terminated
as of the date Participant is no longer actively providing services to the Company or any Participating Company
(regardless of the reason for such termination and whether or not later to be found invalid or in breach of
employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s
employment or service agreement, if any), and unless otherwise expressly provided in this Agreement (including
by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator,
Participant’s right to vest in the Restricted Stock Units under the Plan, if any, will terminate as of such date and
will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual
notice period or any period of “garden leave” or similar period mandated under employment laws in the
jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service
agreement, if any, unless Participant is providing bona fide services during such time); the Administrator shall
have the exclusive discretion to determine when Participant is no longer actively providing services for purposes
of the Restricted Stock Units grant (including whether Participant may still be considered to be providing services
while on a leave of absence);
(i) unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Stock Units and the
benefits evidenced by this Agreement do not create any entitlement to have the Restricted Stock Units or any such
benefits transferred to, or assumed by, another company nor be exchanged, cashed out
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or substituted for, in connection with any corporate transaction affecting the Shares; and
(j) the following provisions apply only if Participant is providing services outside the United States:
i. the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal
or expected compensation or salary for any purpose;
ii. none of the Company, the Employer or any other Participating Company shall be liable for any foreign
exchange rate fluctuation between Participant’s local currency and the United States Dollar that may
affect the value of the Restricted Stock Units or of any amounts due to Participant pursuant to the
settlement of the Restricted Stock Units and any related Dividend Equivalents or the subsequent sale
of any Shares acquired upon settlement; and
iii. no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock
Units resulting from the termination of Participant’s status as a Service Provider (for any reason
whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction
where Participant is a Service Provider or the terms of Participant’s employment or service agreement,
if any).
12. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying
Shares. Participant understands that there may be adverse tax consequences as a result of Participant’s participation in the Plan,
including the receipt or disposition of the Shares issued as payment for the vested Restricted Stock Units. Participant acknowledges
that he or she should consult with a tax, legal or financial consultant, that he or she has had the opportunity to consult with any such
consultants that Participant deems advisable in connection with the receipt or disposition of the Shares, and that Participant is not
relying on the Company for any tax advice.
13. Data Privacy Notice. Participant hereby acknowledges that the collection, use and transfer, in electronic or other
form, of Participant’s personal data as described in this Agreement and any other Restricted Stock Unit grant materials by and
among, as applicable, the Employer, the Company and any Participating Company, is necessary for the exclusive purpose of
implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant,
including, but not limited to, Participant’s name, home address and telephone number, email address, date of birth, social
insurance, passport or other identification number (e.g., resident registration number), salary, nationality, job title,
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any Shares or directorships held in the Company, details of all Restricted Stock Units or any other entitlement to Shares awarded,
canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing,
administering and managing the Plan.
Participant understands that Data will be transferred to E*Trade from Morgan Stanley and its related companies
(“E*TRADE”) or any stock plan service provider as may be selected by the Company in the future, which is assisting the
Company with the implementation, administration and management of the Plan. Participant understands that the recipients of
the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States)
may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides
outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by
contacting his or her local human resources representative. The Company, E*TRADE, any stock plan service provider selected
by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan may receive, possess, use, retain and transfer the Data, in electronic or other form, for the
sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that
Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan.
Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or make any other applicable
data subject requests, in any case without cost, by contacting in writing his or her local human resources representative. For
more information, Participant may contact his or her local human resources representative.
14. Address for Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed to the
Company, in care of Global Equity Plan Services Department, at Salesforce, Inc., Salesforce Tower, 415 Mission Street, 3 Floor,
San Francisco, CA 94105, or at such other address as the Company may hereafter designate in writing.
15. Grant is Not Transferable. Except to the limited extent provided in paragraph 7 above, this grant of Restricted Stock
Units and the rights and privileges conferred hereby will not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process,
until Participant has been issued the Shares. Upon any attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of
this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process,
this grant and the rights and privileges conferred hereby immediately will become null and void.
16. Compensation Clawback or Recovery Policy. Notwithstanding anything in this Agreement to the contrary, as an
additional condition of receiving the Restricted Stock Units, Participant acknowledges and agrees that the Administrator (or the
Board or a committee of the Board, as determined by the Board), in its sole discretion, may require Participant to forfeit,
rd
-10-
return or reimburse to the Company all or a portion of his or her Restricted Stock Units and any Shares or amounts paid thereunder
(including any dividends or Dividend Equivalents), in order to satisfy a recoupment obligation or requirement under the Company’s
Executive Officer Incentive Compensation Recovery Policy, as it may be amended from time to time, or pursuant to the terms of any
other then-effective Company compensation clawback or recovery policy, as may be established or amended from time to time, to
the extent such policies are applicable to Participant.
17. Restrictions on Sale of Securities. Any sale of the Shares issued under this Agreement will be subject to any market
blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other
Applicable Laws.
18. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will
be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
19. Additional Conditions to Issuance of Certificates for Shares. If at any time the Company will determine, in its
discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any
state, federal or foreign law, the tax code and related regulations or under the rulings or regulations of the United States Securities
and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States
Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the
issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing,
registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any
conditions not acceptable to the Company. Subject to the terms of the Agreement and the Plan, the Company shall not be required to
issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of time following the date of
vesting of the Restricted Stock Units as the Administrator may establish from time to time for reasons of administrative convenience.
20. Plan Governs. This Agreement and the Restricted Stock Units granted hereunder are subject to all the terms and
provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the
Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set
forth in the Plan.
21. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any
such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions
taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant,
the Company and all other interested persons. No member of the Administrator will be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or this Agreement.
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22. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related
to Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic
means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such
documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and
maintained by the Company or a third party designated by the Company. To the extent Participant executes the Notice of Restricted
Stock Unit Grant by electronic means, Participant should retain a copy of his or her returned electronically signed Agreement.
Participant may obtain a paper copy at any time and at the Company’s expense by requesting one from Global Equity Plan Services
Department (see paragraph 14 of these Terms and Conditions).
23. English Language Consent. By accepting the Award of Restricted Stock Units, Participant acknowledges and represents
that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English as to
allow Participant to understand the terms of this Agreement and any other documents related to the Plan. If Participant has received
this Agreement or any other documents related to the Plan translated into a language other than English and if the meaning of
translated version is different from the English version, the English version shall control.
24. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
25. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such
provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining
provisions of this Agreement.
26. Governing Law and Venue. This Agreement will be governed by, and construed in accordance with, the laws of the
state of California without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises
under this Award of Restricted Stock Units or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State
of California, and agree that such litigation will be conducted in the courts of San Francisco County, California, or the federal courts
for the United States for the Northern District of California, and no other courts, where this Award of Restricted Stock Units is made
and/or to be performed.
27. Modifications to the Agreement. Participant expressly warrants that he or she is not accepting this Agreement in
reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement can be
made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the
contrary in the Plan or this Agreement, the Company reserves the right to amend this Agreement as it deems necessary or advisable,
in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid
imposition of any additional tax or income recognition under Section 409A of the Code prior to the actual payment
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of Shares pursuant to this Award of Restricted Stock Units, or if necessary to comply with any applicable laws in the jurisdiction in
which Participant resides and/or is rendering services.
28. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or
she has received an Award of Restricted Stock Units under the Plan, and that he or she has received, read and understood a
description of the Plan. Participant understands that the Plan is discretionary in nature and may be modified, amended, suspended or
terminated by the Company at any time, to the extent permitted by the Plan.
29. Waiver. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other
Participant.
30. Country Addendum. Notwithstanding any provisions in this Agreement, the Restricted Stock Unit grant shall be subject
to any special terms and conditions set forth in any appendix to this Agreement for Participant’s country (the “Country Addendum”).
Moreover, if Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for
such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is
necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement.
31. Insider Trading and Market Abuse Laws. Participant may be subject to insider trading restrictions and/or market abuse
laws based on the exchange on which the Shares are listed and in applicable jurisdictions, including the United States, Participant’s
country and any stock plan service provider’s country, which may affect Participant’s ability to acquire, sell or otherwise dispose of
Shares, rights to Shares (e.g., Restricted Stock Units) or rights linked to the value of Shares during such times as Participant is
considered to have material non-public information or “inside information” regarding the Company (as defined by the laws in
applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant
placed before he or she possessed inside information. Furthermore, Participant could be prohibited from (i) disclosing the inside
information to any third party, including fellow employees (other than on a “need to know” basis), and (ii) “tipping” third parties or
causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to
any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is his or
her responsibility to comply with any applicable restrictions, and Participant should speak to his or her personal advisor on this
matter.
32. Foreign Asset or Account and Exchange Control Reporting. Participant’s country may have certain exchange controls
and foreign asset or account reporting requirements that may affect his or her ability to purchase or hold Shares under the Plan or
receive cash from his or her participation in the Plan (including from any dividends or Dividend Equivalents received or sale
proceeds arising from the sale of Shares) in a brokerage or bank account outside Participant’s country. Participant may be required to
report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, Participant may be required to
repatriate proceeds acquired as a result of participating in the Plan to his or her country through a designated bank or broker or
within a certain time. Participant acknowledges and agrees that it is his or her
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responsibility to be compliant with such regulations and understands that Participant should speak with his or her personal legal
advisor for any details regarding any foreign asset or account reporting or exchange control reporting requirements in Participant’s
country arising out of his or her participation in the Plan.
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Salesforce, Inc.
ID: 94-3320693
Salesforce Tower
415 Mission Street, 3 Floor
San Francisco, CA 94105
Notice of Grant of Performance-Based Restricted
Stock Units and Terms and Conditions of Performance-
Based Restricted Stock Units (together, with the exhibits
and appendices thereto, the “Agreement”)
NAME:
ADDRESS:
AWARD NUMBER:
PLAN: 2013 Equity Incentive Plan
EMPLOYEE ID:
Grant Date:
Total Target Number of
Performance-Based Restricted Stock
Units (“Target”):
Effective on the grant date indicated above (the “Grant Date”), you have been granted an award of performance-based
restricted stock units (the “Award”). This Award covers the Target number of shares of Salesforce, Inc. (the “Company”) common
stock shown above.
Vesting Schedule:
The performance-based restricted stock units (“PRSUs”) covered by this Award are eligible to vest in accordance with the
performance-based and service-based conditions described in Exhibit A.
By signifying my acceptance below (either by my electronic signature or acceptance or by my written signature), I agree that
the Award is granted under and governed by the terms and conditions of the 2013 Equity Incentive Plan (the “Plan”) and the
Agreement (including this
rd
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Notice of Grant of Performance-Based Restricted Stock Units, the Terms and Conditions of Performance-Based Restricted Stock
Units, Exhibit A and any other exhibits or appendices to the Agreement), all of which are attached and made a part of this package.
PRSUs also are known as Restricted Stock Units under the Plan. In particular, I acknowledge the data privacy notice provisions
included in paragraph 13 of the Terms and Conditions of Performance-Based Restricted Stock Units.
I understand that there may be adverse tax consequences as a result of my receipt or disposition of the Shares issued as
payment for the vested PRSUs. The Company has urged me to consult with a tax consultant, I have had the opportunity to consult
with any tax consultants that I deem advisable in connection with the receipt or disposition of the Shares, and I am not relying on the
Company for any tax advice. I agree to accept as binding, conclusive and final all decisions or interpretations of the Administrator
upon any questions relating to the Plan and this Agreement. I agree to notify the Company upon any change in the residence address
indicated for me above.
By clicking the “ACCEPT” button, you agree to the following: “This electronic contract contains my electronic
signature, which I have executed with the intent to sign this Agreement.”
If you prefer not to electronically sign or accept this Agreement, you may accept this Agreement by signing a paper copy of
the Agreement and delivering it to Global Equity Plan Services Department.
Signature
Date
-2-
SALESFORCE, INC.
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
TERMS AND CONDITIONS OF PERFORMANCE-BASED RESTRICTED STOCK UNITS
1. Grant. The Company hereby grants to the individual (the “Participant”) named in the Notice of Grant of Performance-
Based Restricted Stock Units (the “Grant Notice”) to which these Terms and Conditions of Performance-Based Restricted Stock
Units (together with the Grant Notice and attachments to each document, the “Agreement”) are attached, an Award of Performance-
Based Restricted Stock Units upon the terms and conditions set forth in this Agreement and the Salesforce, Inc. 2013 Equity
Incentive Plan (the “Plan”), which is incorporated herein by reference.
2. Company’s Obligation to Pay. For each PRSU that vests, Participant will receive one Share. Unless and until the PRSUs
have vested in the manner set forth in paragraphs 3 or 4, Participant will have no right to payment of such PRSUs. Prior to actual
payment of any vested PRSUs, such PRSUs will represent an unsecured obligation of the Company, payable (if at all) only from the
general assets of the Company. Any PRSUs that vest in accordance with paragraphs 3 or 4 will be paid to Participant (or in the event
of Participant’s death, to his or her estate) in whole Shares only (subject to any adjustment that may be made in the event of a
Change of Control), subject to Participant satisfying any obligations for Tax Obligations.
3. Vesting Schedule. Except as otherwise provided in paragraph 4 of this Agreement, and subject to paragraph 6, the PRSUs
awarded by this Agreement shall vest in accordance with the terms and conditions set forth in Exhibit A; provided, that, Participant
has continuously remained an Employee from the Grant Date through the relevant vesting date. Notwithstanding anything in this
paragraph 3 to the contrary, and except as otherwise provided by the Administrator or as required by Applicable Law, satisfaction of
the service-based vesting criteria set forth in Exhibit A shall be suspended during any unpaid personal leave of absence other than a
Company-approved sabbatical and other than military leave such that vesting shall cease on the first day of any such unpaid personal
leave of absence and shall only recommence
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upon return to active service; provided, however, that no vesting credit will be awarded for the time vesting has been suspended
during such leave of absence.
4. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser
portion of the balance, of any Eligible PRSUs (as defined in Exhibit A) at any time, subject to the terms of the Plan. If so
accelerated, such Eligible PRSUs will be considered as having vested as of the date specified by the Administrator. Subject to the
provisions of this paragraph 4, if the Administrator, in its discretion, accelerates the vesting of all or a portion of any unvested
Eligible PRSUs, the payment of such accelerated PRSUs shall be made as soon as practicable upon or following the accelerated
vesting date; provided, however, that if Participant is subject to a Change of Control and Retention Agreement or other agreement
with or authorized by the Company (or with its Parent or one of its Subsidiaries) providing for acceleration of vesting of the PRSUs
covered by this Award, the timing of payment for such accelerated PRSUs provided in such agreement shall control (provided, that,
if Participant is a U.S. taxpayer, such timing is compliant with Section 409A or results in such accelerated PRSUs being exempt
from Section 409A, and subject to any delay required below by this paragraph 4). Notwithstanding anything in the Plan, this
Agreement or any other agreement (whether entered into before, on or after the Grant Date) to the contrary, if the Administrator, in
its discretion, following the Grant Date provides for the acceleration of vesting of any of the PRSUs subject to this Award, if
Participant is a U.S. taxpayer, the payment of such accelerated PRSUs shall only be made at a time or times when such payment is
exempt from or complying with the requirements of Section 409A. The prior sentence may be superseded in a future agreement or
amendment to this Agreement only by direct and specific reference to such sentence.
Notwithstanding anything in the Plan, this Agreement or any other agreement (whether entered into before, on or after the
Grant Date) to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the PRSUs is accelerated in
connection with Participant’s termination as an Employee (provided, that, such termination is a “separation from service” within the
meaning of Section 409A, as determined by the Company), other than due to death, and if (x) Participant is a U.S. taxpayer and a
“specified employee” within the meaning of Section 409A at the time of such termination as an Employee and (y) the payment of
such accelerated PRSUs will result in the imposition of additional tax under Section 409A if paid to
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Participant on or within the six (6) month period following Participant’s termination as an Employee, then the payment of such
accelerated PRSUs will not be made until the date six (6) months and one (1) day following the date of Participant’s termination as
an Employee, unless Participant dies following his or her termination as an Employee, in which case, the PRSUs will be paid in
Shares to Participant’s estate as soon as practicable following his or her death. It is the intent of this Agreement that it and all
payments and benefits to U.S. taxpayers hereunder be exempt from, or comply with, the requirements of Section 409A so that none
of the PRSUs provided under this Agreement or Shares issuable thereunder will be subject to the additional tax imposed under
Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. Each payment payable to a U.S. taxpayer
under this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). For
purposes of this Agreement, “Section 409A” means Section 409A of the Code, and any final Treasury Regulations and Internal
Revenue Service guidance thereunder, as each may be amended from time to time.
5. Payment after Vesting. The payment of Shares vesting pursuant to this Agreement shall in all cases be made at a time or
in a manner that is exempt from, or complies with, Section 409A. The prior sentence may be superseded in a future agreement or
amendment to this Agreement only by direct and specific reference to such sentence. Any PRSUs that vest in accordance with
paragraph 3 will be paid to Participant (or in the event of Participant’s death, to his or her estate) as soon as practicable following the
date of vesting, subject to paragraph 8. Any PRSUs that vest in accordance with paragraph 4 will be paid to Participant (or in the
event of Participant’s death, to his or her estate) in accordance with the provisions of such paragraph, subject to paragraph 8. In no
event will Participant be permitted, directly or indirectly, to specify the taxable year of the payment of any PRSUs payable under this
Agreement.
6. Forfeiture upon Termination of Status as an Employee. Notwithstanding any contrary provision of this Agreement,
except as specifically provided in Exhibit A, the balance of the PRSUs that have not vested as of the time of Participant’s termination
as an Employee for any or no reason will be forfeited and automatically transferred to and reacquired by the Company at no cost to
the Company, and Participant’s right to acquire any such unvested Shares hereunder will immediately terminate. The date of
Participant’s termination as an Employee is detailed in paragraph 11(h).
-5-
7. Death of Participant. Any distribution or delivery to be made to Participant under this Agreement will, if Participant is
then deceased, be made to the administrator or executor of Participant’s estate. Any such administrator or executor must furnish the
Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the
validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
8. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if
different, the Participating Company employing or retaining Participant (the “Employer”), the ultimate liability for Tax Obligations
is and remains Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer.
Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the
treatment of any Tax Obligations in connection with any aspect of the PRSUs, including, but not limited to, the grant, vesting or
settlement of the PRSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or
other distributions, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the
PRSUs to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is
subject to Tax Obligations in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former
employer, as applicable) may be required to withhold or account for Tax Obligations in more than one jurisdiction. If Participant
fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable
taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares or the proceeds of the
sale of Shares.
(b) Withholding of Taxes. Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees to
make adequate arrangements satisfactory to the Company or the Employer to satisfy all Tax Obligations. In this regard, Participant
authorizes the Company and the Employer, or their respective agents, at their discretion, to satisfy their withholding obligations with
regard to all Tax Obligations, if any, by withholding from proceeds
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of the sale of Shares acquired at vesting of the PRSUs, either through a voluntary sale or through a mandatory sale arranged by the
Company (on Participant’s behalf pursuant to this authorization) without further consent. Alternatively, the Company and the
Employer, or their respective agents, in their sole discretion and pursuant to such procedures as they may specify from time to time,
may satisfy their withholding obligations with regard to all Tax Obligations, if any, in whole or in part (without limitation) by (i)
requiring Participant to deliver cash or a check to the Company or the Employer, (ii) withholding from Participant’s wages or other
cash compensation paid to Participant by the Company or the Employer, or (iii) reducing the number of Shares otherwise deliverable
to Participant; provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the
Company will withhold from proceeds of the sale of Shares acquired at vesting of the PRSUs, unless the use of such withholding
method is inadvisable under Applicable Laws or has materially adverse accounting consequences, in which case, the withholding
obligation for Tax Obligations, if any, may be satisfied by one or a combination of methods (i) and (ii) above. For avoidance of
doubt, if Participant is a non-U.S. employee, payment of Tax Obligations may not be effectuated by surrender of other Shares with a
Fair Market Value equal to the amount of any Tax Obligations. Further, depending on the withholding method, the Company or the
Employer may withhold or account for Tax Obligations by considering statutory or other withholding rates, including minimum or
maximum rates applicable in Participant’s jurisdiction(s). In the event of over-withholding, Participant may receive a refund from
the Company of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded by
the Company, Participant must seek a refund from the local tax authorities to the extent Participant wishes to recover the over-
withheld amount in the form of a refund); provided, however, that where the application of such maximum rates would, in the
Company’s determination, result in adverse accounting consequences to the Company, the Company shall withhold only amounts
sufficient to meet the minimum statutory Tax Obligations required to be withheld or remitted with respect to the PRSUs.
9. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the
rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates
representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant (including through
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electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant will have all the rights of a
stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
10. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
SERVICE-BASED VESTING CONDITION OF THE PRSUs WILL BE SATISFIED ONLY BY CONTINUING AS AN
EMPLOYEE AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED THIS AWARD OF PRSUs OR ACQUIRING SHARES HEREUNDER. PARTICIPANT
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING CRITERIA SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY
PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH ANY RIGHT OF PARTICIPANT OR OF THE
COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS AN EMPLOYEE AT ANY
TIME, WITH OR WITHOUT CAUSE.
11. Nature of Grant. In accepting the grant, Participant acknowledges, understands and agrees that:
(a) the grant of the PRSUs is exceptional, voluntary and occasional and does not create any contractual or other
right to receive future grants of PRSUs, or benefits in lieu of PRSUs, even if PRSUs have been granted in the past;
(b) all decisions with respect to future PRSUs or other grants, if any, will be at the sole discretion of the Company;
(c) Participant is voluntarily participating in the Plan;
(d) the PRSUs and the Shares subject to the PRSUs, and the income from and value of same, are not intended to
replace any pension rights or compensation;
-8-
(e) unless otherwise agreed with the Company, the PRSUs and the Shares subject to the PRSUs, and the income
from and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director
of a Subsidiary or an Affiliate;
(f) the PRSUs and the Shares subject to the PRSUs, and the income from and value of same, are not part of normal
or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service
payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments;
(g) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted;
(h) for purposes of the PRSUs, Participant’s status as an Employee will be considered terminated as of the date
Participant is no longer actively providing services to the Company or any Participating Company (regardless of the reason for such
termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where Participant is an
Employee or the terms of Participant’s employment or service agreement, if any), and unless otherwise expressly provided in this
Agreement (including by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator,
Participant’s right to vest in the PRSUs under the Plan, if any, will terminate as of such date and will not be extended by any notice
period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or
similar period mandated under employment laws in the jurisdiction where Participant is an Employee or the terms of Participant’s
employment or service agreement, if any, unless Participant is providing bona fide services during such time), the Administrator
shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of the PRSUs
grant (including whether Participant may still be considered to be providing services while on a leave of absence);
(i) unless otherwise provided in the Plan or by the Company in its discretion, the PRSUs and the benefits evidenced
by this Agreement do not create any entitlement to have the PRSUs or any such benefits transferred to, or assumed by, another
company nor be
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exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
(j) the following provisions apply only if Participant is providing services outside the United States:
i. the PRSUs and the Shares subject to the PRSUs are not part of normal or expected compensation or salary
for any purpose;
ii. none of the Company, the Employer or any other Participating Company shall be liable for any foreign
exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the PRSUs
or of any amounts due to Participant pursuant to the settlement of the PRSUs or the subsequent sale of any Shares acquired upon
settlement; and
iii. no claim or entitlement to compensation or damages shall arise from forfeiture of the PRSUs resulting
from the termination of Participant’s status as an Employee (for any reason whatsoever whether or not later found to be invalid or in
breach of employment laws in the jurisdiction where Participant is an Employee or the terms of Participant’s employment or service
agreement, if any).
12. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying
Shares. Participant understands that there may be adverse tax consequences as a result of Participant’s participation in the Plan,
including the receipt or disposition of the Shares issued as payment for the vested PRSUs. Participant acknowledges that he or she
should consult with a tax, legal or financial consultant, that he or she has had the opportunity to consult with any such consultants
that Participant deems advisable in connection with the receipt or disposition of the Shares, and that Participant is not relying on the
Company for any tax advice.
13. Data Privacy Notice. Participant hereby acknowledges that the collection, use and transfer, in electronic or other
form, of Participant’s personal data as described in this Agreement and any other PRSU grant materials by and among, as
applicable, the Employer,
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the Company and any Participating Company, is necessary for the exclusive purpose of implementing, administering and
managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant,
including, but not limited to, Participant’s name, home address and telephone number, email address, date of birth, social
insurance, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any Shares or
directorships held in the Company, details of all PRSUs or any other entitlement to Shares awarded, canceled, exercised, vested,
unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing
the Plan.
Participant understands that Data will be transferred to E*Trade from Morgan Stanley and its related companies
(“E*TRADE”) or any stock plan service provider as may be selected by the Company in the future, which is assisting the
Company with the implementation, administration and management of the Plan. Participant understands that the recipients of
the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States)
may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides
outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by
contacting his or her local human resources representative. The Company, E*TRADE, any stock plan service provider selected
by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan may receive, possess, use, retain and transfer the Data, in electronic or other form, for the
sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that
Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan.
Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or make any other applicable
data subject requests, in any case without cost, by contacting in writing his or her local human resources representative. For
more information, Participant may contact his or her local human resources representative.
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14. Address for Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed to the
Company, in care of Global Equity Plan Services Department, at Salesforce, Inc., Salesforce Tower, 415 Mission Street, 3 Floor,
San Francisco, CA 94105, or at such other address as the Company may hereafter designate in writing.
15. Grant is Not Transferable. Except to the limited extent provided in paragraph 7 above, this grant of PRSUs and the
rights and privileges conferred hereby will not be sold, pledged, assigned, hypothecated, transferred or disposed of in any way
(whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process, until
Participant has been issued the Shares. Upon any attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of this
grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this
grant and the rights and privileges conferred hereby immediately will become null and void.
16. Restrictions on Sale of Securities. Any sale of the Shares issued under this Agreement will be subject to any market
blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other
Applicable Laws.
17. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will
be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
18. Additional Conditions to Issuance of Certificates for Shares. If at any time the Company will determine, in its
discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any
state, federal or foreign law, the tax code and related regulations or under the rulings or regulations of the United States Securities
and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States
Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the
issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing,
registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any
conditions not acceptable to the Company. Subject to the terms of the Agreement and the Plan, the Company shall not be required to
issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of
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time following the date of vesting of the PRSUs as the Administrator may establish from time to time for reasons of administrative
convenience.
19. Plan Governs. This Agreement and the PRSUs granted hereunder are subject to all the terms and provisions of the Plan.
In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of
the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.
20. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any
such rules (including, but not limited to, the determination of whether or not any PRSUs have vested). All actions taken and all
interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company
and all other interested persons. No member of the Administrator will be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Agreement.
21. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related
to PRSUs awarded under the Plan or future PRSUs that may be awarded under the Plan by electronic means or request Participant’s
consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery
and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third
party designated by the Company.
22. English Language Consent. By accepting this Award of PRSUs, Participant acknowledges and represents that he or she
is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English as to allow Participant
to understand the terms of this Agreement and any other documents related to the Plan. If Participant has received this Agreement or
any other documents related to the Plan translated into a language other than English and if the meaning of translated version is
different from the English version, the English version shall control.
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23. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
24. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such
provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining
provisions of this Agreement.
25. Governing Law and Venue. This Agreement will be governed by, and construed in accordance with, the laws of the
state of California without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises
under this Award of PRSUs or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California,
and agree that such litigation will be conducted in the courts of San Francisco County, California, or the federal courts for the United
States for the Northern District of California, and no other courts, where this Award of PRSUs is made and/or to be performed.
26. Modifications to the Agreement. This Agreement constitutes the entire understanding of the parties on the subjects
covered. Participant expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations,
or inducements other than those contained herein. Modifications to this Agreement can be made only in an express written contract
executed by a duly authorized officer of the Company; provided, that any such modification that is adverse to Participant will not be
effective unless Participant consents in writing to the modification. Notwithstanding anything to the contrary in the Plan or this
Agreement, the Company reserves the right to amend this Agreement as it deems necessary or advisable, in its sole discretion and
without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax
or income recognition under Section 409A of the Code prior to the actual payment of Shares pursuant to this Award of PRSUs, or if
necessary to comply with any applicable laws in the jurisdiction in which Participant resides and/or is rendering services. In no event
will the Company pay or reimburse Participant for any taxes or other costs imposed in connection with the PRSUs under Section
409A or otherwise.
27. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or
she has received an Award of PRSUs under the Plan,
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and that he or she has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary
in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan.
28. Waiver. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other
Participant.
29. Country Addendum. Notwithstanding any provisions in this Agreement, the PRSU grant shall be subject to any special
terms and conditions set forth in any appendix to this Agreement for Participant’s country (the “Country Addendum”). Moreover, if
Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country
will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or
advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement.
30. Insider Trading and Market Abuse Laws. Participant may be subject to insider trading restrictions and/or market abuse
laws based on the exchange on which the Shares are listed and in applicable jurisdictions, including the United States, Participant’s
country and any stock plan service provider’s country, which may affect Participant’s ability to acquire, sell or otherwise dispose of
Shares, rights to Shares (e.g., PRSUs) or rights linked to the value of Shares during such times as Participant is considered to have
material non-public information or “inside information” regarding the Company (as defined by the laws in applicable jurisdictions).
Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant placed before he or she
possessed inside information. Furthermore, Participant could be prohibited from (i) disclosing the inside information to any third
party, including fellow employees (other than on a “need to know” basis), and (ii) “tipping” third parties or causing them otherwise
to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that
may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is his or her responsibility to
comply with any applicable restrictions, and Participant should speak to his or her personal advisor on this matter.
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31. Foreign Asset or Account and Exchange Control Reporting. Participant’s country may have certain exchange controls
and foreign asset or account reporting requirements that may affect his or her ability to purchase or hold Shares under the Plan or
receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of
Shares) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or
transactions to the tax or other authorities in his or her country. Further, Participant may be required to repatriate proceeds acquired
as a result of participating in the Plan to his or her country through a designated bank or broker or within a certain time. Participant
acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that Participant
should speak with his or her personal legal advisor for any details regarding any foreign asset or account reporting or exchange
control reporting requirements in Participant’s country arising out of his or her participation in the Plan.
32. Compensation Clawback or Recovery Policy. Notwithstanding anything in this Agreement to the contrary, as an
additional condition of receiving the PRSUs, Participant acknowledges and agrees that the Administrator (or the Board or a
committee of the Board, as determined by the Board), in its sole discretion, may require Participant to forfeit, return or reimburse to
the Company all or a portion of his or her PRSUs and any Shares or amounts paid thereunder (including any dividends), in
accordance with, or to satisfy a recoupment obligation or requirement under, the Company’s Executive Officer Incentive
Compensation Recovery Policy, as it may be amended from time to time, or any other then-effective Company compensation
clawback or recovery policy, as may be established or amended from time to time, to the extent such policies are applicable to
Participant.
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SALESFORCE, INC.
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
EXHIBIT A -- VESTING CONDITIONS
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Salesforce, Inc.
Salesforce Tower
415 Mission Street, 3 Floor
San Francisco, CA 94105
Notice of Grant of Stock Options and Terms
and Conditions of Stock Options (together, with the
exhibits and appendices thereto, the “Agreement”)
NAME:
ADDRESS:
OPTION NUMBER:
PLAN: 2013 Equity Incentive Plan
EMPLOYEE ID:
Grant Date:
Option Type: Stock Option
Total Shares Granted:
Exercise Price/Share:
Total Option Price:
Vest Commencement Date:
Expiration Date:
Effective on the grant date indicated above (the “Grant Date”) you have been granted an option to purchase the number of
shares of Salesforce, Inc. (the “Company”) common stock indicated above (the “Option”) at the exercise price per share indicated
above.
Vesting Schedule/Expiration:
Subject to any acceleration provisions contained in the Plan, the Option will vest and remain exercisable thereafter based on
the following schedule and according to the Terms and Conditions of Stock Options attached hereto (subject to earlier termination as
provided in paragraphs 2 and 3 of the Terms and Conditions of Stock Options):
The Option granted hereunder (including the Vesting Schedule above) is subject to the terms and conditions of any change of
control, retention and/or other agreement entered into between you and the Company (whether entered into before, on or after the
Grant Date).
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By signifying my acceptance below (either by my electronic signature or acceptance or by my written signature), I agree that
the Option is granted under and governed by the terms and conditions of the 2013 Equity Incentive Plan (the “Plan”) and the
Agreement (including this Notice of Grant of Stock Options, the Terms and Conditions of Stock Options and any exhibits or
appendices thereto), all of which are attached and made a part of this package. I understand that additional important terms and
conditions, including regarding vesting and forfeiture, of this Option are contained in the rest of the Agreement and in the Plan. In
particular, I acknowledge the data privacy notice provisions included in paragraph 12 of the Terms and Conditions of Stock
Options.
I agree to notify the Company upon any change in my residence address indicated above.
By clicking the “ACCEPT” button, you agree to the following: “This electronic contract contains my electronic signature,
which I have executed with the intent to sign this Agreement.”
If you prefer not to electronically sign or accept this Agreement, you may accept this Agreement by signing a paper copy of
the Agreement and delivering it to Global Equity Plan Services Department.
Signature
Date
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SALESFORCE, INC.
STOCK OPTION AGREEMENT
TERMS AND CONDITIONS OF STOCK OPTIONS
1. Grant of Option. The Company hereby grants to the individual named in the Notice of Grant (the “Participant”) an
option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant of Stock Options (the “Notice of
Grant”), at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and
conditions in this Agreement and the Salesforce, Inc. 2013 Equity Incentive Plan (the “Plan”), which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan will have the same defined meanings in this Stock Option
Agreement (the “Agreement”), which includes the Notice of Grant and Terms and Conditions of Stock Option Grant and all
exhibits to the Agreement.
(a) For U.S. taxpayers, the Option will be designated as either an Incentive Stock Option (“ISO”) or a
Nonstatutory Stock Option (“NSO”). If designated in the Notice of Grant as an ISO, this Option is intended to qualify as an ISO
under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it will be treated as a Nonstatutory
Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) will not qualify as an ISO, then, to the extent of
such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event will the
Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to
Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
(b) For non-U.S. taxpayers, the Option will be designated as an NSO.
2. Vesting Schedule. Except as otherwise provided in paragraph 4 and subject to any acceleration provisions contained
in the Plan or set forth in this Agreement, the Option awarded by this Agreement will vest and be exercisable, in whole or in part, in
accordance with the vesting provisions set forth in the Notice of Grant. Shares scheduled to vest on a certain date or upon the
occurrence of a certain condition will not vest in accordance with any of the provisions of this Agreement, unless Participant will
have been continuously a Service Provider from the Grant Date until the date such vesting occurs. Notwithstanding anything in this
paragraph 2 to the contrary, and except as otherwise provided by the Administrator or as required by Applicable Laws, vesting of
the Option shall be suspended during any unpaid personal leave of absence other than a Company-approved sabbatical and other
than military leave such that vesting shall cease on the first (1st) day of any such unpaid personal leave of absence and shall only
recommence upon return to active service; provided, however, that no vesting credit will be awarded for the time vesting has been
suspended during such leave of absence.
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3. Termination Period.
(a) Generally. The Option will be exercisable until 5:00pm local Pacific Time on the ninetieth (90th) day after the
date Participant ceases to be a Service Provider for reasons other than Cause or Participant’s death or Disability. In the event
Participant ceases to be a Service Provider due to Participant’s death or Disability, the Option will be exercisable until the close of
business on the one (1) year anniversary of the date Participant ceases to be a Service Provider. Participant’s status as a Service
Provider shall be deemed to have terminated on account of death if Participant dies within ninety (90) days after the date Participant
ceases to be a Service Provider. In the event Participant ceases to be a Service Provider due to Cause, the Option will terminate and
cease to be exercisable immediately upon the date Participant ceases to be a Service Provider. For purposes of the Option,
Participant’s engagement as a Service Provider will be considered terminated as of the date that Participant is no longer actively
providing services to the Company or any Participating Company (regardless of the reason for such termination and whether or not
later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of
Participant’s employment or engagement agreement, if any), and, unless otherwise expressly provided in this Agreement (including
by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, (i) Participant’s right to
vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g.,
Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period
mandated under employment laws in the jurisdiction where Participant is a Service Provider or Participant’s employment or
engagement agreement, if any, unless Participant is providing bona fide services during such time), and (ii) the period (if any) during
which Participant may exercise the Option after such termination of Participant’s engagement as a Service Provider will commence
on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under
employment laws in the jurisdiction where Participant is employed or terms of Participant’s employment or engagement agreement,
if any; the Company shall have the discretion to determine when Participant is no longer actively providing services for purposes of
the Option (including whether Participant may still be considered to be providing services while on a leave of absence).
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if (i) Participant ceases to be a
Service Provider for reasons other than as a result of Cause and (ii) the exercise of the Option within the applicable time periods set
forth in paragraph 3(a) is prevented by the Section 27 of the Plan, the Option shall remain exercisable until the close of business of
the ninetieth (90th) day after the date Participant is notified by the Company that the Option is exercisable, but in any event no later
than the expiration of the term of the Option as set forth in the Notice of Grant.
(c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, if (i) Participant ceases to be
a Service Provider for reasons other than as a result of Cause and (ii) a sale within the applicable time periods set forth in paragraph
3(a) of Shares acquired upon the exercise of the Option would subject Participant to suit under Section 16(b) of the Exchange Act,
the Option shall remain exercisable until the earliest to occur of (x) the close
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of business of the tenth (10th) day following the date on which a sale of such Shares by Participant would no longer be subject to
such suit or (y) the expiration of the term of such Option as set forth in the Notice of Grant.
(d) Limitations. Notwithstanding anything in Sections 3(a), (b), or (c) to the contrary, in no event may the Option
be exercised after the close business on the expiration of the term of the Option as set forth in the Notice of Grant, and may be
subject to earlier termination as provided in Sections 16(b) and (c) of the Plan.
4. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some
lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will
be considered as having vested as of the date specified by the Administrator.
5. Exercise of Option.
(a) Right to Exercise. This Option may be exercised only within the term set out in the Notice of Grant, and may
be exercised during such term only in accordance with the Plan and the terms of this Agreement.
(b) Method of Exercise. This Option is exercisable in a manner and pursuant to such procedures as the Company
may determine, which may include (but is not limited to) by notification to E*Trade from Morgan Stanley and any of its affiliated
companies (“E*TRADE”), or such other stock plan service provider as may be selected by the Company in the future, or by delivery
of an exercise notice to the Company, in the form attached as Exhibit C (either, the “Exercise Notice”). Any Exercise Notice must
state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised
Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan.
The Exercise Notice will be accompanied by payment or instructions for payment of the aggregate Exercise Price as to all Exercised
Shares. This Option will be deemed to be exercised upon receipt by the Company or any agent designated by the Company of such
fully executed Exercise Notice accompanied by the aggregate Exercise Price (or instructions for payment thereof). This Option may
not be exercised for a fraction of a Share and the Company will not issue fractional Shares upon exercise of this Option.
6. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination
thereof, at the election of Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program (whether through a broker,
net exercise program or otherwise) adopted by the Company in connection with the Plan;
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(d) if Participant is a U.S. Employee, surrender of other Shares which have a Fair Market Value on the date of
surrender equal to the aggregate Exercise Price of the Exercised Shares, provided that accepting such Shares, in the sole discretion of
the Administrator, will not result in any adverse accounting consequences to the Company; or
(e) by such other consideration as may be approved by the Administrator from time to time to the extent
permitted by Applicable Laws.
7. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if
different, the Participating Company employing or retaining Participant (the “Employer”), the ultimate liability for Tax Obligations
is and remains Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer.
Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the
treatment of any Tax Obligations in connection with any aspect of the Option, including, but not limited to, the grant, vesting or
exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends or other
distributions, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to
reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to
Tax Obligations in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former
employer, as applicable) may be required to withhold or account for Tax Obligations in more than one jurisdiction. If Participant
fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable
taxable event, Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the
Shares or the proceeds from the sale of the Shares.
(b) Withholding of Taxes. Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees
to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax Obligations. In this regard,
Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy their withholding
obligations with regard to all Tax Obligations, if any, by withholding from proceeds of the sale of Shares acquired at exercise of the
Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to
this authorization) without further consent. Alternatively, the Company, or the Employer, or their respective agents, in their sole
discretion and pursuant to such procedures as they may specify from time to time, may satisfy their withholding obligations with
regard to all Tax Obligations, if any, in whole or in part (without limitation) by (i) requiring Participant to deliver cash or a check to
the Company or the Employer, (ii) withholding from Participant’s wages or other cash compensation paid to Participant by the
Company and/or the Employer, or (iii) reducing the number of Shares otherwise deliverable to Participant; provided, however, that if
Participant is a Section 16 officer of the Company under the Exchange Act, then the Company will withhold from proceeds of the
sale of Shares acquired at exercise of the Option, unless the
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use of such withholding method is inadvisable under Applicable Laws or has materially adverse accounting consequences, in which
case, the withholding obligation for Tax Obligations, if any, may be satisfied by one or a combination of methods (i) and (ii) above.
For avoidance of doubt, if Participant is a non-U.S. employee, payment of Tax Obligations may not be effectuated by surrender of
other Shares with a Fair Market Value equal to the amount of any Tax Obligations. Further, depending on the withholding method,
the Company or the Employer may withhold or account for Tax Obligations by considering statutory or other withholding rates,
including minimum or maximum rates applicable in Participant’s jurisdiction(s). In the event of over-withholding, Participant may
receive a refund from the Company of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock),
or if not refunded by the Company, Participant must seek a refund from the local tax authorities to the extent Participant wishes to
recover the over-withheld amount in the form of a refund); provided, however, that where the application of maximum rates would,
in the Company’s determination, result in adverse accounting consequences to the Company, the Company shall withhold only
amounts sufficient to meet the minimum statutory Tax Obligations required to be withheld or remitted with respect to the Option.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if
Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2)
years after the Grant Date, or (ii) the date one (1) year after the date of exercise, Participant will immediately notify the Company in
writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the
compensation income recognized by Participant.
(d) Code Section 409A. Under Code Section 409A, an option that vests after December 31, 2004 (or that vested
on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share Exercise Price
that is determined by the Internal Revenue Service (the “IRS”) to be less than the fair market value of a Share on the Grant Date (a
“Discount Option”) may be considered “deferred compensation.” For a Participant who is or becomes subject to U.S. Federal
income taxation, a Discount Option may result in (i) income recognition by Participant prior to the exercise of the option, (ii) an
additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also
result in additional state income, penalty and interest charges to Participant. Participant acknowledges that the Company cannot and
has not guaranteed that the IRS will agree that the per Share Exercise Price of this Option equals or exceeds the Fair Market Value of
a Share on the Grant Date in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per
Share exercise price that was less than the Fair Market Value of a Share on the Grant Date, Participant will be solely responsible for
Participant’s costs related to such a determination, if any.
8. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the
rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates
representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and
delivered to Participant (including through electronic delivery to a brokerage
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account). After such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with
respect to voting such Shares and receipt of dividends and distributions on such Shares.
9. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF
THE OPTION PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES
AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL
NOT INTERFERE IN ANY WAY WITH ANY RIGHT OF PARTICIPANT OR OF THE COMPANY (OR THE EMPLOYER) TO
TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
10. Nature of Grant. In accepting the Option, Participant acknowledges, understands and agrees that:
(a) the grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other
right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(b) all decisions with respect to future option or other grants, if any, will be at the sole discretion of the Company;
(c) Participant is voluntarily participating in the Plan;
(d) the Option and any Shares acquired under the Plan, and the income from and value of same, are not intended
to replace any pension rights or compensation;
(e) unless otherwise agreed with the Company, the Option and the Shares acquired under the Plan, and the income
from and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director
of a Subsidiary or an Affiliate;
(f) the Option and Shares acquired under the Plan, and the income from and value of same, are not part of normal
or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service
payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments;
(g) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted;
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(h) if the Shares underlying the Option do not increase in value, the Option will have no value;
(i) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in
value, even below the Exercise Price;
(j) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits
evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by,
another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the
Shares; and
(k) the following provisions apply only if Participant is providing services outside the United States:
(i) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary
for any purpose;
(ii) none of the Company, the Employer or any other Participating Company shall be liable for any foreign
exchange rate fluctuation between Participant’s local currency and the United States Dollar that may
affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the
Option or the subsequent sale of any Shares acquired upon exercise; and
(iii) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting
from the termination of Participant’s engagement as a Service Provider (for any reason whatsoever,
whether or not later found to be invalid or in breach of employment laws in the jurisdiction where
Participant is a Service Provider or the terms of Participant’s employment or engagement agreement, if
any).
11. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying
Shares. Participant understands that there may be adverse tax consequences as a result of Participant’s participation in the Plan,
including the exercise of the Option or the disposition of the Shares subject to the Option. Participant acknowledges that he or she
should consult with a tax, legal or financial consultant, that he or she has had the opportunity to consult with any such consultants
that Participant deems advisable in connection with the receipt or disposition of the Shares, and that Participant is not relying on the
Company for any tax advice.
12. Data Privacy. Participant hereby acknowledges that the collection, use and transfer, in electronic or other form, of
Participant’s personal data as described in this Agreement and any other Option grant materials by and among, as applicable,
the Employer,
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the Company and any Participating Company, is necessary for the exclusive purpose of implementing, administering and
managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant,
including, but not limited to, Participant’s name, home address and telephone number, email address, date of birth, social
insurance, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any Shares or
directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested,
unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing
the Plan.
Participant understands that Data will be transferred to E*TRADE or any stock plan service provider as may be selected
by the Company in the future, which is assisting the Company with the implementation, administration and management of the
Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the
recipients’ country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s
country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names
and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The
Company, E*TRADE, any stock plan service provider selected by the Company and any other possible recipients which may
assist the Company (presently or in the future) with implementing, administering and managing the Plan may receive, possess,
use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing
his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement,
administer and manage Participant’s participation in the Plan. Participant understands if he or she resides outside the United
States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require
any necessary amendments to Data or make any other applicable data subject requests, in any case without cost, by contacting in
writing his or her local human resources representative. For more information, Participant may contact his or her local human
resources representative.
13. Address for Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed in
care of Global Equity Plan Services Department, at Salesforce, Inc., Salesforce Tower, 415 Mission Street, 3 Floor, San Francisco,
CA 94105, or at such other address as the Company may hereafter designate in writing.
14. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the
laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.
15. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will
be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
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16. Additional Conditions to Issuance of Certificates for Shares. If at any time the Company will determine, in its
discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any
state, federal or foreign law, the tax code and related regulations under the rulings or regulations of the United States Securities and
Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States
Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the
purchase by, or issuance of Shares to, Participant (or his or her estate) hereunder, such purchase or issuance will not occur unless
and until such listing, registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected
or obtained free of any conditions not acceptable to the Company. Assuming such compliance, for income tax purposes the
Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to such Exercised
Shares.
17. Plan Governs. This Agreement and the Option granted hereunder are subject to all terms and provisions of the Plan.
In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions
of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.
18. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any
such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested). All
actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon
Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or this Agreement.
19. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents
related to Options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the
Company or a third party designated by the Company. To the extent Participant executes the Notice of Stock Option Grant by
electronic means, Participant should retain a copy of his or her returned electronically signed Agreement. Participant may obtain a
paper copy at any time and at the Company’s expense by requesting one from Global Equity Plan Services Department (see
paragraph 13 of these Terms and Conditions).
20. English Language Consent. By accepting the Option, Participant acknowledges and represents that he or she is
proficient in the English language or has consulted with an advisor who is sufficiently proficient in English as to allow Participant
to understand the terms
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of this Agreement and any other documents related to the Plan. If Participant has received this Agreement or any other documents
related to the Plan translated into a language other than English and if the meaning of translated version is different from the
English version, the English version shall control.
21. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
22. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such
provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining
provisions of this Agreement.
23. Governing Law and Venue. This Agreement will be governed by the laws of California, without giving effect to the
conflict of law principles thereof. For purposes of litigating any dispute that arises under this Option or this Agreement, the parties
hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be conducted in the
courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California, and no
other courts, where this Option is made and/or to be performed.
24. Modifications to the Agreement. Participant expressly warrants that he or she is not accepting this Agreement in
reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement can
be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the
contrary in the Plan or this Agreement, the Company reserves the right to amend this Agreement as it deems necessary or advisable,
in its sole discretion and without the consent of Participant, to comply with Code Section 409A or to otherwise avoid imposition of
any additional tax or income recognition under Section 409A of the Code in connection with the Option, or if necessary to comply
with any applicable laws in the jurisdiction in which Participant resides and/or is rendering services.
25. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he
or she has received an “Option” under the Plan, and has received, read and understood a description of the Plan. Participant
understands that the Plan is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any
time to the extent permitted by the Plan.
26. Waiver. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any
other Participant.
27. Legends. The Company may at any time place legends referencing restrictions imposed by any Applicable Laws on
all certificates representing Shares subject to the provisions of this Agreement.
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28. Country Addendum. Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any
special terms and conditions for Participant’s country set forth in the Country Addendum attached to this Agreement (the “Country
Addendum”). Moreover, if Participant relocates to one of the countries included in the Country Addendum, the special terms and
conditions for such country will apply to Participant to the extent the Company determines that the application of such terms and
conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement.
29. Insider Trading and Market Abuse Laws. Participant may be subject to insider trading restrictions and/or market
abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions, including the United States,
Participant’s country and any stock plan service provider’s country, which may affect Participant’s ability to acquire, sell or
otherwise dispose of Shares, rights to Shares (e.g., the Option) or rights linked to the value of Shares during such times as
Participant is considered to have material non-public information or “inside information” regarding the Company (as defined by the
laws in applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders
Participant placed before he or she possessed inside information. Furthermore, Participant could be prohibited from (i) disclosing
the inside information to any third party, including fellow employees (other than on a “need to know” basis), and (ii) “tipping” third
parties or causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in
addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges
that it is his or her responsibility to comply with any applicable restrictions, and Participant should speak to his or her personal
advisor on this matter.
30. Foreign Asset or Account and Exchange Control Reporting. Participant’s country may have certain exchange controls
and foreign asset or account reporting requirements that may affect his or her ability to purchase or hold Shares under the Plan or
receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale
of Shares) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets
or transactions to the tax or other authorities in his or her country. Further, Participant may be required to repatriate proceeds
acquired as a result of participating in the Plan to his or her country through a designated bank or broker or within a certain time.
Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that
Participant should speak with his or her personal legal advisor for any details regarding any foreign asset or account reporting or
exchange control reporting requirements in Participant’s country arising out of his or her participation in the Plan.
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EXHIBIT C
SALESFORCE, INC.
2013 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
Salesforce, Inc.
Salesforce Tower
415 Mission Street, 3 Floor
San Francisco, CA 94105
Attention: Global Equity Plan Services Department
1. Exercise of Option. Effective as of today, ________________, _____, the undersigned (“Purchaser”) hereby elects to
purchase ______________ shares (the “Shares”) of the Common Stock of Salesforce, Inc. (the “Company”) under and pursuant to
the 2013 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ________ (the “Agreement”). The purchase price
for the Shares will be $_____________, as required by the Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares and any Tax
Obligations (as defined in paragraph 7(a) of the Agreement) to be paid in connection with the exercise of the Option.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and
the Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a
stockholder will exist with respect to the Shares subject to the Option, notwithstanding the exercise of the Option. The Shares so
acquired will be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date of issuance, except as provided in Section 16 of the Plan.
5. Restriction on Sale of Securities. Any sale of the Shares issued under this Agreement will be subject to any market
black-out period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other
Applicable Laws.
6. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in
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connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
7. Entire Agreement; Governing Law. The Plan and Agreement are incorporated herein by reference. This Exercise
Notice, the Plan and the Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and
Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the State of California.
Submitted by: Accepted by:
PURCHASER SALESFORCE, INC.
____________________________________ _____________________________________
Signature By
____________________________________ _____________________________________
Print Name Its
Address:
____________________________________
____________________________________
______________________________________
Date Received
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Exhibit 10.5
Salesforce, Inc.
Salesforce Tower
415 Mission Street, 3 Floor
San Francisco, CA 94105
Notice of Grant of Restricted Stock Units and Terms
and Conditions of Restricted Stock Units (together,
with the exhibits and appendices thereto, the
“Agreement”)
NAME:
ADDRESS:
AWARD NUMBER:
PLAN: 2014 Inducement Equity Incentive Plan
EMPLOYEE ID:
Grant Date:
Award Type: Restricted Stock Units
Total Shares Granted:
Vest Commencement Date:
Effective on the grant date indicated above (the “Grant Date”), you have been granted an award of restricted stock units over
the number of shares specified above (the “Award”). These units are restricted until the vest date(s), at which time you will receive
shares of Salesforce, Inc. (the “Company”) common stock. This Award is intended as a material inducement to your becoming an
Employee.
Vesting Schedule: Subject to any acceleration provisions contained in the Plan:
The Award granted hereunder (including the Vesting Schedule above) is subject to the terms and conditions of any change of
control, offer, retention and/or other agreement entered into between you and the Company (whether entered into before, on or after
the Grant Date).
By signifying my acceptance below (either by my electronic signature or acceptance or by my written signature), I agree that
the Award is granted under and governed by the terms and conditions of the 2014 Inducement Equity Incentive Plan (the “Plan”) and
the Agreement (including this Notice of Grant of Restricted Stock Units, the Terms and Conditions of Restricted Stock Units and any
exhibits or appendices thereto), all of which are attached and made a part of this package. In particular, I acknowledge the data
privacy notice provisions included in paragraph 13 of the Terms and Conditions of Restricted Stock Units.
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I agree to notify the Company upon any change in my residence address indicated above.
By clicking the “ACCEPT” button, you agree to the following: “This electronic contract contains my electronic signature,
which I have executed with the intent to sign this Agreement.”
If you prefer not to electronically sign or accept this Agreement, you may accept this Agreement by signing a paper copy of
the Agreement and delivering it to Global Equity Plan Services Department.
Signature
Date
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SALESFORCE, INC.
RESTRICTED STOCK UNIT AGREEMENT
TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
1. Grant. The Company hereby grants to the individual (the “Participant”) named in the Notice of Grant of Restricted Stock
Units (the “Grant Notice”) to which these Terms and Conditions of Restricted Stock Units (together with the Grant Notice and
attachments to each document, the “Agreement”) are attached, an Award of Restricted Stock Units upon the terms and conditions set
forth in this Agreement and the Salesforce, Inc. 2014 Inducement Equity Incentive Plan (the “Plan”), which is incorporated herein by
reference. Unless otherwise determined by the Administrator, the Restricted Stock Units include a right to Dividend Equivalents
equal to the value of any cash dividends paid on the Shares for which the record date occurs during the period commencing on the
Grant Date and ending prior to the date the Restricted Stock Units (or portion thereof) are settled. Subject to vesting, each Dividend
Equivalent entitles Participant to receive the equivalent cash value of any cash dividends paid on the number of Shares underlying
the Restricted Stock Units that are outstanding during such period. Dividend Equivalents will be accrued (without interest) and will
be subject to the same conditions as the Restricted Stock Units to which they are attributable, including, without limitation, the
vesting conditions and the provisions governing the timing of settlement of the Restricted Stock Units (or portion thereof). Dividend
Equivalents will be settled in cash or, subject to the approval of the Administrator, in Shares, in either case, subject to withholding of
any applicable Tax-Related Items.
2. Company’s Obligation to Pay. For each Restricted Stock Unit that vests, Participant will receive one Share and, unless
otherwise determined by the Administrator, any accrued Dividend Equivalents with respect to such Share. Unless and until the
Restricted Stock Units have vested in the manner set forth in paragraphs 3 or 4, Participant will have no right to payment of such
Restricted Stock Units or any accrued Dividend Equivalents. Prior to actual payment of any vested Restricted Stock Units, such
Restricted Stock Units will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the
Company. Any Restricted Stock Units that vest in accordance with paragraphs 3 or 4 will be paid to Participant (or in the event of
Participant’s death, to his or her estate) in whole Shares, subject to Participant satisfying any obligations for Tax Obligations.
Payment of any vested Restricted Stock Units shall be made in whole Shares only.
3. Vesting Schedule. Except as otherwise provided in paragraph 4 of this Agreement, and subject to paragraph 6, the
Restricted Stock Units awarded by this Agreement shall vest in accordance with the vesting schedule set forth in the Grant Notice,
provided that Participant has continuously remained a Service Provider from the Grant Date through the relevant vesting date.
Notwithstanding anything in this paragraph 3 to the contrary, and except as otherwise provided by the Administrator or as required
by Applicable Law, vesting of the Restricted Stock Units shall be suspended during any unpaid personal leave of absence other
-3-
than a Company-approved sabbatical and other than military leave such that vesting shall cease on the first (1st) day of any such
unpaid personal leave of absence and shall only recommence upon return to active service; provided, however, that no vesting credit
will be awarded for the time vesting has been suspended during such leave of absence.
4. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser
portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such
Restricted Stock Units will be considered as having vested as of the date specified by the Administrator. Subject to the provisions of
this paragraph 4, if the Administrator, in its discretion, accelerates the vesting of all or a portion of any unvested Restricted Stock
Units, the payment of such accelerated Restricted Stock Units shall be made as soon as practicable upon or following the accelerated
vesting date; provided, however, that if Participant is subject to a Change of Control and Retention Agreement or other agreement
with or authorized by the Company (or with its Parent or one of its Subsidiaries) providing for acceleration of vesting of the
Restricted Stock Units, in each case entered into prior to the Grant Date, and such agreement provides different timing of payment
for such accelerated Restricted Stock Units, the timing in such agreement shall control (provided that, if Participant is a U.S.
taxpayer, such timing is compliant with Section 409A or results in such accelerated Restricted Stock Units being exempt from
Section 409A, and subject to any delay required below by this paragraph 4; otherwise, this paragraph 4 shall control).
Notwithstanding anything in the Plan, this Agreement or any other agreement (whether entered into before, on or after the Grant
Date) to the contrary, if the Administrator, in its discretion, following the Grant Date provides for the further acceleration of vesting
of any of the Restricted Stock Units subject to this Award, if Participant is a U.S. taxpayer, the payment of such accelerated
Restricted Stock Units may only be made at a time or times that would result in such Restricted Stock Units to be exempt from or
complying with the requirements of Section 409A. The prior sentence may be superseded in a future agreement or amendment to
this Agreement only by direct and specific reference to such sentence.
Notwithstanding anything in the Plan, this Agreement or any other agreement (whether entered into before, on or after the
Grant Date) to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units is
accelerated in connection with Participant’s termination as a Service Provider (provided that such termination is a “separation from
service” within the meaning of Section 409A, as determined by the Company), other than due to death, and if (x) Participant is a
U.S. taxpayer and a “specified employee” within the meaning of Section 409A at the time of such termination as a Service Provider
and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of additional tax under Section 409A if
paid to Participant on or within the six (6) month period following Participant’s termination as a Service Provider, then the payment
of such accelerated Restricted Stock Units will not be made until the date six (6) months and one (1) day following the date of
Participant’s termination as a Service Provider, unless Participant dies following his or her termination as a Service Provider, in
which case, the Restricted Stock Units will be paid in Shares to Participant’s estate as soon as practicable following his or her death.
It is the intent of this Agreement that it and all payments and benefits to U.S. taxpayers hereunder be exempt from, or comply with,
the requirements of Section 409A so that none of the Restricted Stock
-4-
Units provided under this Agreement or Shares (or cash pursuant to the Dividend Equivalents) issuable thereunder will be subject to
the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. Each
payment payable to a U.S. taxpayer under this Agreement is intended to constitute a separate payment for purposes of Treasury
Regulation Section 1.409A-2(b)(2). For purposes of this Agreement, “Section 409A” means Section 409A of the Code, and any final
Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.
5. Payment after Vesting. The payment of Shares (including any related Dividend Equivalents) vesting pursuant to this
Agreement shall in all cases be made at a time or in a manner that is exempt from, or complies with, Section 409A, unless otherwise
determined by the Administrator. The prior sentence may be superseded in a future agreement or amendment to this Agreement only
by direct and specific reference to such sentence. Any Restricted Stock Units that vest in accordance with paragraph 3 will be paid to
Participant (or in the event of Participant’s death, to his or her estate) as soon as practicable following the date of vesting, subject to
paragraph 8. Any Restricted Stock Units that vest in accordance with paragraph 4 will be paid to Participant (or in the event of
Participant’s death, to his or her estate) in accordance with the provisions of such paragraph, subject to paragraph 8. In no event will
Participant be permitted, directly or indirectly, to specify the taxable year of the payment of any Restricted Stock Units payable
under this Agreement.
6. Forfeiture upon Termination of Status as a Service Provider. Notwithstanding any contrary provision of this Agreement,
the balance of the Restricted Stock Units that have not vested as of the time of Participant’s termination as a Service Provider for any
or no reason will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company, and
Participant’s right to acquire any Shares (or cash pursuant to the Dividend Equivalents) hereunder will immediately terminate. The
date of Participant’s termination as a Service Provider is detailed in paragraph 11(h).
7. Death of Participant. Any distribution or delivery to be made to Participant under this Agreement will, if Participant is
then deceased, be made to the administrator or executor of Participant’s estate. Any such administrator or executor must furnish the
Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the
validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
8. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if
different, the Participating Company employing or retaining Participant (the “Employer”), the ultimate liability
for Tax Obligations is and remains Participant’s responsibility and may exceed the amount, if any, actually
withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the
Employer (i) make no representations or undertakings regarding the treatment of any Tax Obligations in
connection with any aspect of the Restricted Stock Units or
-5-
any related Dividend Equivalents, including, but not limited to, the grant, vesting or settlement of the Restricted
Stock Units, payment of any Dividend Equivalents, the subsequent sale of Shares acquired pursuant to such
settlement and the receipt of any dividends or other distributions, and (ii) do not commit to and are under no
obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate
Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to
Tax Obligations in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer
(or former employer, as applicable) may be required to withhold or account for Tax Obligations in more than one
jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations
hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may
refuse to issue or deliver the Shares, Dividend Equivalents or the proceeds of the sale of Shares.
(b) Withholding of Taxes. Prior to the relevant taxable or tax withholding event, as applicable, Participant agrees to
make adequate arrangements satisfactory to the Company or the Employer to satisfy all Tax Obligations. In this
regard, Participant authorizes the Company and the Employer, or their respective agents, at their discretion, to
satisfy their withholding obligations with regard to all Tax Obligations, if any, by withholding from proceeds of
the sale of Shares acquired at vesting of the Restricted Stock Units, either through a voluntary sale or through a
mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further
consent. Alternatively, the Company and the Employer, or their respective agents, in their sole discretion and
pursuant to such procedures as they may specify from time to time, may satisfy their withholding obligations with
regard to all Tax Obligations, if any, in whole or in part (without limitation) by (i) requiring Participant to deliver
cash or a check to the Company or the Employer, (ii) withholding from Participant’s wages or other cash
compensation paid to Participant by the Company or the Employer, or (iii) reducing the number of Shares or
amount of Dividend Equivalents otherwise deliverable to Participant; provided, however, that if Participant is a
Section 16 officer of the Company under the Exchange Act, then the Company will withhold from any cash
Dividend Equivalents and from proceeds of the sale of Shares acquired at vesting of the Restricted Stock Units,
unless the use of such withholding method is inadvisable under Applicable Laws or has materially adverse
accounting consequences, in which case, the withholding obligation for Tax Obligations, if any, may be satisfied
by one or a combination of methods (i) and (ii) above. For avoidance of doubt, if Participant is a non-U.S.
employee, payment of Tax Obligations may not be effectuated by surrender of other Shares with a Fair Market
Value equal to the amount of any Tax Obligations. Further, depending on the withholding method, the Company
or the Employer may withhold or account for Tax Obligations by considering
-6-
statutory or other withholding rates, including minimum or maximum rates applicable in Participant’s
jurisdiction(s). In the event of over-withholding, Participant may receive a refund from the Company of any over-
withheld amount in cash (with no entitlement to the equivalent in Common Stock), or if not refunded by the
Company, Participant must seek a refund from the local tax authorities to the extent Participant wishes to recover
the over-withheld amount in the form of a refund); provided, however, that where the application of such
maximum rates would, in the Company’s determination, result in adverse accounting consequences to the
Company, the Company shall withhold only amounts sufficient to meet the minimum statutory Tax Obligations
required to be withheld or remitted with respect to the Restricted Stock Units.
9. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the
rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates
representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such
issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such
Shares and receipt of dividends and distributions on such Shares.
10. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE
VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS
OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT
INTERFERE IN ANY WAY WITH ANY RIGHT OF PARTICIPANT OR OF THE COMPANY (OR THE EMPLOYER) TO
TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
11. Nature of Grant. In accepting the grant, Participant acknowledges, understands and agrees that:
(a) the grant of the Restricted Stock Units is exceptional, voluntary and occasional and does not create any contractual or
other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if
Restricted Stock Units have been granted in the past;
-7-
(b) all decisions with respect to future Restricted Stock Units or other grants, if any, will be at the sole discretion of the
Company;
(c) Participant is voluntarily participating in the Plan;
(d) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income from and value of
same, are not intended to replace any pension rights or compensation;
(e) unless otherwise agreed with the Company, the Restricted Stock Units and the Shares subject to the Restricted Stock
Units, and the income from and value of same, are not granted as consideration for, or in connection with, the service
Participant may provide as a director of a Subsidiary or an Affiliate;
(f) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income from and value of
same, are not part of normal or expected compensation for purposes of calculating any severance, resignation,
termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or
retirement or welfare benefits or similar mandatory payments;
(g) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted;
(h) for purposes of the Restricted Stock Units, Participant’s status as a Service Provider will be considered terminated as
of the date Participant is no longer actively providing services to the Company or any Participating Company
(regardless of the reason for such termination and whether or not later to be found invalid or in breach of employment
laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service
agreement, if any), and unless otherwise expressly provided in this Agreement (including by reference in the Notice of
Grant to other arrangements or contracts) or determined by the Administrator, Participant’s right to vest in the Restricted
Stock Units under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g.,
Participant’s period of service would not include any contractual notice period or any period of “garden leave” or
similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or the
terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services
during such time); the Administrator shall have the exclusive discretion to determine when Participant is no longer
actively providing services for purposes of the Restricted Stock Units grant (including whether Participant may still
be considered to be providing services while on a leave of absence);
(i) unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Stock Units and the benefits
evidenced by this Agreement do not create
-8-
any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another
company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the
Shares; and
(j) the following provisions apply only if Participant is providing services outside the United States:
i. the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal or
expected compensation or salary for any purpose;
ii. none of the Company, the Employer or any other Participating Company shall be liable for any foreign exchange
rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of
the Restricted Stock Units or of any amounts due to Participant pursuant to the settlement of the Restricted
Stock Units and any related Dividend Equivalents or the subsequent sale of any Shares acquired upon
settlement; and
iii. no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock Units
resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever whether
or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a
Service Provider or the terms of Participant’s employment or service agreement, if any).
12. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying
Shares. Participant understands that there may be adverse tax consequences as a result of Participant’s participation in the Plan,
including the receipt or disposition of the Shares issued as payment for the vested Restricted Stock Units. Participant acknowledges
that he or she should consult with a tax, legal or financial consultant, that he or she has had the opportunity to consult with any such
consultants that Participant deems advisable in connection with the receipt or disposition of the Shares, and that Participant is not
relying on the Company for any tax advice.
13. Data Privacy Notice. Participant hereby acknowledges that the collection, use and transfer, in electronic or other
form, of Participant’s personal data as described in this Agreement and any other Restricted Stock Unit grant materials by and
among, as applicable, the Employer, the Company and any Participating Company, is necessary for the exclusive purpose of
implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant,
including, but not limited to, Participant’s name, home address and telephone number, email address, date of birth, social
insurance, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any Shares or
directorships held in the Company, details of all Restricted Stock Units or any
-9-
other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the
exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to E*Trade from Morgan Stanley and its related companies
(“E*TRADE”) or any stock plan service provider as may be selected by the Company in the future, which is assisting the
Company with the implementation, administration and management of the Plan. Participant understands that the recipients of
the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States)
may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides
outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by
contacting his or her local human resources representative. The Company, E*TRADE, any stock plan service provider selected
by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan may receive, possess, use, retain and transfer the Data, in electronic or other form, for the
sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that
Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan.
Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or make any other applicable
data subject requests, in any case without cost, by contacting in writing his or her local human resources representative. For
more information, Participant may contact his or her local human resources representative.
14. Address for Notices. Any notice to be given to the Company under the terms of this Agreement will be addressed to the
Company, in care of Global Equity Plan Services Department, at Salesforce, Inc., Salesforce Tower, 415 Mission Street, 3 Floor,
San Francisco, CA 94105, or at such other address as the Company may hereafter designate in writing.
15. Grant is Not Transferable. Except to the limited extent provided in paragraph 7 above, this grant of Restricted Stock
Units and the rights and privileges conferred hereby will not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process,
until Participant has been issued the Shares. Upon any attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of
this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process,
this grant and the rights and privileges conferred hereby immediately will become null and void.
16. Compensation Clawback or Recovery Policy. Notwithstanding anything in this Agreement to the contrary, as an
additional condition of receiving the Restricted Stock Units, Participant acknowledges and agrees that the Administrator (or the
Board or a committee of the Board, as determined by the Board), in its sole discretion, may require Participant to forfeit, return or
reimburse to the Company all or a portion of his or her Restricted Stock Units and any Shares or amounts paid thereunder (including
any dividends or Dividend Equivalents), in order
rd
-10-
to satisfy a recoupment obligation or requirement under the Company’s Executive Officer Incentive Compensation Recovery Policy,
as it may be amended from time to time, or pursuant to the terms of any other then-effective Company compensation clawback or
recovery policy, as may be established or amended from time to time, to the extent such policies are applicable to Participant.
17. Restrictions on Sale of Securities. Any sale of the Shares issued under this Agreement will be subject to any market
blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other
Applicable Laws.
18. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will
be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
19. Additional Conditions to Issuance of Certificates for Shares. If at any time the Company will determine, in its
discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any
state, federal or foreign law, the tax code and related regulations or under the rulings or regulations of the United States Securities
and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States
Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the
issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing,
registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any
conditions not acceptable to the Company. Subject to the terms of the Agreement and the Plan, the Company shall not be required to
issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of time following the date of
vesting of the Restricted Stock Units as the Administrator may establish from time to time for reasons of administrative convenience.
20. Plan Governs. This Agreement and the Restricted Stock Units granted hereunder are subject to all the terms and
provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the
Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set
forth in the Plan.
21. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt
such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any
such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions
taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant,
the Company and all other interested persons. No member of the Administrator will be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or this Agreement.
22. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related
to Restricted Stock Units awarded under the Plan or
-11-
future Restricted Stock Units that may be awarded under the Plan by electronic means or request Participant’s consent to participate
in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to
participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party
designated by the Company. To the extent Participant executes the Notice of Restricted Stock Unit Grant by electronic means,
Participant should retain a copy of his or her returned electronically signed Agreement. Participant may obtain a paper copy at any
time and at the Company’s expense by requesting one from Global Equity Plan Services Department (see paragraph 14 of these
Terms and Conditions).
23. English Language Consent. By accepting the Award of Restricted Stock Units, Participant acknowledges and represents
that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English as to
allow Participant to understand the terms of this Agreement and any other documents related to the Plan. If Participant has received
this Agreement or any other documents related to the Plan translated into a language other than English and if the meaning of
translated version is different from the English version, the English version shall control.
24. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
25. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such
provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining
provisions of this Agreement.
26. Governing Law and Venue. This Agreement will be governed by, and construed in accordance with, the laws of the
state of California without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises
under this Award of Restricted Stock Units or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State
of California, and agree that such litigation will be conducted in the courts of San Francisco County, California, or the federal courts
for the United States for the Northern District of California, and no other courts, where this Award of Restricted Stock Units is made
and/or to be performed.
27. Modifications to the Agreement. Participant expressly warrants that he or she is not accepting this Agreement in
reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement can be
made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the
contrary in the Plan or this Agreement, the Company reserves the right to amend this Agreement as it deems necessary or advisable,
in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid
imposition of any additional tax or income recognition under Section 409A of the Code prior to the actual payment of Shares
pursuant to this Award of Restricted Stock Units, or if necessary to comply with any applicable laws in the jurisdiction in which
Participant resides and/or is rendering services.
-12-
28. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or
she has received an Award of Restricted Stock Units under the Plan, and that he or she has received, read and understood a
description of the Plan. Participant understands that the Plan is discretionary in nature and may be modified, amended, suspended or
terminated by the Company at any time, to the extent permitted by the Plan.
29. Waiver. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other
Participant.
30. Country Addendum. Notwithstanding any provisions in this Agreement, the Restricted Stock Unit grant shall be subject
to any special terms and conditions set forth in any appendix to this Agreement for Participant’s country (the “Country Addendum”).
Moreover, if Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for
such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is
necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement.
31. Insider Trading and Market Abuse Laws. Participant may be subject to insider trading restrictions and/or market abuse
laws based on the exchange on which the Shares are listed and in applicable jurisdictions, including the United States, Participant’s
country and any stock plan service provider’s country, which may affect Participant’s ability to acquire, sell or otherwise dispose of
Shares, rights to Shares (e.g., Restricted Stock Units) or rights linked to the value of Shares during such times as Participant is
considered to have material non-public information or “inside information” regarding the Company (as defined by the laws in
applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant
placed before he or she possessed inside information. Furthermore, Participant could be prohibited from (i) disclosing the inside
information to any third party, including fellow employees (other than on a “need to know” basis), and (ii) “tipping” third parties or
causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to
any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is his or
her responsibility to comply with any applicable restrictions, and Participant should speak to his or her personal advisor on this
matter.
32. Foreign Asset or Account and Exchange Control Reporting. Participant’s country may have certain exchange controls
and foreign asset or account reporting requirements that may affect his or her ability to purchase or hold Shares under the Plan or
receive cash from his or her participation in the Plan (including from any dividends or Dividend Equivalents received or sale
proceeds arising from the sale of Shares) in a brokerage or bank account outside Participant’s country. Participant may be required to
report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, Participant may be required to
repatriate proceeds acquired as a result of participating in the Plan to his or her country through a designated bank or broker or
within a certain time. Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations
and understands that Participant should speak with his or her personal legal advisor for any details regarding any foreign asset or
account
-13-
reporting or exchange control reporting requirements in Participant’s country arising out of his or her participation in the Plan.
-14-
Exhibit 10.6
June 8, 2023
Sabastian Niles
[REDACTED]
Dear Sabastian,
I am pleased to offer you a position with Salesforce, Inc. (the "Company") as President and Chief Legal Officer for a start date of
August 1, 2023, reporting to Marc Benioff, Chairman and Chief Executive Officer. This offer of employment is contingent upon
acceptable results from a background investigation. This offer is also contingent upon your being eligible to work in the United
States. For purposes of federal immigration law, you will be required to provide the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of
your hire date, or your employment may be terminated. If you require work sponsorship, the Company will sponsor you for a work
visa to the extent of your eligibility.
In the event Salesforce is required to obtain an U.S. Department of Commerce Bureau of Industry & Security export license for your
employment, this offer is contingent upon receipt of that license. In support of that application process, you will be required to
provide additional information to support the U.S. export license application submission.
I. Compensation
Base Salary
If you decide to join us, you will receive an initial annual base salary of $900,000, which will be paid semi-monthly in accordance
with the Company's normal payroll procedures. Your base salary and any other amounts or benefits you are entitled to receive from
the Company will be paid or provided to you less applicable withholdings.
Gratitude Bonus
In addition, you will be eligible to receive an initial annual discretionary bonus pursuant to the Company’s Gratitude Bonus Plan
based on your individual performance, Company performance, and the Company’s funding formula. Your initial bonus target for the
Company’s fiscal year (February 1 through January 31) shall be 100% of your base salary and will be paid according to the terms of
the Gratitude Bonus Plan, which is subject to change at the Company’s discretion, and prorated accordingly for any fiscal year in
which you do not work a full twelve months.
Sign-On Bonus
We are also pleased to offer you a one-time sign on bonus of $3,000,000 less applicable withholding. The payment or receipt of a
sign-on bonus does not change your status as an at-will employee of the Company.
In the event you voluntarily terminate your employment with the Company for any reason (other than Good Reason) within two
years after your employment start date, or the Company terminates your employment for Cause within two years after your
employment start date, you agree to repay the Company net of income tax, on the date of your termination, the pro rata amount of
any hiring bonus paid to you pursuant to this paragraph, calculated based on the number of months and days you were in the
Company’s employment.
For purposes of this letter offer of employment, “Good Reason” and “Cause” shall be as defined in the Change of Control and
Retention Agreement.
II. Equity Grants
Restricted Stock Units
In addition, we intend to recommend that you be granted, subject to the approval of the Company’s Board of Directors (“the
Board”), Restricted Stock Units (“RSUs”), the number of which shall be calculated as follows: $5,500,000 USD divided by the
average closing sale price of one share of Salesforce common stock as reported on the New York Stock Exchange on the date of
grant. The RSUs shall vest 25% on the first anniversary of the grant date and 1/16th of the grant amount each quarter thereafter,
subject to the terms and restrictions set forth in the RSU Award agreement and Salesforce, Inc. equity plan(s), as may be modified
from time to time (the “2013 Equity Incentive Plan”).
Performance Restricted Stock Units
In addition, we intend to recommend that you be granted, subject to the approval of the Company’s Board of Directors (“the
Board”), Performance-based Restricted Stock Units (“PRSUs”) in the amount of $5,500,000 USD. The PRSU grant value will be
converted into units using the fair market value of one PRSU share on the date in which the PRSU Award is granted. The earned
PRSU Award at the end of the three-year performance period, if any, will be based on a) 50% on the achievement of non-GAAP
operating margin targets for each of the 2024, 2025, and 2026 fiscal years (with ⅙ of the total target shares tied to each of the
three, one-year measurement periods), and b) 50% on the achievement of relative total shareholder return (“rTSR”) over the three-
year performance period from the date of grant, all subject to the terms and restrictions set forth in the Stock Plan and the PRSU
Award agreement.
Conditions Applicable to RSUs and PRSUs
The above grants are subject to the terms and conditions of the 2013 Equity Incentive Plan and your grant agreement(s), which will
be provided to you shortly after the grant date, and the laws of your state and/or country of residence. The vesting date of RSU and
PRSU grants will be set upon the Board’s approval and you will be notified in writing of the same. The Company will provide you
with a copy of the 2013 Equity Incentive Plan upon request.
The Company reserves the absolute right in its sole discretion to suspend, modify, cancel or terminate the 2013 Equity Incentive
Plan at any time without compensation to you or any other of the participating employees. Your participation in the 2013 Equity
Incentive Plan is entirely
voluntary and the benefits that are afforded under the 2013 Equity Incentive Plan do not form an employment contract with the
Company or its subsidiaries. The RSUs and PRSUs acquired under the 2013 Equity Incentive Plan are not part of your salary or
other remuneration for any purposes, including, in the event your employment is terminated, for purposes of computing payment
during any notice period, payment in lieu of notice, severance pay, other termination compensation or indemnity (if any) or any
similar payments. You remain responsible to comply with any applicable legal requirements in connection with your participation in
the 2013 Equity Incentive Plan and for any taxes arising from the grant, vesting or exercise of RSUs, PRSUs, the subsequent sale
of your shares and the receipt of any dividends (regardless of any tax withholding and/or reporting obligations). Further, we
recommend that you seek independent advice from your personal accountant or tax advisor at your own expense regarding the tax
implications of your participation in the 2013 Equity Incentive Plan.
III. Employee Benefits
As a Company employee, you are also eligible to receive certain employee benefits. The Company reserves the right to change the
benefits and compensation programs at any time. Health care will be provided through Cigna for yourself and your eligible family
members.
Severance Benefits
In the event the Company terminates your employment for reasons other than Cause as defined in Section I. above and conditional
upon you signing a full and final release of claims in the Company’s standard form, you will be eligible for severance payments
equal to one year of your annual base salary plus an amount equal to your annual bonus target, each at the level in effect
immediately prior to your termination date, to be paid, less applicable withholdings, in monthly installments for twelve (12) months
following your termination date. Eligibility for the severance payments is also conditional upon not providing services to a
competitor, as determined by the Company.
IV. At-Will Employment
If you choose to accept this offer, your employment with the Company will be “at-will” and will be for no specified period. As a result,
you will be free to resign at any time, for any reason or for no reason, as you deem appropriate. The Company will have a similar
right and may conclude its employment relationship with you at any time, with or without cause or advance notice. This also means
that the Company can change or modify the terms and conditions of your employment including, without limitation, your job duties,
reporting structure and compensation, at any time with or without cause. Nothing in this offer letter modifies or changes your status
as an at-will employee.
You will be located in New York.
You will be entitled to have and enter into the Change of Control and Retention Agreement and the Indemnity Agreement in the
Company’s updated customary forms for senior executive officers.
V. Obligations to Third Parties
In your work for the Company, you will be prohibited from using or disclosing any confidential, proprietary or trade secret
information of any former employer or other person to whom you have an obligation of confidentiality. Rather, you will be required to
use only information that is generally known and used by persons with training and experience comparable to your own, is
common knowledge in the industry or otherwise legally in the public domain, or is otherwise provided or developed by the
Company. You agree that you will not bring onto Company premises or use in your work for the Company any unpublished
documents or property belonging to any former employer or third party that you are not authorized to use and disclose. You further
represent that when working for the Company, you will not violate the terms of any restrictive contract you might have signed with a
former employer or other person. By accepting employment with the Company, you are representing that you will be able to perform
your job duties within these parameters.
In the event any previous employer of yours alleges that your joining the Company is a breach of a non-compete or other
restrictive-covenant agreement between you and that employer, you understand that the Company will not indemnify you or pay for
your representation against any such claims. You further understand that if a court or arbitrator determines or mandates that you
may not work for the Company for a period of time as a result of a restrictive covenant that you signed with a previous employer,
you will not be entitled to any pay or equity vesting from the Company during that period and the Company may terminate your
employment. You understand that you are responsible for obtaining your own legal advice on the enforceability and extent of any
restrictive covenants you have signed with any former employer.
VI. Arbitration Agreement
Attached to this offer letter is an arbitration agreement for your review. Once you have reviewed it, please sign and date it where
indicated and return it along with the other documents provided with this offer letter in the enclosed envelope.
VII. Outside Business Activities and Board Membership
Because of the nature of the Company’s business and the identities of our customers, partners and prospects, outside activities
(including for example sitting on the board of another company) may present many areas of actual or potential conflict. If you wish
to engage in any outside activities that take time away from your job at the Company, create a possible conflict with the Company
or are related in any way to the Company’s business, you must disclose these activities to the Company immediately and prior to
your start date.
VIII. Section 409A
The Company intends for all payments and benefits under this offer letter to comply with or be exempt from the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended, and any guidance promulgated thereunder (“Section 409A”) so
that you will not be subject to an additional tax under Section 409A on any payments or benefits under this offer letter, and any
ambiguities or ambiguous terms herein will be interpreted to so comply or be exempt. As a result, payment of all or a portion of any
termination-related benefits will be delayed until the first payroll date that occurs on or after the date that is 6 months and 1 day
following your termination of employment if and to the extent necessary to avoid subjecting you to an additional tax under Section
409A on any such termination-related payments. In addition, each payment and benefit payable under this offer letter is intended to
constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. You and the Company agree to
work together in good faith to consider amendments to this offer letter and to take such reasonable actions that are necessary,
appropriate or desirable to avoid subjecting you to an additional tax or income recognition under Section 409A prior to actual
payment of any payments and benefits under this offer letter, as applicable. In no event will the Company reimburse you for any
taxes that may be imposed on you as a result of Section 409A.
IX. Miscellaneous
You will be asked to provide your social security number for an I-9 form as part of your on-boarding process. Please note that we
will also be using your social security number for purposes of benefits and payroll administration.
This offer letter fully sets forth all of your compensation information and other terms of your employment with the Company, and you
agree that in making your decision to join the Company you are not relying on any oral or other representations concerning any
other compensation or consideration or the duration of your employment with the Company, including but not limited to any value
associated with your stock options or restricted stock units, or any other terms of employment.
This offer of employment expires on June 16, 2023. To indicate your acceptance of the Company’s offer, please sign and date this
letter in the space provided below. In addition to this offer letter and the attached Arbitration Agreement, you will also be required to
sign the Change of Control and Retention Agreement, the Indemnity Agreement, an Employee Inventions and Proprietary Rights
Assignment Agreement (“Proprietary Rights Agreement”) and the Company’s Global Employee Handbook and Code of Conduct as
a condition of your employment. This offer letter, along with any agreements relating to proprietary rights between you and the
Company and the Arbitration Agreement, set forth the terms of your employment with the Company and supersede any prior
representations or agreements, whether written or oral. Except for at-will employment and the arbitration agreement, the Company
reserves the right to revise, amend or modify the terms of employment. Any revision or amendment of at-will employment or the
arbitration agreement must be in writing, signed by the parties. No oral statements or representations can change the provisions of
this offer letter.
We look forward to working with you at Salesforce. Welcome aboard!
Best Regards,
/s/ Brent Hyder
Brent Hyder
President, Chief People Officer
AGREED TO AND ACCEPTED
/s/ Sabastian Niles 6/9/2023
Sabastian Niles Date
Exhibit 31.1
CERTIFICATION
I, Marc Benioff, certify that:
1. I have reviewed this report on Form 10-Q of Salesforce, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
May 29, 2024 /s/ MARC BENIOFF
Marc Benioff
Chair of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION
I, Amy Weaver, certify that:
1. I have reviewed this report on Form 10-Q of Salesforce, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
May 29, 2024 /s/ AMY WEAVER
Amy Weaver
President and Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Based on my knowledge, I, Marc Benioff, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that the Quarterly Report of Salesforce, Inc. on Form 10-Q for the period ended April 30, 2024 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of Salesforce, Inc.
May 29, 2024
/s/ MARC BENIOFF
Marc Benioff
Chair of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
Based on my knowledge, I, Amy Weaver, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that the Quarterly Report of Salesforce, Inc. on Form 10-Q for the period ended April 30, 2024 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of Salesforce, Inc.
May 29, 2024 /s/ AMY WEAVER
Amy Weaver
President and Chief Financial Officer
(Principal Financial Officer)
